by Christine Hall
November 18, 2009

Washington, D.C., November 18, 2009—A House subcommittee on Thursday will take a step closer to inserting government as the arbiter of consumer privacy online. But relying on Big Government to protect privacy is hardly the best solution to fears over who has access to private information online, explains Competitive Enterprise Institute technology policy expert Wayne Crews, in the following statement.

Statement of Wayne Crews, CEI Vice President for Policy 

At tomorrow's U.S. House Subcommittee on Commerce, Trade, and Consumer Protection hearing on “online and offline collection and use of consumer information,” some will urge federal privacy legislation for the purpose of limiting data collection and restricting the use of consumer information for marketing purposes.

However, the real question that policymakers should be asking is not whether competitive enterprise can offer strong privacy assurances, but rather, will government allow it?

If Congress wants to protect Americans’ privacy interests, its first priority should be reforming U.S. data retention laws, the PATRIOT Act, and privacy protections regarding information stored in the “cloud.”  Congress should also reject proposals that would create a new national identification regime (REAL ID) and impose burdensome requirements on telecom firms to retain customer data.

Information collection – both online and offline – is crucial to targeted advertising, which enables firms to offer free services that benefit consumers enormously. Attempts to legislate privacy will invariably constrain data collection capabilities, endangering consumer welfare and even privacy itself. Politicians should remember that privacy is a relationship, not a “thing” that bureaucracies are well suited to protect.  

Privacy and anonymity are important consumer values that benefit from competition. Healthy, competitive markets are best equipped to strengthen anonymity, provide for secure online commerce, and develop novel security guarantees.

Legislation undermines voluntary, private arrangements – known as “privacy policies” in the online world – by overruling such contracts and, therefore, obstructing the emergence of new institutions, like privacy insurance, that are likely to emerge alongside innovation in information collection. And if history is any guide, any privacy legislation is likely to stay on the books long after technological evolution renders it obsolete and even counterproductive.

Privacy doesn’t exist in a vacuum, and the “consumer advocates” dominating the show in Congress tomorrow cannot properly define optimal privacy for anyone but themselves. Moreover, many groups advocating privacy legislation explicitly do not even support the preemption of state law, which is perhaps the most important demand of businesses going along with this campaign for federal standards to avoid a patchwork of rules.

For these and many other reasons, data collection mandates are anti-consumer and should be rejected in the interest of protecting commerce and individual privacy.