Online Privacy


The Federal Trade Commission wants new powers to regulate online privacy, and that's bad news for online consumers. After conducting surveys of consumer websites, the agency has determined that the free market has failed, because too few sites uphold the hallowed principles of "Notice, Choice, Access, and Security." Don't you remember learning in school that we all have the right to life, security and the pursuit of access? If these ideas aren't quite as familiar to you as, say, "equality before the law" or "freedom of speech," it's not because you missed the day these principles were discussed. It's because the FTC just made them up. Then the agency applied these standards to show that many web companies were disobeying…something.

The FTC decided that companies should follow a specific process for informing customers about how the companies collect data, how they use it, how they secure it, with whom they share it, how consumers can get access to it, etc. The FTC also decided that companies should give consumers specific choices regarding the use of information. In my opinion, the government has absolutely no business dictating to me the terms under which I will shop at Amazon.com. But even if you believe in privacy laws, there's no law here.

It's like Janet Reno prosecuting people for things that aren't illegal. Well, okay, that may sound like the Microsoft case, but generally we frown on law enforcement officials who make up their own rules. That's supposed to be Congress' job, and the agencies are charged with enforcing the laws on the books. According to U.S. law, the FTC is supposed to be protecting us from things like consumer fraud—deceptive sales practices, bogus product claims and the like. Of course, investigating infomercial diet gurus and used car dealers is not exactly a ticket to power and influence in Washington. Perhaps not surprisingly, the agency staff decided that they'd rather investigate prominent high-tech firms, so – in the absence of any online privacy law – they just made up their own rules. Then the FTC announced that (surprise!) web companies aren't complying with them, so now the agency needs the legal authority to regulate online commerce.

If given the authority, what new burdens would the agency place on web companies? We can't say for sure, because the FTC proposal is for Congress to leave it up to the "implementing agency" to define new requirements. Apparently the implementers at the FTC don't want to tell us what's in store for e-commerce.

What we do know is that the FTC doesn't want these privacy rules to apply to all businesses – just web companies. And what about the costs of these new regulations? Sorry, that's somebody else's department. FTC Commissioners voted 3-2 in favor of recommending new online privacy laws. Said Orson Swindle, who cast one of the two dissenting votes: "Shockingly, there is absolutely no consideration of the costs and benefits of regulation; nor of regulation's predictable and unanticipated effects on competition and consumer choice; nor of the experience to date with government regulation of privacy; nor of Constitutional issues; nor of how this vague and vast mandate will be enforced."

Right now, consumers have all kinds of great high-tech tools to protect their privacy, and they have the greatest tool of all to discipline a customer-unfriendly website. They can choose not to visit.