Reason Roundup

Trade Associations, Chamber of Commerce Warn of Danger in Data Privacy Bill

Plus: Purity politics, the end of the "millennial consumer subsidy," an unhappy outcome for folks seeking to free Happy the elephant, and more...

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splrfphotos174668 | SAKKMESTERKE/SCIENCE PHOTO LIBRARY/Newscom
(SAKKMESTERKE/SCIENCE PHOTO LIBRARY/Newscom)

U.S. lawmakers on Tuesday held a hearing on a bipartisan data privacy bill known as the American Data Privacy and Protection Act (ADPPA). While the broad contours of the bill have earned the support of tech-industry trade groups, some are warning that certain provisions of the bill could wreak a lot of havoc, including frivolous litigation brought by "a host of private lawyers for hire" and undue burdens on tech businesses. The bill has also earned opposition from the U.S. Chamber of Commerce.

At the hearing on Tuesday, members of the House Subcommittee on Consumer Protection and Commerce of the Committee on Energy and Commerce discussed ADPPA, which would set up a federal framework for the privacy and security of consumer data. The need for such a framework has support from some seemingly unlikely corners, in part because in the absence of a federal framework for dealing with user data, states have started making their own rules. (As of this summer, five states—California, Colorado, Connecticut, Utah, and Vermont—had done so.) And complying with a bunch of different states' rules would likely be more burdensome than complying with one national set of standards.

But the ADPPA may merely compound the problem of too many cooks, some trade industry groups warn.

In a letter to the leaders of the Senate Committee on Commerce, Science, and Transportation and the House Committee on Energy and Commerce, the Computer & Communications Industry Association, the Software & Information Industry Association, and TechNet note that the bill wouldn't really override state provisions:

Congress's consideration of this novel legislation occurs against a backdrop of a
rapidly growing patchwork of state laws, each containing slightly different and sometimes contradictory obligations. The language of the bill's preemption provisions appears to allow those laws to continue to remain in effect so long as the complaint does not allege violations of the ADPPA. In addition, the bill expressly preserves Section 1798.150 of the California Civil Code, which created a private right of action with recovery for statutory damages and led to a wave of costly litigation.

And this is far from these groups' only concern.

"The legislation contains several provisions that concern our member companies and need further refinement, among them an attempt to restrict the dissemination of information 'derived' from publicly available information, a novel 'duty of loyalty' and its attendant obligations, and an untailored, burdensome requirement to submit assessments of virtually all computer-based activities involving algorithms," states the trade group's June 14 letter.

(Data covered by the bill includes any information "that identifies or is linked or reasonably linkable to an individual or a device that identifies or is linked or reasonably
linkable to 1 or more individuals, including derived data and unique identifiers.")

The groups are especially worried about a provision creating a private right of action. That means anyone could sue over alleged violations of the bill.

"The bill's inclusion of a private right of action has the potential to compound the problems created by these and other novel obligations," the trade groups write. "The ADPPA represents the regulation of a massive, rapidly developing, and highly technical interstate information ecosystem. Every state that has considered and enacted a consumer privacy statute has eschewed a private right of action for good reason: the Federal Reporter is replete with instances of litigation abuse, a risk compounded by the bill's provisions allowing for recovery of attorneys' fees."

You can find a draft of the bill here and a briefing memo about it here.

The U.S. Chamber of Commerce also has concerns about the bill. In a draft letter obtained by CNBC last week, the chamber called the draft ADPPA "unworkable."

"A national privacy law should be a true national standard but the bill's preemption language carves out fifteen different state laws including those in California and Illinois," stated the Chamber's draft letter. "This legislation would create a new national patchwork of privacy laws."

In a May 31 statement, the group also warned against the private right of action. "A national data protection law including a private right of action would encourage an influx of abusive class action lawsuits, create further confusion regarding enforcement of blanket privacy rights, harm small businesses, and hinder data-driven innovation."

In general, the ADPPA could seriously limit how companies use data even with user consent, which could, in turn, limit their ability to make money and to provide free services to users. Under its provisions, getting consumer consent to use data in a certain way would not be enough. Rather, covered entities could not "collect, process, or transfer covered data beyond what is reasonably necessary, proportionate, and limited to provide specifically requested products and services or communicate with individuals in a manner they reasonably anticipate," per the briefing memo, which adds that "this duty applies irrespective of any consent from an individual."

The ADPPA would require "large data holders to submit annual algorithmic impact assessments to the FTC that describe steps the entity has taken or will take to mitigate potential harms from algorithms"—a provision that's at best a lot of busywork for companies and could potentially open them up to punishment from lawmakers or regulators who don't really understand technology.

