Coming off last week’s July 4 recess, the Senate held a hearing on the privacy implications of online advertising. Online ads, behavioral tracking, targeted ads – whatever you might call it – has been an explosive policy issue, but today’s hearing was mostly just sparklers, with only a few bottle rockets here and there.
The big players were there–Google, Microsoft, Facebook and NebuAd–minus the ISPs, which Dorgan called out as being absent (which is why there will be another online ads hearing just for the ISPs, sure to be full of loud M-80s).
Key concepts mentioned over and over: Self Regulation; the need for Baseline Privacy Law; Pseudo-Anonymous; Opt-in vs. Opt-out; Choice.
Key Principle #1 – Self Regulation
All the witnesses espoused the need for self regulation. I’ve never liked this term, as it sounds like more of a system of conscious personal health management than a public policy strategy. Alas, it’s the lingua franca of pro-market forces in Washington.
Google, not surprisingly, is a supporter of self-regulation when it comes to online advertisements (but see baseline privacy law below). Most surprisingly, Google took very little heat from the Committee. There weren’t any questions about why it took so long to have a privacy link on its website – which Google added only a few days ago. Was the hearing, hmm, hmm, a catalyst toward this sort of “self regulation”?
The FTC is pushing for “self-regulation” principles, which I describe more in a previous post. Continue reading →
Are small businesses empowered or encumbered by online advertisements? That was the gist of today’s hearing of the House Small Business Committee on Internet ads.
Rep. Charlie Gonzalez ran the hearing (you can watch it here on YouTube) and started off with how a book called “The Search” by John Battel inspired him to learn more about online ads. He introduced the concept of the microbusiness, which he credited to the MicroEnterprise Journal.
4 of the 5 witnesses were businessmen, so there was an apparent disconnect when Rep. Gonzalez asked the more difficult public policy questions: how do trademark protections affect search ads? Should Congress be concerned about Google/Yahoo? Or a potential Microsoft/Yahoo deal?
What was surprising is the amount of love that gushed toward gigantic Google from these small business persons. But Richard Lent of AgencyNet, a consulting firm, tempered his comments by saying that the op-out rights of consumers, making sure minors aren’t inappropriately targeted, phishing, and instituting limits on data retention were all important.
Charter communications officially announced plans to back-off its deal with NebuAd to monitor the traffic of subscribers for ad-delivery purposes. Yet the witnesses liked the ability to better target potential customers. But as a Washington Post article describes, Rick – creator of list to block ads called EasyList — doesn’t like it! His disdain for ads is a common consumer feeling that Internet ads still must overcome.
Remember that old Saturday Night Live character, the Pathological Liar, played by Jon Lovitz? He’d deliver outrageous lies, like the recurring one that he was married to Morgan Fairchild. When he realized he’d thought of a particularly good lie, he’d exclaim “Yeahhh! That’s the ticket!”
Future references to tickets may only be idiomatic if a new paperless trend for concerts and sporting events takes off. Ticketmaster has introduced what it calls a “Paperless Ticket” and Veritix has a paperless ticketing technology called Flash Seats. The concept is the same – no more paper tickets.
But to me paperless tickets are not the ticket for consumer convenience.
Ticketmaster touts the convenience of paperless tickets: “Fans will no longer have to stand in line to pick up tickets at will-call”, it says, and the “entire process is quick, secure and simple.”
And, after all, it sounds appealingly convenient. It’s similar to ordering movie tickets from home on Fandango. But this is one advancement in technology that heads in the wrong direction.
First of all, check out this line from the Ticketmaster press release:
Fans who ordered tickets can simply present venue door staff their credit card, along with a valid photo ID, and they’ll be given a receipt and granted immediate access.
I added the italics for emphasis. So fans must present the credit card used in purchasing the tickets and a government-issued photo identification for admittance? Continue reading →
Today the Politico ran an article on online retail theft, an issue that NetChoice has been working on for a while now. In the article Retail Merchants want Feds to Crack Down Online, writer Lisa Lerer does a good job of laying out the position of traditional retailers:
The stores blame online auction sites — particularly those that allow sellers to offer items anonymously — for boosting the crimes from a few stolen razor blades to enough theft to supply a burgeoning industry. They want Congress to limit the types of items that can be sold online and to require the sites to investigate their sellers.
Retailers are also going to the states. There were bills in Maryland and Colorado, among others, that would prohibit a state’s residents and businesses from selling common consumer items such as cosmetics, non-prescription drugs, food products, and baby formula on any internet auction.
Here’s the reality: when retailers blame online marketplaces for organized retail crime, they don’t want you to know about the root causes of their theft problems. The National Retail Federation conducted its own study of the problem in 2005, and found that:
- Most retail theft occurs from a store’s own employees and retail vendors. Shoplifting accounted for less than one-third of all theft.
- Retailers have pursued fewer prosecutions, arrests, and invoked civil recovery laws less frequently in 2005 compared to previous years.
- Retail theft is not increasing. The rate has generally declined over the years, and is 12% lower than it was just 4 years earlier.
Continue reading →
“I know a smart business decision when I see one — choosing open standards is a very smart business decision indeed. No citizen or company should be forced or encouraged to choose a closed technology over an open one.”
The above proclamation is from Neelie Kroes, the EU’s Competition Commissioner, as reported in the New York Times. And it seems odd–perhaps even an abuse of the position–for a regulator charged with enforcing competition rules to advocate for one business model over another.
First of all, the world is not so simple as “open” or “closed.” Most software has both open and closed elements, and thus falls along a linear spectrum of being more open or more closed (or proprietary). But politicians, we know, will often eschew nuance and speak in simple rhetoric. And what rhetoric it is! No citizen should be forced or ENCOURAGED to choose a “closed technology” — this is more befitting of the Free Software Foundation or any NGO, just not a government’s chief antitrust official.
