Archive for February, 2012

Observations on the White House Privacy Report

Monday, February 27th, 2012

Last week, the Administration released its long-awaited privacy report.  The new privacy framework includes a Consumer Privacy Bill of Rights and a Multistakeholder (MSH) process to develop “enforceable codes of conduct” that put those rights into practice.

The inclusion of this “Bill of Rights” raises some serious concerns. In adopting the language of “rights” the Administration is moving toward the European approach, which also discusses privacy in terms of rights.  This sends the wrong signal.  The U.S. has created an environment that is much more conducive to IT innovation, partly as a result of our less regulatory privacy regime.  It is not an accident that the U.S. has spawned literally all the great IT companies of the last couple of decades.  Google, Facebook, Amazon, Microsoft and others all depend on personal information in one way or another.  So, why we would want to move in the direction of Europe is a bit of a mystery.

Adopting the language of rights also provides a rationale for not subjecting privacy proposals to any kind of regulatory analysis.  Rights are absolute.  Once we label something a right, we’re saying we’re beyond the point of considering its costs and benefits.  But privacy regulation involves major tradeoffs that we would be better off to consider explicitly.  The White House report does not do that and suggests there is no intention to do so in the future.

In the report, the Administration also voices its support for legislation.  However, this seems somewhat inconsistent with the MSH approach described in the report.  A key advantage of the MSH approach, if structured properly, should be greater flexibility relative to regulation that would typically result from legislation.  This flexibility is vital for the tech sector, which is constantly changing.  We should give the MSH process a chance to work before trying to adopt something more formal.   Therefore, Congress should put efforts to enact privacy legislation on hold.

Raising the Cost of Innovation

Thursday, February 9th, 2012

Google stirred up a hornet’s nest when it announced its new privacy policy, including questions from Congress, a request from the EU for Google to delay implementing the new policy pending an investigation and, yesterday, a Complaint for Injunctive Relief filed by EPIC alleging that the new policy violates the FTC’s Consent Order.

Google’s new privacy policy appears to represent a relatively small change that is also pro-consumer.  The company is proposing to consolidate privacy policies across its various products, such as Gmail, Maps and YouTube.  Google says it is not collecting any new or additional data, is not changing the visibility of any information it stores (i.e., private information remains private), and is leaving users’ existing privacy settings as they are now.

Google has indicated it will merge user data from its various products, and this is what has riled up critics, who apparently believe that combining information on users, even within a company, is harmful. Yet, combining the data Google already has will increase the value of those data, both for the company and its users.  As its understanding of users increases, Google will be able to provide more personalized services, such as more relevant search results. And, of course, if it can serve users more useful ads then it can charge advertisers more for those ads.

It is important to note that the new policy has not actually been implemented.  No actual users of Google products have experienced how the policy will affect their user experience or had a chance to react to it. If users feel the change negatively impacts their experience, they will presumably let Google know.

Not being a lawyer, I’m not going to opine on whether this policy is or is not consistent with the FTC Consent Order.  But the episode is troubling if one thinks about its potential effect on innovation on the Internet, which largely depends on the use of information—either to develop and improve products or to fund them.  It seems now that the cost of making even a modest innovation has ratcheted up.