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Capitol Comment 285 – “Privacy Online”: Fear and Loathing at the FTC

The Federal Trade Commission’s (FTC’s) recommendations in Privacy Online: Fair Information Practices in the Electronic Marketplace have replaced the heat and humidity as this summer’s most stifling climatic development. The FTC’s suggestion that legislation is needed to supplement industry self-regulation disregards private-sector developments and long-established American values.

By a 3-2 margin, the FTC proposed a four-pronged regulatory approach to online profiling. A regulatory agency, presumably the FTC, would be tasked with assuring that online businesses comply with the federally imposed mandates of notice, choice, access, and security. E-commerce sites would have to provide consumers with a “clear and conspicuous” notice of the information they collect and with whom they share it. They would also be forced to get consent from consumers before they can collect data, provide access for consumers to review and delete their file, and take “reasonable” steps to make sure the collected information is secure.

Although the recommendation’s ambiguous language and specious evidence should be more than enough to doom its myopic call for regulation, something much more is at stake in the privacy debate.

Although the recommendation’s ambiguous language and specious evidence should be more than enough to doom its myopic call for regulation, something much more is at stake in the privacy debate. Once again, the agents of fear have joined forces to demand government intervention on behalf of American consumers. In this instance, it is the information sharing arrangements integral to the information age that have drawn their indignation.

In this case, as in so many before it, the FTC recommends legislation to be “phrased in general terms,” so as “to provide flexibility to the implementing agency in promulgating its rules and regulations.” The reason for such expansive authority, according to the commission, is due to the constantly changing technological environment. Furthermore, it would take time to define terms like “reasonable” and “adequate.” Given the speed of change and lack of general knowledge concerning e-commerce, it would only be logical for the FTC to recommend deferring judgment to a later date. It is unfortunate that the FTC has not afforded private efforts the same time frame to adjust their privacy policies accordingly.

The FTC study demonstrates the efforts of private business to protect the privacy of consumers. In 1998, only 14 percent of randomly sampled Web sites and 71 percent of the most popular sites provided privacy disclosures. Today, those numbers read 62 percent and 97 percent respectively, an astonishing achievement. Likewise, the number of businesses joining self-policing organizations and engaging in a positive discourse on the issue is encouraging. And these voluntary industry improvements are only part of the story.

The market has provided concerned consumers sites like and as well as Digital Me software to circumvent the privacy policies of sites consumers may find unappealing. If privacy concerns on the part of consumers are indeed a reality, industry and technology will respond, while consumers’ concerns about online purchases creates an incentive for e-businesses to protect the privacy of online customers.

Industry self-regulation for online consumer problems is outpacing regulation. Consider the example of Doubleclick, whose privacy transgressions have contributed to the company’s stock price dropping by more than 50 percent over the past four months. Public outrage over the company’s plan to merge browsing patterns with offline direct mail profiles has led Doubleclick to recruit privacy experts for its board of directors and create, a Web site offering consumers a comprehensive explanation of their privacy rights and lucid information about how to opt out of targeted advertising. also provides consumers with something that has been omitted by the harangue of regulation’s proponents: an articulation of the benefits of Internet advertising. The popular misconception that the Internet is “free” has shrouded the current discourse. As explains, the targeted advertising that alleged consumer advocates lament is precisely the mechanism that provides the boundless environment consumers passionately support. As FTC Commissioner Orson Swindle asks in his dissent to the commission’s recommendation, “Why not encourage consumers to ‘vote with your mouse?’”

As in all debates concerning government incursion into well-functioning markets, the proponents of regulation will provoke fear, while those favoring market solutions will list the ways regulation will be costly for both compliance and enforcement, stifling to both competition and innovation, and unnecessary. But this debate will be far more than the sum of its left-right dichotomy.

Historians of the future will look back on today and be startled by how fast things, both technological and political, changed. In the late 1950s when then-Vice President Nixon met Soviet Premier Nikita Khrushchev in the model American kitchen, they debated the difference between American and Soviet values: Madison’s constitutionalism versus Lenin’s Bolshevism. Part of what was debated there and throughout the Cold War was the principle of free and uninhibited communication. On many occasions, the Soviets did not pretend censorship did not exist in their empire; they simply contended that a free exchange of thoughts, ideas, and information was not always in the best interests of a society. Implicit to that argument is that the state, in its omnipotence, is best suited to determine what information and ideas should pass from person to person. This is the precise contention embodied in the FTC’s report. Let us recommit ourselves to American principles by rejecting the FTC’s recommendation and proudly assert that the more things change, the more they remain the same.