As the Federal Trade Commission contemplates requests by Congress to impose strict privacy rules on the Internet, examples of market forces causing the industry to protect the personal information of their online customers abound.
JPMorgan Chase, for instance, presents a message to its online banking customers—in hard-to-miss red type—that that they will lose their overdraft protection unless they opt in to the program by providing more personal information.
Even Chris Hoofnagle, a fellow at Berkeley Center for Law & Technology who is an advocate for stricter government privacy rules, is impressed.
“We don’t see privacy notices that say anything that clearly or that urgently,” Hoofnagle said at an FTC roundtable discussion about online privacy this spring.
‘An Unmitigated Disaster’
In late April, Sen. Charles Schumer (D-NY) wrote a letter to the FTC urging it to develop rules on how Web-based companies—especially social networks such as Facebook—collect and share the personal information of their customers (see article on page 13).
But Fred Cate, director of the Center for Applied Cybersecurity Research at the Indiana University School of Law, said government-led privacy policies would be “an unmitigated disaster” because they would stifle information-sharing that has led to rapid growth in the digital economy.
Current online privacy policies under relatively lax federal regulation are already loaded up with “legalese-ridden terms” designed to protect the company from a lawsuit, he noted. The result is that users become confused when they should more easily understand the ins and outs of information-sharing.
Government Fostering Confusion
Jeffrey Johnson, a partner at the Pryor Cashman law firm in New York City, agrees.
Since the Internet economy is global, Johnson added, country-by-country regulation would only harm growth. It is better, he said, that online companies are already “focusing on developing a worldwide regime for dealing with privacy issues on a coordinated basis.”
“Otherwise, you open up a hornet’s nest of competing regulations,” he said.
“Consumers have it within their power to compel companies to protect their privacy by utilizing the services of the companies that best satisfy their privacy concerns,” Johnson added. “But that means having privacy policies that are easy to read. As long as governments compel businesses to meet regulatory requirements for privacy issues, it will be difficult to find privacy policies that are in fact easy to read and understand.”
Randall Skoglund, executive director of Americans for Technology Leadership in Washington, DC, says transparency is the key.
“We believe that the best solutions always come when technology companies, consumers, and regulators work together,” he said. “When lawmakers dictate public policy in the technology arena, all too often they unintentionally stifle innovation and create unintended consequences that negatively impact consumers.”