Privacy Reform: The Sound of No Hand Clapping

In the wake of nationwide demonstrations calling for stronger government regulation of banks and investment firms, draft legislation was introduced in the House on Tuesday that targets a less conspicuous multi-billion dollar industry that still affects everyday Americans: the collection and distribution of personal information. At a time when everyone from Tea Partiers to progressives is complaining that the government isn’t looking out for the people, US Reps. Rick Boucher (D-Virginia) and Cliff Stearns (R-Florida) offered their proposal for meaningful privacy protection legislation.

The long-awaited bill, which many privacy experts assumed would only cover online data collection, is broader than expected. It applies to any nongovernmental entity that collects personal information (including names, numbers and addresses) from more than 5,000 people a year, whether online or off. They would be required to provide “a clearly-written, understandable privacy policy that explains how information about individuals is collected, used and disclosed.” The bill would also allow individuals to opt out of data collection for purposes such as behavioral marketing, and would require opt-in consent for the collection of sensitive personal information such as medical or financial records, sexual orientation, Social Security number or precise geographic location.

From a regulatory standpoint, this discussion draft is a significant move because it begins to close the gap between the US and countries with omnibus data protection laws. Commenting on the bill’s comprehensive requirements and the new obligations it would impose, Lisa J. Sotto, head of the privacy and information management practice at the law firm of Hunton & Williams, noted, “outside the US, we are perceived as lagging behind the EU when it comes to providing data privacy protections for individuals.”(1)

This bill should also resonate on a personal level. Despite Facebook CEO Mark Zuckerberg’s claim that people don’t really care about privacy anymore, there is no shortage of outrage when users feel their privacy had been violated. In March, a federal judge approved a $9.5 million settlement in a class-action suit over Facebook’s “Beacon” program. The program tracked online activities not related to Facebook, such as video rentals or purchases and added them to the users’ “news feeds,” making them visible to their Facebook friends. The ACLU spearheaded a campaign that successfully led to a change in Facebook’s privacy policy. Unfortunately, while the change did increase protection for some types of information, it relaxed it for others. The ACLU continues to petition for more user control over Facebook profiles.

Marketers and social networking sites claim the data they collect helps them select ads and suggest products tailored to consumers, which enhances the user experience and benefits retailers. Data collectors argue that people want this kind of personalized service. However, a study conducted by a group of researchers from the University of Pennsylvania and the University of California, Berkeley, titled “Americans Reject Tailored Advertising” indicates otherwise. According to the 2009 study, “most adult Americans (66%) do not want marketers to tailor advertisements to their interests. Moreover, when Americans are informed of three common ways that marketers gather data about people in order to tailor ads, even higher percentages – between 73% and 86% – say they would not want such advertising.” Although Zuckerberg would like us to believe that it’s nothing more than a generation gap and the social norm of privacy is “just something that has evolved over time,” the research tells a different story. The study also found that “86% of young adults say they don’t want tailored advertising if it is the result of following their behavior on websites other than one they are visiting and 90% of them reject it if it is the result of following what they do offline.”

The statistics show that the vast majority of Americans feel there should be laws giving them the right to know everything that a web site knows about them and require web sites to delete all personal information upon request. In light of these opinions, it seems surprising that there is not more public awareness of the proposed legislation. The authors of the UPenn/UC Berkeley study may have an answer. As they wrote, “Whatever the reasons explaining Americans’ dislike of behavioral targeting, our findings indicate that they expect companies to take privacy rules extremely seriously. Our results show that American consumers believe (albeit mistakenly) that an array of strong laws prohibit companies from the sharing or selling of data about them.” Unlike the debate over health care reform, which was fueled by hope and fear of change, it seems people aren’t concerned with this legislation because they believe it already exists. The unfortunate reality is that, even if the bill passed, Americans’ assumptions about regulation would still exceed the reality of the law. The bill was also drafted with business in mind. Representative Boucher carefully reassured advertisers that the bill would not present a threat to their profits. Recognizing the importance that advertising plays in the financing of free online content, he said, “Online advertising supports much of the commercial content, applications and services that are available on the Internet today without charge and this legislation will not disrupt this well-established and successful business model.”

In the end, a lack of public interest may lead to legislation in the public’s interest. There was little fanfare when Obama signed his landmark crackdown on credit card companies, but, mercifully, there was little or no public opposition. With a relatively new FCC chair, a Democratically-controlled FTC, a bi-partisan draft before the House and no reactionaries yelling, “keep your government hands off my Internet,” the administration may be able to follow up credit card and health care reform with an overhaul of online policy.

1. Interview with Lisa Sotto, 5 May, 2010.