The ADPPA also bans targeted advertising toward minors, orders companies to report on how algorithms affect minors, and creates a new Youth Privacy and Marketing Division at the Federal Trade Commission. And it would require that companies also allow adult users to opt out of targeted advertising.

Violations of any of these provisions could be enforced by the FTC, state attorneys general, or private civil lawsuits.

FREE MINDS

Virginia Postrel, former editor in chief of Reason, explores the concept of purity and why it matters to modern politics:

Purity is about identifying and eliminating contaminants—anomalies that are sources of danger. The danger may be physical, spiritual, cultural, or moral. To purify is to purge whatever is out of place. It establishes what belongs by banishing what does not. "The quest for purity is pursued by rejection," writes anthropologist Mary Douglas in her landmark 1966 book Purity and Danger.

Every culture and every person beyond infancy maintains standards separating clean from unclean, safe from hazardous, permitted from forbidden. We police purity when we do laundry, copyedit manuscripts, or recite religious creeds. Vegans observe one system of dietary purity, paleo adherents another. Concepts of purity are among the essential classifications we use to navigate the world.

"Ideas about separating, purifying, demarcating and punishing transgressions have as their main function to impose system on an inherently untidy experience," writes Douglas. Shared purity standards define communities. The rituals, customs, and mores that maintain purity embody communal values and beliefs.

The critical question, then, is not whether we care about purity but what we count as contamination. What characterizes an impurity? How small a trace constitutes pollution? Who decides? In many forms, these are the questions roiling our culture.

More here.

FREE MARKETS

The "millennial lifestyle subsidy" is ending. At The Atlantic, Derek Thompson explores why life is getting more expensive for a certain subset of millennials and startup-reliant urbanites:

For the past decade, people like me—youngish, urbanish, professionalish—got a sweetheart deal from Uber, the Uber-for-X clones, and that whole mosaic of urban amenities in travel, delivery, food, and retail that vaguely pretended to be tech companies. Almost each time you or I ordered a pizza or hailed a taxi, the company behind that app lost money. In effect, these start-ups, backed by venture capital, were paying us, the consumers, to buy their products.

It was as if Silicon Valley had made a secret pact to subsidize the lifestyles of urban Millennials. As I pointed out three years ago, if you woke up on a Casper mattress, worked out with a Peloton, Ubered to a WeWork, ordered on DoorDash for lunch, took a Lyft home, and ordered dinner through Postmates only to realize your partner had already started on a Blue Apron meal, your household had, in one day, interacted with eight unprofitable companies that collectively lost about $15 billion in one year.

These start-ups weren't nonprofits, charities, or state-run socialist enterprises. Eventually, they had to do a capitalism and turn a profit. But for years, it made a strange kind of sense for them to not be profitable. With interest rates near zero, many investors were eager to put their money into long-shot bets. If they could get in on the ground floor of the next Amazon, it would be the one-in-a-million bet that covered every other loss. So they encouraged start-up founders to expand aggressively, even if that meant losing a ton of money on new consumers to grow their total user base.

Now, with venture capital drying up and interest rates rising, those companies need to make money—which means raising prices. That means—per Thompson—that "the golden age of bougie on-demand urban-tech discounting has come to a close."

FOLLOWUP

New York's high court won't free Happy the elephant from the Bronx Zoo. The court ruled in a 5-2 decision that the elephant does not count as a person subject to freedom from illegal confinement. Backstory here. More on the court's decision here.

QUICK HITS

• WNBA star Brittney Griner is still being detained in Russia after officials found hashish oil—which is illegal there—on her at the airport near Moscow. She has been in custody since February 17. According to Russian state news outlet TASS, her detention was just extended another 18 days, until at least July 2.

• "Abandoning decades of antitrust precedent won't reduce inflation," writes law professor Richard J. Pierce Jr at The Hill.

• Some key takeaways from last night's primaries.

• Rep. Alexandria Ocasio-Cortez is coming out as an unlikely skeptic of new bipartisan gun legislation:

• Republicans in Congress are trying to restrict access to Freedom of Information Act requests to apply only to American citizens, barring foreign individuals and entities from making them. "FOIA lawyers are writing it off as a solution in search of a problem," reports Axios.

• Is the current bitcoin collapse different? "On Monday Bitcoin tumbled as much as 17% to $22,603, the lowest in about 18 months," notes Bloomberg. "Bitcoin is about to fall back below the highs of its previous halving cycle peak. That's something that's never happened before and matters for the investment case in crypto."

• New energy rules from the Biden administration. "Under the proposed rule, non-weatherized gas furnaces and those used in mobile homes would be required to achieve an annual fuel utilization efficiency of 95%," says a press release from the U.S. Department of Energy.

• Here's an interesting thread on burger pricing—from Brendan Hodge, a former pricing manager for Wendy's—that pushes back on corporate greed narratives: