Regulation

Will Consumer Privacy Initiatives Slow the Internet Economy?

California looks to grant its residents new "rights."

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As the legislative session ends, California political junkies will soon turn their attention to the slate of initiatives making their way to the November 2018 ballot. One of the more significant proposed statewide measures is the California Consumer Privacy Act of 2018, which would give consumers the "right" to know what information businesses collect and to stop them from using it for commercial purposes.

The initiative promises consumers "control" over the personal information businesses glean from "tracking and collection devices"—and seeks to restore privacy rights at a time of "accelerating encroachment on personal freedom and security." It would apply to all businesses, ranging from internet service providers to websites to cellphone companies.

The proposal has sparked concern in tech-friendly California, given that it could impose significant costs on everything from small-time websites to major internet players such as Facebook, Google and Amazon. If the measure qualifies for the ballot and is approved by voters, it would apply not only to California-based internet companies, but to any entity that does business in the state. So, it could have national reverberations.

"Forcing companies to allow consumers to opt out of tracking, and not allowing those companies to charge more or deny service to consumers who do opt out, would be burdensome for websites and application developers, and would significantly hurt the advertising industry since it would decrease the amount of targeted advertising they can do," said Tom Struble, tech policy manager at the R Street Institute in Washington, D.C.

The initiative would provide consumers with four new "rights" that would be inserted into the state Constitution. First, consumers would have the right to learn about the categories of personal information that any business has collected from them. Second, consumers would have the right to know how that specific personal information is being used—i.e., whether it has been sold or shared for marketing or advertising purposes.

Third, consumers would have the right to "direct a business" not to sell or share that information. Finally, the initiative grants consumers the right to "equal service or price," which means the business would be forbidden from charging different prices or limiting services if a consumer directs a business not to use the information.

Companies would be required to honor a consumer's information request within 30 days and provide it at no charge. The initiative requires companies to set up a toll-free telephone number and website by which consumers could make a "verifiable" request.

The initiative's backers argue that consumers "are in a position of relative dependence on businesses" that collect this information and that it is difficult for them "to monitor business operations or prevent companies from using your personal information for the companies' financial benefit."

Critics, however, argue that the measure doesn't make necessary distinctions. Unlike a bill now in the California legislature, it doesn't distinguish between, say, internet service providers that operate essentially like paid utilities and businesses that offer access to their websites and are paid based on advertising fees. It also does nothing about a potentially greater threat to privacy—collection of data by state and local governments.

The issue has gotten more attention since April, when President Donald Trump signed a law that repealed some Obama-era Federal Communications Commission rules. The rules would have required internet service providers to get permission before using a customer's information, such as their browsing history, to create targeted online advertisements.

The California Legislature is now trying to restore some of those Obama-era rules. Assembly Bill 375 was designed to "protect California consumers since Congress and the Trump administration effectively halted a set of federal consumer privacy protection rules on internet service providers that were scheduled to take effect," according to the state Senate Judiciary Committee analysis.

AB375 applies only to broadband providers. As the thinking goes, "people pay heavily for internet service," which "is akin to a must-have utility," explained the San Diego Union-Tribune in an editorial supporting the bill. By contrast, Facebook and Google provide their services for free. Consumers presumably know that the "cost" of maintaining a Facebook page and searching for information on a web browser is that those companies can sell targeted advertisements based on one's search and buying habits.

The bill was referred to the Senate Rules Committee Tuesday following some technical amendments and is likely make it to the Senate floor by Friday's end-of-session deadline. The initiative has been cleared for signature-gathering. It would go far beyond the intent of AB375 by imposing new requirements on every type of firm that operates in the state.

Consumer initiatives have met with varied levels of success in California over the years. The most recent, Proposition 45, would have "required changes to health insurance rates, or anything else affecting the charges associated with health insurance, to be approved by the California Insurance Commissioner before taking effect." It lost 59 percent to 41 percent.

The big question with all initiatives is whether their backers have the millions of dollars necessary to collect signatures and then run a successful general election campaign. Given the far-reaching implications of the proposal, Californians can expect aggressive push-back from the tech community if this one starts looking like a serious deal.

This article first appeared in Calwatchdog.

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  1. I think everyone except the 4th one (not being able to have the providers charge a different price) are reasonable – except for ISP’s. I don’t think ISP’s should be charging more if I choose not to share info (like USPS wouldn’t be charging more if they can’t read my mail).

    I’m a software engineer – though I’ve mostly transitioned to back-end technologies – so I understand the technical complications involved with this, and it’s not as bad as it sounds. I can’t speak from the marketing/business side, but considering how terrible the business requirements I get are (when I even get formal requirements), it’ll probably be hellacious for them. As a contractor who has worked for about 10 different companies, this is a fairly ubiquitous situation in my experience. Although I say that somewhat tongue-in-cheek, I do hope they know who they’re selling this crap to.

    1. Even more reasonable is to stay the fuck out of everybody else’s business. It’s simple in two aspects: the laws are too easy to get around in all sorts of ways; and the more government intrudes, the more ways it thinks of for further intrusion.

      Just stay the fuck out of everybody’s business.

      1. I’m making over $12k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life. This is what I do,…Go this web and start your work… Good luck.. http://www.startonlinejob.com

    2. “Finally, the initiative grants consumers the right to “equal service or price,” which means the business would be forbidden from charging different prices or limiting services if a consumer directs a business not to use the information.”

      To me, this is a completely conflicting idea. When I use google/facebook/whatever, I am paying for a service. I’m paying for that service by granting them permission to collect and sell my info. If the government would like to force google to offer an option where customers can pay for the service with money instead of info, that’s just fine (okay, it’s not fine, but it is semi-tolerable). Mandating that they provide the service for free… completely unacceptable.

      What solution does a company have? Ultimately, to follow these rules, the company would have to charge everyone a standard rate in real money. So, essentially, the rules are eliminating my option to pay for services with information.

  2. Given how powerless people have been feeling in the wake of the Equifax breach, this is one regulation that people of all political stripes will get behind.

    I think we libertarians can see this breach, and Equifax’s response to it, for the market failue that it is, and get behind (gasp) government intervention. After all, the usual market mechanisms that keep companies responsive to the populace have failed (we’re not the consumers, but the product).

    Anyone who believes they have power as consumers in this situation, should try calling their bank and asking them to stop sending their data to Equifax.

    1. It’s not a market failure, it’s a direct result of hobbled markets in a thoroughly regulated and controlled business area complying with a host of restrictions and nonsensical requirements.
      It’s a government failure — mandated data collection by a limited number of favored companies with nationwide rules and regulations can lead to no other result. Or has the IRS never had a data breach?

    2. Sue Equifax under the FCRA. That is what I am next week. Get a free copy of your credit report and makes sure they fix the mistakes. There are always mistakes on your credit report.

      1. That is what I am doing next week… that is.

  3. I support this personally. Given how frequently personal data is taken without permission (ignoring stuff people give out willingly but when sites take the info without any permission), the internet has earned some regulations. They’ve not proven to be trustworthy stewards.

    1. They’ve shown themselves to be far more trustworthy than regulators.
      What the internet needs is more competition, more markets, more options. Not more regulations.
      There are no trustworthy stewards when the state is involved.

      1. You assume these firms want to be competitive with each other. Little I’ve seen verify that. If it was, Apples e-book suit for price fixing wouldn’t have been needed as Google would’ve undercut them.

  4. First, consumers would have the right to learn about the categories of personal information that any business has collected from them

    Replace “business” with “government” and I’m all for this.

    1. I’d rather ADD “government” instead of replacing “business”

  5. There is more to life than efficiency.

  6. Once they remove the ad-sculpting from the internets maybe they can pass a law that chocolate cake manufacturers have to keep those nasty calories out of their product. And I want free beer, dammit.

    Websites don’t include tracking as a by-product of their business – tracking *is* their business. You want websites that don’t track you? There are alternatives, they’re just not as easy and convenient and ubiquitous as the big boys. How much do you currently pay for Google and Facebook? Your privacy, that’s the deal. You aren’t the customer, you’re the product being sold. Get that through your fat head, you moron. Take away their ability to track you and how the hell are they supposed to make money, why should they agree to give you something for free?

  7. Now is the time for all good companies to depart California. The entire silicon valley should pack up and move to Austin.
    The lawsuit against California for passing a law purporting to apply to companies outside of California should take about 30 seconds to adjudicate.
    Entertaining as hell they are doing this as a constitutional amendment. An unconstitutional state constitution? Only in California. Exactly how does an initiative action create a law the amends the constitution anyway?
    Best possible outcome: All ISPs refuse to provide service to any government agency in the state of California.

    Or can the rest of the world do a reverse secession and force California out?

  8. This is the problem with identity based business transactions. A better format for business transaction is remaining as anonymous as possible. Cash was great for having anonymous transactions but as people moved to credit cards, people’s names were tied to business dealings.

    Now Motel 6 requires ID to stay and they give those names up to government. Equifax stores more personal information than just how much credit worthiness you have. ISPs require personal information. Cell phone companies require personal information unless you have a burner phone. Website accounts are more and more becoming tied to people’s identity rather than “fake accounts”.

    Why does it matter who pays the ISP bill? It doesn’t as the equipment is physically at an address and can be tracked by an account number. The government wants internet service tied to names with “secure” passwords so YOU are responsible. This fits right into massive government surveillance and being able to positively link website accounts to actual people.

    This is why I don’t sign up for grocery store member things unless I can enter a fake name. I pay with cash so my transactions cannot be collected and associated with me.

  9. Personally I haven’t had much of an issue continually giving these websites essentially fake information instead of my ‘real’ personally identifying information but I can see where these pieces of legislation are coming from.

    It’s understandable that companies like Google and Facebook are absolutely against it though since it implodes their business model from top to bottom. Not sure how I feel about that since Google and Facebook are both enormously shitty but that shouldn’t be a reason for the Government to crush them like a bug. It’s obvious that most people have no problems using those services even though they track your every move online though. That says to me that the market thinks the benefits outweigh the downsides.

  10. [i]One of the more significant proposed statewide measures is the California Consumer Privacy Act of 2018, which would give consumers the “right” to know what information businesses collect and to stop them from using it for commercial purposes.[/i]

    Personally, I’m more concerned about other entities collecting and using my personal information for other purposes (political, in particular)

    Businesses can be sued.

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