Excerpted from a Wilson Sonsini Blog by Christopher Olsen, Maneesha Mithal and Rebecca Garcia
We are less than two months into the new Trump administration and are seeing an unprecedented wave of activity and major changes at federal agencies. These changes promise to bring significant disruption to the staff and negatively impact the typical activities of numerous agencies, including the nation’s consumer protection watchdog, the Federal Trade Commission (FTC). We expect the impact on the FTC to be significant given the rapid and aggressive moves by the new administration. And we expect state Attorneys General (AGs) to step in to fill the gap.
One of the first actions the new administration took was to implement a hiring freeze across the federal government. Shortly thereafter, the Office of Management and Budget (OMB) sent an email to all federal employees offering a “deferred resignation” that would exempt them from return-to-office mandates and provide them pay and benefits through September 30, 2025.
The hiring freeze and deferred resignation program will certainly affect the FTC. According to its Fiscal Year 2025 Congressional Budget Justification, the FTC has close to 1,400 employees. Accordingly, the agency could quickly lose the services of 140 employees, plus others whose job offers may already have been rescinded. For a small agency, this would have a significant operational impact. And this is only the beginning of the administration’s efforts to reduce the federal workforce.
The administration’s swift and aggressive moves to reduce the federal workforce will not go unnoticed by state legislators and AGs.
- Artificial Intelligence (AI) regulation. Within the first three days of the new administration, the White House took three major actions to reduce AI regulatory constraints and bolster AI innovation: 1) issued an Executive Order rescinding President Biden’s Executive Order establishing standards for AI development; 2) announced the $500 billion Stargate venture designed to invest in the future of AI; and 3) issued another Executive Order imposing requirements designed to “sustain and enhance America’s global AI dominance in order to promote human flourishing, economic competitiveness, and national security.” These are all clear indicators that the federal government, including the FTC, is likely to be hands-off when it comes to AI oversight.
States, however, are unlikely to take the same approach. In terms of enforcement, the Texas AG has already brought one AI-related enforcement action against Pieces Technologies, alleging that the company deployed its AI healthcare technology products at several Texas hospitals after making a series of false and misleading statements about their accuracy and safety.
- Minors’ privacy and online safety legislation and enforcement. State legislatures were particularly focused on minors’ privacy and safety legislation in 2024, and we expect even more attention on this issue in the coming year. California, Colorado, Connecticut, Florida, Louisiana, New York, Tennessee, Texas, Utah, and Puerto Rico enacted social media laws that apply to all users under the age of 18, though these laws have been the focus of legal challenges. Some states have passed laws applicable only to users under 16 (e.g., Georgia). Some states require parental consent to have an account (see, e.g., Tenn. Code Ann. 47-18-5701 et seq), while others require it only for certain purposes, such as overcoming default settings (see, e.g., Tex. Bus. & Com. Code 509.001 et seq). Some of these statutes require verifiable parental consent (similar to the federal Children’s Online Privacy Protection Act, or COPPA) for parental consent to be valid.
- Comprehensive privacy legislation and enforcement. Apart from issues involving minors, states will remain active on the general privacy front as well. New privacy laws come into effect in 2025 in Delaware, Iowa, Minnesota, Maryland, Nebraska, New Hampshire, New Jersey, and Tennessee. Various states, including notably Massachusetts and New York, have already proposed comprehensive privacy bills this session, and others are likely to follow suit. The Texas AG is also focusing on comprehensive privacy enforcement. In addition to the 14 inquiries mentioned above, the Texas AG also sued Allstate and its subsidiary, Arity, for violations of the TDPSA.
- Health data and privacy. We are already seeing signs of likely disruption at the Department of Health and Human Services (HHS) related to changes to regulatory priorities by the new administration. It is unclear to what extent the federal government will be active in protecting consumer health data. States, however, have passed laws in this space and will likely increase their focus on this issue in the absence of federal government involvement.
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