TCS Daily

Warning, Congress! Look Before You Leap Into Internet Privacy Thicket

By Duane D. Freese - April 11, 2001 12:00 AM

House Majority Leader Richard Armey this week provided some sound advice to his colleagues intent on passing privacy restrictions for the Internet - Let's look at government privacy practices first.

Armey noted a litany of abuses by federal agencies, from the Internal Revenue Service's failure to secure tax records to the Federal Trade Commission itself not following the prescription for privacy protection it laid out for commercial sites.

"There are plenty of things we can do to improve the way the federal government uses personal information - both in the bureaucracy and in Congress," Armey wrote fellow House members. " We should clean our own house before dictating solutions to others.

Armey's reasoning goes beyond government not demanding of others what it doesn't do itself. It recognizes government's special position as the one organization that can compel people to surrender information about themselves and take away their liberty if they don't.

Privacy advocacy groups, though, were quick to pounce on Armey's statement as being insensitive to the privacy concerns of citizens.

"The leadership is sending a message not only to the public, but to the rank and file," the U.S. Public Interest Research Group's Edmund Mierzwinski told The New York Times. "It's clear to me that the K Street forces are out, and they are pushing their anti-privacy agenda, and they've convinced the leadership to make it their agenda."

Marc Rotenberg, executive director of the Electronic Privacy Information Center (EPIC), in a letter to Armey shot back that "problems with privacy protection in the federal government should (not) become a basis for inaction elsewhere." His organization wants to "establish Fair Information Practices for the collection and use of personal information in the commercial sector."

What those "practices" would amount to is mounds of additional regulations for businesses to meet in dealing with their customers. Legislation now on the Hill would micromanage all aspects of Internet transactions, including e-mail ads, the technologies businesses could use to track users, the sharing of customer information between businesses, and consumers having to "opt-in" - approve - any personal information a site collects about them.

The presumptions of the privacy advocates are that enacting these privacy "rights" is vital so that consumers can protect themselves from abuses by business, and that the new protections will come at virtually no cost.

Well, even in the land of virtual reality, all of those presumptions are false.

As Eugene Volokh, a law professor at the University of California-Los Angeles who has written extensively on privacy issues, noted people already have protections in contract law. If a business promises to keep information private, consumers can sue that business if it doesn't. If they can't get that assurance of privacy, they can take their business elsewhere - they aren't compelled to turn anything over if they don't want to. Furthermore, if a business collects data about you and lets it slip out, to your detriment, you've got recourse in the courts now to collect damages.

In addition to the law, consumers also have the power to set up a web of technology around them to protect their privacy. Just as you can wear a hat, raincoat, false beard and sunglasses to avoid detection in the non-virtual world, so consumers can use anonymizers and cookie crunchers to protect themselves when they travel through cyberspace.

The law of contract and the use of technology, unlike one-size-fits all laws, allow people to pick and choose their privacy preferences - from nearly absolute to none at all. And the market is filling those demands. Businesses are forming alliances to tell customers what their privacy practices are, including developing software that will allow people to set privacy preferences to find their sites.

So what would the new laws really protect against? Fraud? Identity theft? People who commit those acts aren't going to be deterred by new laws any more than they would by the old. Those acts are as punishable now if done over the Net as they are if someone dupes you over the phone or steals your wallet.

The answer is not much. But they will raise business transaction costs. The nearly perfect anonymity privacy groups seem to want is not really free.

As the Federal Reserve Board has long noted, information is the "lifeblood" of a market economy. Mortgages would cost homeowners in the United States $80 billion more a year without universal reporting of personal credit histories, according to Walter F. Kitchenman of The Tower Group.

Credit and debit card systems depend on sharing identifiable information about people. Without it, fraud and bankruptcies would force up rates or increase fees to a point many people would be denied credit. Information sharing allows the tailoring of marketing information to meet individual preferences. It permits businesses to develop new products at less cost.

All of that benefits consumers. And while polls show many Americans are concerned about their personal privacy, they also reveal they are willing to give up some of it to get things they want - over the Net and elsewhere.

EPIC's demand that "privacy should be a right, not a preference" suggests that people place privacy as their primary need, when often it is not. When they have the tools to protect themselves and are under no compulsion to divulge information, other than in exchange for something else, privacy really is a matter of preference. And government has no business limiting people's preferences - their freedom to choose -- when it hasn't thought through the consequences.

As Armey noted, "Congress is an inexperienced and amateur mechanic trying to tinker with the supercharged, high-tech engine of our economy. We need to be careful not to let our good intentions get in the way of common sense."

Look before you leap is always wise advice, and Congress should listen to it and not those wearing privacy blinders and shouting, "Jump! Jump!"

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