Trade commission should act to stop Chinese from spying on American consumers

Donald Trump is the first president to stand up against China’s economic warfare against the United States. He has railed against their currency manipulation as well as their “massive theft” of intellectual property and trade secrets (to say nothing of their hypocritical manipulation of our intellectual property law). Less discussed is their ability to take personal data and spy on American citizens and companies.

The Federal Trade Commission’s settlement with the soon-to-be Chinese owned Vizio over its egregious privacy violations of American consumers demonstrates this threat. The Irvine, California-based Vizio has sold over 11 million internet-connected “smart” TVs in the United States since 2010. Last year, the Chinese conglomerate LeEco purchased Vizio for $2 billion, though the deal still requires regulatory approval from China.

{mosads}According to the FTC’s complaint, Vizio remotely installed software on its TVs to allow it to track its users’ viewing history—including DVDs and Cable and broadcast television. It created a massive database, which included each consumer’s I.P. address, Wi-Fi location, and personal information like income, education, and marital status. Vizio sold this data to third parties, who could use the IP and Wi-Fi information to track consumers’ behavior across other internet-connected devices.

The settlement requires Vizio to pay $2.2 million dollars in fines, delete all the improperly obtained data, and completely revamp its privacy policies. Acting FTC Chair Maureen Ohlhausen issued a concurring statement, calling for a further examination to clarify what consumer data is considered especially sensitive.

This is a good start, but does not address the threat Chinese acquisitions of American tech companies poses to consumers. China has among the weakest privacy protections in the world. The government has instituted very modest privacy and data security laws in the last few years, but they are under-enforced. The Chinese government has massively subsidized the technology sector, with state backed venture capitalists investing $338 billion into the tech sector 2015 alone.

While China subsidizes its expansion into the West, it enacts draconian regulations against American tech companies trying to operate within its borders. Of particular concern, it requires many Internet firms to maintain detailed records of its users and turn it over to authorities on request. James McGregor of APCO Worldwide described the Chinese government’s stated tech strategy to the Economist as “steeped in suspicion of outsiders” and creating “a blueprint for technology theft.”

When Vizo and LeEco announced their merger, they promised to hold all of Vizio’s data in the U.S. This assuaged the concerns of the Brookings Institution’s Susan Hennessy who noted that “if data is in fact stored in the United States and not elsewhere, then it is protected by U.S. law and could not be handed over to the Chinese government.” Yet Vizio’s privacy policy does not state that it will hold consumer data stay in the U.S., nor does the FTC’s settlement with the company.

The FTC’s failure to address the concerns with China in the Vizio settlement is somewhat understandable because the LeEco has not finalized its purchase of the company, so the privacy violations occurred under American ownership. However, given the Chinese government’s record on privacy and intellectual property theft from Americans, the agency needs to be more vigilant in the future.

The settlement requires Vizio to delete all of its illegally obtained data within 120 days. Common sense dictates that this occur before the Chinese takes control of the company. While the settlement does not require future data to be stored in the U.S., it makes Vizio enact a comprehensive privacy policy and submit it to the FTC. The agency must ensure that LeEco-Vizio keep their promise to not store any American’s data in China.

Moving forward, the commission needs to continue to monitor and counter against this risk. The FTC does not have jurisdiction over international trade and has repeatedly ruled that privacy is not a major concern in merger review. However, it should work with other agencies and use its lawful authority to regulate data security and consumer privacy to develop a strategy to counter the risk the Chinese pose to our private and personal information.

Mytheos Holt (@MytheosHolt) is a senior fellow at the Institute for Liberty. He has worked as a speechwriter for Sen. John Barrasso (R-Wyo.), and as a writer for publications including The Federalist.

The views expressed by contributors are their own and not the views of The Hill.