On a related point, I’d like to refer you to a blog post by Noah Clements, who is a guest on the ACT blog. He’s an attorney and former computer programmer, and he recently discussed why governments should not choose technology standards:
First, it is simply too easy to bet on the wrong horse. A prominent developer, John Sowa, summarized this idea as the “law of standards”: “Whenever a major organization develops a new system as an official standard for X, the primary result is the widespread adoption of some simpler system as a de facto standard for X.”
Second, and a point that flows from the first, even when you choose the best option available, that option will not be the best for long, nor will it be the best solution for all problems.
I invite you to read the rest of his post.
Two contrasting examples of different paths to take for Internet Safety: beefing up our criminal laws vs. imposing pseudo-verification requirements on social networking sites.
First, the good news–a Virginia appellate court upheld the commonwealth’s law criminalizing online solicitation. The law makes it illegal to send sexual content to a minor online with the intent to engage the minor in criminal sexual conduct offline.
Enhancing existing or creating new criminal laws is the crux of a model legislation strategy NetChoice has been promoting before state legislators. It’s a way to direct an understandable legislative urge to protect children toward a productive, meaningful end. And to avoid the bad news – age verification.
Last week the Attorney General for Washington, Rob McKenna, called for sites like Facebook and MySpace to use credit cards as a way to prove identity. Now, age verification has been a pet project of AGs for over two years now. I’ve written on why age verification won’t work to keep kids safe, and so too has Adam Thierer (see his most recent post). I mean, really, don’t sexual predators have credit cards too?
This morning the Senate Committee on Foreign Relations held a hearing on Sovereign Wealth Funds–those growing state-owned investment funds (often invested in the tech sector) causing a political stir as of late.
The panelists differed at the margins, but all agreed that sovereign wealth funds are a good thing for the U.S. economy. We need the money! The thought that foreign governments would invest in the U.S. to surreptitiously bring down the U.S. is nil, as it’s a mutually assured destruction strategy. There’s just too much money being invested in the U.S. so even some Arab and Asian countries have an interest in seeing our economy prosper.
ACT released a paper on foreign direct investment earlier this year, where my coauthor Nora von Ingersleben and I conclude that there are processes already in place–namely CFIUS review–that will account for any national security threats. I wrote in a past blog post that Congress should refrain from politicizing foreign investment, including the proposed acquisition of 3Com.
Congress is right to be involved, and CFIUS keeps them involved. Congress receives reports from the CFIUS committee that does a national security review of foreign transactions to ensure transparency in the process.
David Marchick of the Carlyle Group was one of the witnesses, and last month he was a panelist at an event on foreign investment that ACT sponsored in the Capitol Building.
E-commerce advertising, meet sales tax. Sales tax, meet e-commerce advertising. And they are talking amongst themselves–in a New York court.
Last week Overstock.com filed a lawsuit against New York to overturn the state’s recently implemented sales tax law. Overstock’s suit is in addition to a lawsuit filed by Amazon.com, with both companies saying that New York’s law is unconstitutional and should be overturned.
Overstock’s complaint highlights the disconnect that regulators have with how technology creates new ways to drive business and enhance revenues. Overstock has affiliates, which are websites that contain a link to Overstock.com in exchange for the possibility of earning a commission from purchases made by those visitors who access the Overstock website form the affiliate’s website. New York says these websites, if in New York, are soliciting business sufficient to create a legal nexus for sales tax purposes. Overstock says it’s just advertising.
Here’s where technology makes it interesting. Overstock says:
- It can’t determine whether affiliates are actual legal residents of NY
- It doesn’t control the affiliate websites, and can’t determine whether a specific ad is a direct or indirect solicitation for business.
- Websites aren’t location specific. Are New York websites even soliciting New York consumers?
Continue reading →
As a result of New York’s new sales tax law, Overstock.com announced that it will bid adieu to its New York-based affiliates. 3,400 New York-based affiliate advertisers will no longer provide advertising for the company.
In a previous blog post, I talked about how the New York legislature in April passed a law designed to increase sales tax revenue from Internet sales. The law is referred to as the “Amazon tax” because of the way it broadens the sales tax law to apply to Amazon’s Associates Program, thereby achieving the necessary legal nexus for New York to force Amazon and other Internet retailers to collect and remit taxes on all sales to NY residents.
I like Overstock’s reaction here. Instead of rolling over and complying, it’s thumbing its nose at New York’s law and the up to 9.5% sales tax collection burden as Amazon’s lawsuit proceeds in court.
Amazon says it is advertising when it compensates New York-based websites for posting links that refer customers to Amazon.com. New York says it’s soliciting business. The distinction means all the difference in the world for sales taxes, for Amazon, and possibly even print media, television and radio.
Amazon.com sued New York State earlier this month, challenging a newly enacted law that has serious implications for online advertisements. In April, the New York legislature passed a law designed to increase sales tax revenue from Internet sales. The law is known as the “Amazon tax” because of the way it broadens the sales tax law to apply to Amazon’s Associates Program, thereby achieving the necessary legal nexus for New York to force Amazon (and other Internet retailers) to collect and remit taxes on all sales to NY residents.
A little bit of history helps put this law into context. The Supreme Court has held that a state can only impose sales or use tax-collection obligations on an out-of-state retailer if the retailers has a “substantial nexus” with the state (the Quill decision). Nexus occurs from a sufficient physical presence, which can be an office or warehouse, but physical presence can also derive from soliciting a state’s consumers via sales representatives located in the state. However, it can’t be just any sales rep, according to another Supreme Court case — in-state representatives must be “significantly associated with the taxpayer’s ability to establish and maintain a market in the state” (Tyler Pipe). Continue reading →
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