My message here today, condensed from two recent law review articles, boils down to three points:
1. First, no matter how well-intentioned, restrictions on data collection could negatively impact the competitiveness of America’s digital economy, as well as consumer choice.
2. Second, it is unwise to place too much faith in any single, silver-bullet solution to privacy, including “Do Not Track,” because such schemes are easily evaded or defeated and often fail to live up to their billing.
3. Finally, with those two points in mind, we should look to alternative and less costly approaches to protecting privacy that rely on education, empowerment, and targeted enforcement of existing laws. Serious and lasting long-term privacy protection requires a layered, multifaceted approach incorporating many solutions.
TRADE-OFFS ASSOCIATED WITH RESTRICTIONS ON DATA COLLECTION
Let’s be more specific about the potential costs of restrictions on data collection. Online advertising and data collection are the fuel that powers our information economy. Privacy-related mandates that curtail the use of data to better target ads or services could have several deleterious effects.
First, data restrictions could raise direct costs for consumers if walled gardens and paywalls are erected in response. Something has to pay for all the wonderful free sites and services we enjoy today.
Second, data restrictions could indirectly cost consumers by diminishing the abundance of content and culture now supported by data collection and advertising. In other words, even if prices and paywalls don’t go up, overall quantity or quality could suffer if data collection is restricted.
Third, data restrictions could hurt the competitiveness of domestic markets. While regulation raises the costs of doing business for all online operators, those costs will fall hardest on smaller operators and new start-ups. For example, today’s “app economy” has given countless small innovators a chance to compete on even footing with the biggest players. Burdensome data collection restrictions could short-circuit the engine that drives entrepreneurial innovation among mom-and-pop companies if ad dollars get consolidated in the hands of only the larger companies that can afford to comply with new rules.
Fourth, data restrictions could undermine America’s global competitive advantage in this space. We should ask ourselves how it is that America’s Internet sector came to be the envy of the world and why it is so hard to name any major Internet company from Europe. Our more flexible, light-touch regulatory regime leaves more room for competition and innovation compared to Europe’s top-down regime.
UNINTENDED CONSEQUENCES OF DO NOT TRACK
Generally speaking, when it comes to privacy protection, we should avoid placing excessive faith in schemes like Do Not Track because they could fail, just as previous techno-fixes failed to keep pace with fast-moving developments in this space.
[See Appendix I: “Techno-‘Silver-Bullet’ Solutions Don’t Work—Some Case Studies.”]
Even if Do Not Track takes root and some consumers turn it on, many will be incentivized by ad networks or publishers to opt right back in to “tracking” to retain access to sites and services they desire. In doing so, they may end up sharing even more information than they do today. Moreover, this may drive still greater consolidation since larger players will be in a position to grant Internet-wide opt-in exceptions, while smaller providers cannot.