A Patchwork of Conflicting Online Privacy Legislation Threatens to Strangle Innovation

Mar 09, 2011, 07:40 ET from NetChoice

Updated iAWFUL List Ranks Top Threats to Online Commerce

WASHINGTON, March 9, 2011 /PRNewswire-USNewswire/ -- NetChoice's 2011 "iAWFUL" list of bad Internet laws has identified a confusing and contradictory surge in state and federal online privacy legislation that is threatening to tie the hands of online innovators.  Proposals in Washington, D.C., California and Tennessee all use the cover of online privacy to insert government regulators between consumers and the online services on which they depend.

The Internet Advocates' Watchlist for Ugly Laws (iAWFUL) (http://www.iawful.com) tracks the 10 pieces of state and federal legislation that pose the greatest threat to the Internet and e-commerce. In its first update for 2011, iAWFUL identifies several new measures that threaten to undermine the freedom and openness that lie at the core of the Internet's global appeal.

"Our 2011 iAWFUL list catalogues the disturbing willingness of legislators to micromanage how consumers and businesses communicate," said Steve DelBianco, executive director of NetChoice. "The continued evolution of free online services is imperiled by state and federal legislators tripping over themselves to jump on the privacy bandwagon."  

The number one offender on the iAWFUL list is a bill by Rep. Jackie Speier (D-CA) to let the Federal Trade Commission create regulations to dramatically reduce the use of tracking data that drives Internet advertising, by enforcing a global opt-out preference by users.

The effect of a global opt-out will reduce the population of users for whom targeted ads can be delivered.   If ads aren't targeted, advertisers will pay less and sites may be forced to show a greater quantity of lower-paying ads.  And if that doesn't make up the lost revenue, sites will likely spend less on new features and services.  Do Not Track will harm consumers and businesses alike.

Neither Rep. Speier nor the FTC have been able to demonstrate to Americans why the world needs Do Not Track.  Two of the FTC's own commissioners doubt whether such a measure is useful and suggested that the same goals might be accomplished through improved enforcement rather than rulemaking.

At the state level, an avalanche of proposed legislation seeks to regulate everything from online speech (Tennessee's SB 487), to sharing personal information (California's SB 242), to a website's ability to use consumer information to display relevant content and advertising (New York's AB 4809).

All of these proposals threaten to swamp online retailers with an impossible patchwork of conflicting state laws. Rather than adding additional burdens on users and websites, state governments should educate consumers about Internet data collection while ensure that companies comply with their privacy policies.

"We are witnessing an onslaught of network nannies," said DelBianco. "While protecting consumer privacy and minors is important, legislators need to remember that consumers have an important role in managing their own relationships with online service providers they choose to do business with."  

Fortunately, several top threats identified in the 2010 iAWFUL list were defeated. Efforts to enact a Streamlined Sales Tax (SST) were turned back at the federal level after NetChoice joined a chorus of voices documenting harms the tax would impose on small online retailers.  The SST will find a similar reception in the 112th Congress judging by a House Resolution offered by Representatives Dan Lungren (R-CA) and Zoe Lofgren (D-CA) that put States on notice this Congress won't impose any new tax collection burdens on the nation's small online businesses.

Another high-profile item on the last iAWFUL – a Colorado bill that required retailers to report consumer purchases to state tax collectors – was rejected by a Colorado judge on constitutional grounds. However, Hawaii and California legislators are threatening to follow in Colorado's footsteps, and NetChoice remains vigilant on the issue.

The iAWFUL list, created in 2009, identifies America's 10 worst legislative and regulatory proposals targeted at the Internet. The iAWFUL web site urges Internet users to join the fight to fix bills that threaten the future of online commerce and communication. The list is regularly updated to reflect the most immediate dangers, based on regulatory severity and likelihood of passage.

The full iAWFUL list, complete with bill descriptions, is available at www.iAWFUL.com. Twitter users can follow iAWFUL developments on the NetChoice feed (@NetChoice) and via the hashtag #iAWFUL. Expanded information is also available on the NetChoice blog at http://blog.netchoice.org

The entire 2010 iAWFUL includes:

1.  Congressional Do-Not-Track Privacy Bill

What's wrong? Do Not Track is an unjustified restriction on targeted advertising, which helps pay for free online services and content.

2.  Social Network Micro Managing (California and Tennessee)

What's wrong? These bills would prevent teenagers from sharing their address and phone numbers on social networking sites and further limit their online interactions.

3.  Affiliate Nexus Bills (California, Texas, Massachusetts, et al.)

What's wrong? An unconstitutional expansion of sales tax burdens to out-of-state businesses.

4.  Recurring Offer Restrictions Bills (Washington, Indiana, et al.)

What's wrong? Restricting consumers' ability to use convenient automatic renewals.

5.  Child Online Registry and Do-Not-Market Mandate (Indiana)

What's wrong? Dangerously exposes children's email addresses while drastically restricting U.S. advertisers' ability to market to children..

6.  Behavioral Advertising Restrictions (New York)

What's wrong? Severe restrictions on websites' ability to collect user information that enables websites to provide free services and content.

7.  Telemarketing Restrictions on Online Marketing (Missouri and Indiana)

What's wrong? Sorry, but Do Not Call just Does Not Work for the Internet.

8.  Adolescents' Online Privacy Protection Act (New Jersey)

What's wrong? Strips teenagers' access to any website collecting information without first obtaining parental consent.

9.  Remote Purchaser Reporting Mandate (California and Hawaii)

What's wrong? Requires out-of-state companies to report consumers' purchasing information to the state's Department of Revenue.

10.  Restrictions and Liability for Geo-Location Tracking (New Hampshire)

What's wrong? Requires repeated consumer consent for the collection of geographical information.

NetChoice is a public policy advocacy organization that promotes Internet innovation and communication and fights threats to online commerce at state, federal and international levels.  The Washington, DC-based group protects Internet commerce-driven competition and battles rules that hinder consumer choice and hurt small businesses.  For more information, see www.netchoice.org.

SOURCE NetChoice