Fair and Free Digital Markets Act.

A BILL

To promote fair and free digital markets by prohibiting unfair business practices involving monetization derived from surveillance, behavioral manipulation through algorithmic influence, and targeting advertising using behavioral profiles, and for other purposes.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the “Fair and Free Digital Markets Act.”

SECTION 2. FINDINGS AND PURPOSE.

Congress finds that —

1. the business practices of surveillance-based monetization, algorithmic manipulation of user engagement, and targeted advertising based on behavioral profiling constitute unfair methods of competition and unfair or deceptive acts or practices under 15 U.S.C. § 45(a)(1); and
2. these practices cause substantial harm to consumers, distort markets, and undermine fair competition in interstate commerce; and
3. these practices cause demonstrable harm to individuals by exposing them to identity theft, fraud, and behavioral manipulation, and by depriving them of the economic value of their own data and creative works; and
4. these practices cause demonstrable harm to competition by distorting markets, entrenching monopolies, and raising barriers to entry for innovative services that do not rely on surveillance monetization; and
5. these practices cause demonstrable harm to society and democracy by amplifying disinformation, fostering compulsive use, and chilling the free expression of users under pervasive monitoring; and
6. these practices are not speech, but rather constitute commercial conduct analogous to fraud and misappropriation, which have never been entitled to First Amendment protection; and
7. persistent, repeated violations of this Act justify mandatory reclassification of offending entities in order to protect consumers and competition.

SECTION 3. PROHIBITION.

(a) Covered Conduct. Any person or entity engaged in interstate commerce who operates or maintains any digital communication platform that —

1. monetizes user-generated content or user data through surveillance; or
2. employs algorithmic recommendation systems, gamification, or other design techniques intended to maximize user engagement for commercial gain; or
3. derives revenue through the sale of targeted advertising based on user data or behavioral profiling,

is engaged in an unfair method of competition and an unfair or deceptive act or practice in or affecting commerce, and such conduct is hereby prohibited.

SECTION 4. ENFORCEMENT.

(a) Federal Trade Commission Authority. The Federal Trade Commission shall enforce this prohibition under its authority pursuant to 15 U.S.C. § 45.

(b) Offense. Any violation of section 3 of this Act shall constitute an offense.

(c) Repeat Violations. Upon the final adjudication of a third violation of section 3 of this Act by the same person or entity —

1. For a first violation, the Commission may impose a civil penalty not to exceed 4 percent of the violator’s total annual global revenue for the preceding fiscal year.
2. For a second violation, the Commission may impose a civil penalty not to exceed 8 percent of total annual global revenue, and may require structural or behavioral remedies, including but not limited to algorithmic audits, mandatory transparency reports, or separation of advertising and data businesses, overseen by a special master appointed by the Commission.
3. Upon a third final adjudication of a violation of Section 3 of this Act by the same person or entity —
   (A) the Federal Trade Commission shall transmit notice of such offenses to the Federal Communications Commission; and
   (B) any digital communication platform operated by such person or entity —
   (i) shall not qualify for the liability protections of 47 U.S.C. § 230(c);
   (ii) shall be reclassified, by operation of law, from a Title I information service under 47 U.S.C. § 153(24) to a Title II telecommunications service under 47 U.S.C. § 153(53); and
   (iii) shall thereafter be subject to regulation by the Federal Communications Commission as a common carrier.
   (C) Such reclassification shall take effect 90 days after receipt of notice by the Federal Communications Commission.
4. For purposes of this subsection, a final adjudication of a violation of Section 3 of this Act includes any final judgment entered by a United States district court in an action brought by the Commission, by a State attorney general, or by a private plaintiff under this Act.
5. Any reorganization, spinoff, or successor entity shall be deemed the same person or entity for purposes of counting adjudications under this Act.

(d) Private Right of Action. Any person aggrieved by a violation of Section 3 of this Act may bring a civil action in a United States district court to recover —

1. actual damages sustained, including consequential damages resulting from misuse, breach, or unauthorized exploitation of user data or user-generated content;
2. statutory damages of not less than $1000 per violation and not more than $10,000 per violation, or up to three times the violator’s gross revenue derived from the misuse of that person’s data or content, whichever is greater; and
3. reasonable attorneys’ fees and costs.
4. The right of action under this subsection may be brought individually or as a class action under Rule 23 of the Federal Rules of Civil Procedure, and no predispute arbitration agreement or contractual waiver shall preclude a person from bringing such an action in a court of the United States.

(e) State Enforcement. The attorney general of any State may bring a civil action in the name of the State to enforce this Act on behalf of residents of the State, in any district court of the United States having jurisdiction.

(f) Expedited Judicial Review. Any civil action or petition for review of a Commission order under this Act shall be heard and determined on an expedited basis, and shall have priority over all other civil actions.

