Stopped in their tracksJoel Reidenberg in The Economist, March 17, 2011
A proposed privacy law could help as well as hurt America’s web companies
Mar 17th 2011 | SAN FRANCISCO | from the print edition
THE outcry over internet firms’ habit of surreptitiously tracking web surfers’ activities has clearly resonated inside the White House. On March 16th the Obama administration announced that it intends to work with Congress to produce “a privacy bill of rights” giving American consumers greater control over how their information is collected and used by digital marketers.
Those who have been lobbying for change agree with, but are unsympathetic to, internet firms’ worries that such a law could dent their advertising-driven business models, which rely on tracking and targeting consumers to maximise revenues. “This is dimming the prospects of Google, Facebook and other digital ad companies,” says Jeffrey Chester of the Centre for Digital Democracy.
Quite how dark things get for them will depend on the details of the bill. It will seek to lay down the basic principles of internet privacy rights, broadly following recommendations published last December by the Department of Commerce. The department’s report said consumers should be told more about why data are being collected about them and how they are used; and it called for stricter limits on what companies can do with information they collect.
Whatever legislation finally emerges is likely to give a broader role to the Federal Trade Commission (FTC), which will almost certainly be charged with deciding how those principles are translated into practice and with policing their implementation. Among other things, the FTC is known to be keen on a formal “do not track” system, which would allow users to block certain sites from monitoring their online activities.
Keen to avoid this, the online-advertising industry has been working overtime to convince policymakers that it can police itself using systems such as icons on web pages that show surfers when they are being tracked. And it is telling anyone who will listen that consumers will suffer if tough do-not-track rules hit ad revenues, forcing web firms to charge for more content.
With Mr Obama throwing his weight behind internet privacy, this rearguard action is less likely to be successful. Some ad firms have started talking of creating a do-not-track system of their own, that would limit the damage to their digital activities. Microsoft and Mozilla, two tech giants, have recently said they are including do-not-track features in new versions of their respective web browsers, Internet Explorer and Firefox.
Although all this may dent their revenues, America’s internet giants could also benefit from the legislation if it helps them in their dealings with the European Union. The EU’s already fairly strict rules on privacy—which it considers a fundamental human right—are being tightened further. The time-consuming and expensive legal hoops the EU makes American internet firms jump through, to be allowed to handle Europeans’ online data, will become more demanding.
If by passing its own online-privacy “bill of rights” America can convince the EU to ease this legal burden, then it will be an important win for American companies, says Joel Reidenberg, a professor at Fordham University’s law school. Google, Facebook and others will no doubt be tracking—both online and offline—the progress of EU-American talks on this matter very closely.