March 30, 2011

The State of Online Privacy

Written Testimony on Senate Hearing on The State of Online Privacy
Key materials

As the Commerce Committee continues its exploration of online privacy issues, it is important that it ask some hard questions about the wisdom of imposing a comprehensive new regulatory regime on the Internet, which the Obama Administration appears to now favor. The Federal Trade Commission (FTC)[1] and Department of Commerce (DoC)[2] both released new privacy “frameworks” late last year and seem determined to move America toward a more “European-ized” conception of privacy regulation.[3]

Here are a few questions that should be put to the FTC and DoC officials, or those who support the direction they are taking us:

  • Before implying that we are experiencing “market failure,” why hasn’t either the FTC or DoC conducted a thorough review of online privacy policies to evaluate how well organizational actions match up with promises made in those policies?
  • To the extent any sort of internal cost-benefit analysis was done internally before the release of these reports, has an effort been made to quantify the potential size of the hidden “privacy tax” that new regulations like “Do Not Track” could impose on the market?
  • Has the impact of new regulations on small competitors or new entrants in the field been considered?  Has any attempt been made to quantify how much less entry / innovation would occur as a result of such regulation?
  • Were any economists from the FTC’s Economics Bureau consulted before the new framework was released? Did the DoC consult any economists?
  • Why do FTC and DoC officials believe that citing unscientific public opinions polls from regulatory advocacy organizations serves as a surrogate for serious cost-benefit analysis or an investigation into how well privacy policies actual work in the marketplace?
  • If they refuse to conduct more comprehensive internal research, have the agencies considered contracting with external economists to build a body of research looking into these issues (as the Federal Communications Commission did in a decade ago in its media ownership proceeding)?
  • Has either agency attempted to determine consumer’s “willingness to pay” for increased privacy regulation?
  • Has either agency explored the potential free speech issues that are at stake here since increased privacy regulation could potentially infringe legitimate First Amendment rights?
  • More generally, where is the “harm”[4] and aren’t there plenty of voluntary privacy-enhancing tools out there that privacy-sensitive users can tap to shield their digital footsteps, if they feel so inclined?

These are just some of the many of these questions explored in my recent filing to the Federal Trade Commission in its proceeding on Protecting Consumer Privacy in an Era of Rapid Change.[5]

[1]    Federal Trade Commission, Protecting Consumer Privacy in an Era of Rapid Change (December 2010), http://www.ftc.gov/os/2010/12/101201privacyreport.pdf.

[2]    U.S. Department of Commerce, Commercial Data Privacy and Innovation in the Internet Economy: A Dynamic Policy Framework, U.S. Department of Commerce Internet Policy Task Force (December 2010).

[3]    Adam Thierer, “Obama Admin’s ‘Let’s-Be-Europe’ Approach to Privacy Will Undermine U.S. Competitiveness,” Technology Liberation Front, January 5, 2011, http://techliberation.com/2011/01/05/obama-admins-lets-be-europe-approach-to-privacy-will-undermine-u-s-competitiveness/

[4]    Berin Szoka and Adam Thierer, “Targeted Online Advertising: What’s the Harm & Where Are We Heading?” Progress on Point 16.2, (Washington, DC: The Progress & Freedom Foundation, February 13, 2009), http://www.pff.org/issues-pubs/pops/2009/pop16.2targetonlinead.pdf.

[5]    Adam Thierer, Public Interest Comment on Protecting Consumer Privacy in an Era of Rapid Change86 (Arlington, VA: Mercatus Center at George Mason University), February 18, 2011, https://www.mercatus.org/publication/public-interest-comment-protecting-consumer-privacy-era-rapid-change. Also see, see Adam Thierer, “Unappreciated Benefits of Advertising and Commercial Speech,” Mercatus on Policy 86 (Arlington, VA: Mercatus Center at George Mason University), January 2011, https://www.mercatus.org/sites/default/files/publication/unappreciated-benefits-of-advertising-and-commercial-speech_0.pdf