Senate Takes a Crack at Online Consumer Privacy Protection

Senators John Kerry, D-Mass., and John McCain, R-Ariz., introduced an Internet privacy bill on Tuesday that proposes new rules about how websites can collect information about users. The measures would help protect Internet users by requiring sites to notify customers when their data is being collected and tell them how it will be shared. The bill would require advertisers to let them opt out of disclosing sensitive details such as medical information.

The bill would also limit a website’s ability to target users through personal information and consumer profiles. Websites would be allowed to collect only information necessary for a particular transaction.

Kerry said at a press conference on Tuesday that companies agreed it made good business sense to protect the customer and was the right thing to do. McCain said the bill respects the ability of businesses to advertise while protecting customers’ personal information.

The responsibility of enforcing of the bill would lie with the Federal Trade Commission (FTC) and state attorneys general.

The offices of Sens. McCain and Kerry did not respond to the E-Commerce Times’ requests for comment by press time.

Possible New Regulatory Regime

The bill calls for stricter regulations, which could improve consumer safety but stifle creativity.

“What we’re witnessing is the Europeanization of American privacy policy and the beginning of a fairly significant new regulatory regime for the Internet,” said Adam Thierer, senior research fellow at George Mason University’s Mercatus Center.

“Europe has already walked down the path of heavy-handed privacy controls and data directives, and that has resulted in less online innovation compared to the United States,” he told the E-Commerce Times.

The bill could put a price tag on many free Internet services that consumers have grown accustomed to.

“We don’t want to strangle the goose (advertising and data collection) that lays the Internet’s golden eggs (free digital goodies),” said Thierer. “Yet pay walls and prices could go up if privacy regulation becomes too burdensome. There is no free lunch, after all. Thus, these new regulations could act as a privacy tax on consumers who currently enjoy a cornucopia of free sites, services and content online.”

While many bills are proposed to showboat legislators on consumer-friendly issues, the McCain-Kerry bill has a good chance of becoming law.

“This train is moving down the tracks with a full head of steam and it’s likely we’ll see action before the end of the session,” said Thierer. “I’m still wondering where the harm is, however, and why no one is discussing all the wonderful privacy-enhancing empowerment tools already on the market that can get the job done without such command-and-control regulation.”

Some privacy hawks such as the Mercatus Center believe privacy tools currently available are strong enough to protect consumers.

“Education and empowerment is the approach we’ve taken to address online child safety concerns,” said Thierer. “It’s the same approach we should adopt for online privacy. Hands off the Net remains wise policy.”

Unnecessary and Harmful

The Interactive Advertising Bureau (IAB) members may have a lot to lose if the legislation is passed. Their members benefit from the current rules that allow advertisers to track consumer behavior.

“The Interactive Advertising Bureau applauds the leadership of Senators Kerry and McCain in this important area of consumer privacy,” Mike Zaneis, SVP and general counsel, Interactive Advertising Bureau, told the E-Commerce Times.

“However, we are concerned with the provisions in their proposal that would impose strict new requirements on first-party sites to allow their users to access, correct, and delete data collected by that site,” he said.

“These types of first-party restrictions were explicitly rejected by the FTC and are unnecessary to protect consumer privacy but would severely hurt publishers,” Zaneis contended. “Secondly, their proposal provides the FTC with far too much discretion in drafting implementing rules.”