The Pretense of Judicious Deliberation on the Rush to Impose Privacy Regulation at Any Cost

by on March 16, 2011 · 0 comments

National Journal reports that the Department of Commerce (NTIA) will, at a Senate Commerce Committee hearing today, call for a “consumer privacy bill of rights”—a euphemism for sweeping privacy regulation:

“Having carefully reviewed all stakeholder comments to the Green Paper, the department has concluded that the U.S. consumer data privacy framework will benefit from legislation to establish a clearer set of rules for the road for businesses and consumers, while preserving the innovation and free flow of information that are hallmarks of the Internet,” [NTIA Administrator Larry] Strickling said in his prepared testimony obtained by Tech Daily Dose.

In other words: “We’ve taken the time to think this through very carefully and have reluctantly come to the conclusion that regulation is necessary.” Sorry, but I’m just not buying it—not just the wisdom of the recommendation but the process that produced it. Let’s consider the timeline here:

  • October 27, 2010 – NTIA Administrator Strickling announces Green Paper is coming but says nothing about timing and little about substance
  • December 16, 2010 – NTIA/Commerce releases its Privacy Green Paper
  • January 28, 2011 – deadline for public comments (28 non-holiday business days later)
  • ??? – Commerce decides regulation is necessary
  • March 16, 2011 – Commerce is ready to ask Congress for legislation (31 non-holiday business days later)

The Commerce Department gave the many, many interested parties the worst four weeks of the year—including  Christmas, New Year’s and Martin Luther King Day—to digest and comment on an 88 page, ~31,000 tome of a report on proposed regulation of how information flows in our… well, information economy. Oh, and did I mention that those same parties had already been given a deadline of January 31, 2011 to comment on the FTC’s 122 page, ~34,000 word privacy report back on December 1 (too bad for those celebrating Hanukkah)? In fairness, the FTC did, on January 21, extend its deadline to February 18—but that hardly excuses the Commerce Department’s rush to judgment.

Now, does this timeline suggest that either agency—but particularly Commerce—was really serious about gathering substantive comments on its report? Or that the agency really had time to carefully consider the comments that were filed in the short time it allowed? It should be pretty obvious to anyone what a mockery this process has made of transparency. The Commerce Department’s pretense of judicious deliberation is a pretty thin cover for its clearly premeditated rush to regulation.

Now, if I were a betting man, I’d wager that these agencies might not have been planning to move so quickly—until, by the time Strickling first mentioned the Green Paper at the end of October, it became clear the Democrats would be hammered in the November elections. Who could blame them for feeling they needed to put their regulatory agenda into high gear? It’s not just that the Republicans suddenly took over the House with a 48-seat majority. It’s also that people throughout the Administration had finally tasted their first real defeat—a reminder that they, too, might be booted out in November 2012—which means they had a mere 8-10 months to actually “do something” to move privacy regulation forward before everything in Washington shut down for the circus that is every presidential election.

All of that is perfectly understandable, and I don’t doubt that the Republicans would think much the same way if the shoe were on the other foot. But let’s not kid ourselves about the political reality here: This administration has been pushing to impose comprehensive controls on the collection and use of information long before they came into office: Obama made privacy regulation one of the key planks of his campaign’s tech policy statement, for example, and even on election day, the Washington Post was talking about his planned “focus on protecting online privacy.”

One might say the FTC staff had started down this path even under the Bush administration. (Indeed, Adam Thierer and I proposed “Principles to Guide the Debate” over online advertising & user privacy back in September 2008.) But the FTC is still “behind” the Commerce Department in terms of being willing to openly call for increased regulation—which is pretty ironic, since the Commerce department is supposed to be the one agency that can be relied on to think about how regulation affects, well, commerce!

Still, the FTC’ may be playing a bit coy: Despite repeated public insistence by FTC staff (most recently at last week’s IAPP Global Privacy Summit) that the agency was only calling for improved best practices, the Staff report is worded in such a way that the WSJ was able to assert last week (in a story on the “Privacy Bill of Rights” legislation being drafted by Sens. Kerry and McCain) that the FTC had “urged Congress to authorize creation of a ‘do-not-track’ system.” The WSJ later ran a correction to the story—but not on this critical statement, which apparently the FTC didn’t really mind… probably because it’s exactly what the agency wanted journalists to say!

In my comments on the FTC’s preliminary staff report, I pointed out the rather obvious fact that FTC Chairman Jon Leibowitz’s term expires this coming September. My hunch that he was using the draft report to gain political capital for his renomination was reinforced when, little more than two weeks after the FTC’s comment deadline closed, the President issued the Chairman’s renomination. (Some observers had speculated that Obama was dissatisfied with Leibowitz for not “doing more,” in terms of earning headlines, for privacy protection, and that the newly appointed Commissioner Edith Ramirez might make an attractive replacement, as the first Latina to head—I believe she would have been—a major regulatory agency. Thus, speculation went, Leibowitz was trying to earn brownie points among those on the Hill who want to do something, anything to “get tough” on privacy regulation, no matter the costs.)

Whatever one says of the FTC, it is, at least in theory, an independent regulatory agency. The Commerce Department, by contrast, is simply an arm of the White House. And it should be pretty clear that, while the FTC has spent a lot of time on roundtables and in thinking through its staff report, the Commerce Department is rarin’ to go. with new privacy regulations. That brings me back to my title: How serious could the Commerce Department really be here about collecting and processing public comment to understand the pitfalls of new privacy regulations?

I outline eight broad categories of concerns about privacy regulation in general in my FTC comments, which are equally applicable to the Commerce Department’s Green Paper.

my concerns are grounded in a firm belief that sound policymaking can be reduced to a single question: “And then what?”  What do we imagine will the first order consequences of the various changes the  FTC is proposing companies make—or perhaps be required by law to make—be  to the Internet ecosystem?  If the purpose of a “Do Not Track” mechanism is to create a market for privacy users to essentially, but simply and seamlessly, negotiate with websites over how to fund content, how do we imagine that marketplace will work?  ….

These three, deceptively  simple  words—“And then what?”—make much the same point the Nobel Prize-winning economist F.A. Hayek made when he remarked  in  The Fatal Conceit, his damning treatment of top-down government planning, that “[t]he curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.”.

So, how much do we really know about the framework for governing data use the FTC has outlined in its Staff Report?  What will be its costs, its effects on competition, its various other unintended consequences?

Adam Thierer has sketched out a number of tough questions that the Senate Commerce Committee should ask at their hearing today, focusing on the paucity of serious economic analysis of the harms that supposedly need regulation, the potential costs of regulation, etc. That’s exactly the kind of hard-nosed realism that’s been sorely missing from this debate, as Adam and I have repeatedly noted (1, 2, 3).

On behalf of all those who took the time to file thoughtful comments on the Green Paper (sorry, I was busy launching a new think tank and finishing a 575 page book!) on the assumption that the Commerce Department was actually approaching this issue with an open mind and would weigh those comments seriously, I can only cite to that contemporary Blackstone of legal authority—yes, you guessed it, The Simpsons.  Specifically, I direct the court’s attention to episode 2F04, Bart’s Girlfriend:

Skinner: Congratulations, [Bart] Simpson.  You just fell for our sting and won
         yourself three months' detention.  There's no such thing as
  Willy: There's not?  Ya used me, Skinner!  Yah used me!

The clip is available here.  To paraphrase: “Ya used us, Strickling, ya used us!”

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