Increased Privacy or Decreased Innovation?

Recently, the House’s Committee on Energy and Commerce held a hearing on privacy and the new regulations and guidelines being proposed by the Federal Trade Commission (FTC) and the National Telecommunications and Information Administration (NTIA), including the Obama administrations desire for a Privacy Bill of Rights. At the heart of the hearing was whether the new guidelines and regulations put forth in the FTC’s final consumer privacy plan are necessary, and if regulations at a time of unprecedented growth in the tech and digital sector are the correct course for Congress to take.

In the FTC’s newly released consumer privacy plan, the agency calls for industry to adopt best practices to head off any privacy concerns that consumers might have. The FTC chairman, Jon Leibowitz, acknowledges that we’re seeing this being done already in the area of Do Not Track legislation, where the vast majority of large Internet companies are voluntarily signing on to allow consumers to opt out of Internet tracking for advertising purposes. But the report goes on to suggest new laws that Congress can pass that would theoretically protect consumers from privacy intrusions. These laws include “enacting general privacy legislation, data security and breach notification legislation, and data broker legislation.” So although many of the proposals laid out are currently suggestions and are “voluntary,” the Obama administration plans to introduce legislation that would strengthen privacy regulations. What exactly these laws would look like remain to be seen.

Not everyone is a fan of the administrations attempts to impose regulations or guidelines. Some are worried about the costs associated with these regulations, would the policing would fall to, and if the consumers would best be served in this situation. In his testimony before the committee, Berin Szoka, president of TechFreedom, said:

“…both the White House and FTC propose principles that, while noble in their aspirations, may prove counter-productive for consumers if transposed without a careful consideration of the real world trade-offs inherent in regulating consumer data practices. Both documents present reformulations of the Fair Information Practice Principles. While the White House framework is perhaps the best articulation of the FIPPs thus far, the FIPPs alone cannot protect consumers effectively—at least not without imposing significant costs and burdens on consumers.”

Many opponents of the plan also contend that these guidelines and regulations could be a true job killer. A study was recently released that showed the app economy has created 466,000 jobs. This is a market that only a few short years ago didn’t exist. The app economy, according to a new book of essays published by the American Consumer Institute, is currently a $5 billion industry, and will be worth $54 billion in the next four years. And according to a study by the Boston Consulting Group, the digital economy made up about 4.7% of the US GDP in 2010, and will account for $4.2 trillion of the G-20’s GDP by the year 2016. Apple claims to be responsible for creating 514,000 jobs alone. Would these new privacy regulations hurt this huge section of the US and the world economy?

Congressman Fred Upton seems to think it’s worth exploring. In his opening statement at the hearing, he said:

I am highly skeptical of Congress’ or a government regulator’s ability to keep up with the innovative and vibrant pace of the Internet without breaking it. Consumers and the economy as a whole will not be well served by government attempts to wrap the web in red tape. And we cannot ignore that Internet companies have a strong incentive to protect their users – it’s called consumer choice. Today’s online consumers are savvy customers who will not be loyal to a company that puts their personal information at risk. The next big thing is just around the virtual corner.

It remains to be seen if these hearings will have any effect over some companies that seem to constantly be in the news regarding privacy concerns. As The American Consumer points out, Google was largely absent from the hearings, even in the face of a string of embarrassing privacy concerns. Concern over Internet privacy is sure to be with us for some time, and it’s an open question if government regulators or Congress will feel the need to step in.

Zack Christenson writes on digital/tech policy issues for the American Consumer Institute

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