(g) Whistleblower Protections.

1. An employee or contractor who discloses to the Commission information relating to a violation of this Act shall be protected against retaliation as if such disclosure were a protected disclosure under 5 U.S.C. § 2302(b)(8).
2. The Commission may establish monetary awards for whistleblowers whose disclosures lead to successful enforcement actions under this Act.

(h) Additional Remedies. Civil penalties, injunctive relief, and all other remedies available under existing law shall apply in addition to the reclassification described in subsection (c).

(i) Authorization of Appropriations. There are authorized to be appropriated to the Federal Trade Commission and the Federal Communications Commission such sums as may be necessary to carry out this Act, including to hire additional staff, conduct investigations, oversee structural or behavioral remedies, and administer whistleblower programs established under this Act.

SECTION 5. RELATIONSHIP TO ANTITRUST LAW.

(a) Merger Review. No merger, acquisition, or consolidation involving a digital communication platform shall be approved under 15 U.S.C. § 18 if either party has been adjudicated in violation of Section 3 of this Act within the preceding 10 years.

(b) Antitrust Findings. The use of business practices prohibited by Section 3 of this Act shall constitute per se evidence of monopolization, attempted monopolization, or unfair methods of competition under 15 U.S.C. §§ 1–2 and 12–27.

(c) Presumption Against Approval. Any entity that has been adjudicated in violation of Section 3 of this Act within the preceding 10 years shall be conclusively presumed not to satisfy the requirements for merger approval under 15 U.S.C. § 18.

SECTION 6. GENERAL PROVISIONS.

(a) Application. This Act applies to any person or entity subject to the jurisdiction of the United States that provides services to, or collects or processes data from, users located within the United States.

1. Nothing in this Act prohibits the use of data solely and exclusively for the purpose of service provision, security, or legal compliance.

(b) Preemption. This Act shall supersede any State law that permits or authorizes the practices prohibited by this Act. Nothing in this Act shall be construed to preempt State laws that provide greater protections to consumers or competition.

SECTION 7. DEFINITIONS.

(a) Algorithmic recommendation systems. The term “algorithmic recommendation systems” means a collection of ordered computational steps that determine what content is displayed by a digital communication platform to individuals, groups, or places, including, but not limited to, all users of such platform and all physical locations within the solar system.

(b) Behavioral profiling. The term ‘behavioral profiling’ means the collection or analysis of data regarding the actions, choices, preferences, or inferred characteristics of a user for the purpose of targeting, segmenting, or predicting user behavior.

(c) Digital communication platform. The term “digital communication platform” means any interactive computer service (as defined in 47 U.S.C. § 230(f)(2)), information service (as defined in 47 U.S.C. § 153(24)), or other online service, application, or system that —

1. enables users to create, share, or access user-generated content; or
2. collects, processes, or disseminates data about its users in interstate commerce.

(d) Game. The term “game” means a playful activity for entertainment defined by a set of rules.

(e) Gamification. The term “gamification” means the process of modifying systems, services, organizations, and activities through the integration of game design elements and principles, including but not limited to points, likes, badges, leaderboards, and rewards, in non-game contexts to influence the behavior of individuals or groups.

(f) Monetization. The term “monetization” means the process of deriving revenue, financial benefit, or other commercial advantage, whether direct or indirect, from information or services. For the purposes of this Act, monetization includes, but is not limited to —

1. the sale, licensing, transfer, or provision of access to —
   (A) user-generated content, where the majority of revenue or financial benefit derived from such transaction is not provided to the user who generated the content; or
   (B) user data, where such data is provided to any party other than the user to whom the data pertains; or
2. the use of user-generated content or user data to target or deliver advertising or marketing; or
3. the use of user-generated content or user data in any manner that contributes to the development, training, or refinement of algorithms, products, or services offered or intended for commercial gain; or
4. the use of user-generated content or user data in any transaction, exchange, or arrangement intended to generate revenue or other commercial benefit.

(g) Surveillance. The term “surveillance” means the systematic close observation of individuals, groups, or places by visual, aural, electronic, photographic, clerical, computational, or other means.

1. For the purposes of this Act, surveillance includes all forms of system monitoring, logging, or data collection, regardless of purpose.
2. Nothing in this Act shall be construed to prohibit the un-monetized collection or use of such surveillance to the extent reasonably necessary to administer a digital communication platform.

(h) User-generated content. The term “user-generated content” means any data, information, or expressive material provided, created, or produced by an individual user of a digital communication platform, whether —

1. Directly, including but not limited to text, images, video, audio, or other submissions; or
2. Indirectly, including but not limited to:
   (A) profiles, inferences, behavioral data, or other derivative information collected from or generated by the platform; or
   (B) data acquired from third parties through surveillance, scraping, collection, or analysis of user activity on or off the platform.