Articles by Braden Cox

Braden Cox formerly wrote for the TLF.

In light of the Delahunt “Main Street Fairness Act” (HR 5660) introduced earlier this month, over at the NetChoice blog Steve DelBianco describes why it is important to consider that “where you sit determines where you stand”  when it comes to Internet taxes:

Big-box stores like Walmart and Target support a federal mandate that forces everyone to collect sales tax, even for states where they have zero presence.  So why would these giant chains  — who already have to collect taxes on their web sales — stand for this?

Because from where Walmart sits, any simplification – even a little – helps reduce their costs.  And because these big boys want to impose new tax collection costs on their small online competitors.

He’s also reacting to a post at BNET last week, where Chris Dannen described how big retailers are supporting the so-called “streamlined sales tax”:

“Brick-and-mortar retailers — many of whom have operations online — are some of the most vocal proponents of the new online tax laws. The members of the pro-tax lobby, which includes Best Buy, WalMart ,Target and others, already collect sales tax online, regardless of the buyer’s state, and see Web-only retailers as having an unfair advantage, from How to Tax E-Commerce without Killing Entrepreneurship (and eBay)”

Now is a critical time for online commerce as policymakers assess their approaches to privacy. And as NetChoice says in our comments filed today, now is the perfect time for the Department of Commerce to be more involved in privacy issues.

What? We’re calling for more government involvement in a politically charged issue? Yes, and here’s why it’s an appropriate response to the Commerce Dept’s Notice of Inquiry.

Data flows today are much more complex than they were even a decade ago.  Simple one-way transfers between one country and another have been replaced by multinational corporations that transfer data across multiple jurisdictions on a daily basis.

Because of this, privacy-related laws and regulation can have a broad impact on the growth of online commerce, not just here in the U.S. but across the globe. And as a voice for commerce, the Department of Commerce should promote pro-commerce policies over there (EU, Asia, elsewhere) and over here (in the U.S.).

Here’s what we say in our comments:

  • The Commerce Department should act as an international ambassador for innovative American online companies.  The Department can play an important role as a government-to-government advocate for flexible international rules to promote continued innovation and economic growth.  And as a government agency speaking to other government agencies, the Commerce Department can bring credibility and leverage that cannot be matched by corporate interests alone.
  • Domestically, the Commerce Department should work with the FTC to step-up state and federal enforcement against unfair or deceptive information practices. Aggressive enforcement will help foster a better climate for innovation than would expanded regulation. Continue reading →

There’s a bill moving in California (SB 1361) that restricts how social networking sites display the personal information of 13 to 17 yr olds. It’s billed as a privacy bill and at first glance seems relatively harmless — after all, kids don’t need to be broadcasting their contact information, right? Maybe. It all depends.

It depends on the situation, obviously. We teach our kids to recognize risky situations and to react appropriately.

But whether or not teens are at risk by publishing their telephone numbers is not the threshold question here. The law presumes such and I’m not aware of any specific findings offered in testimony about the bill.

Instead, the issue at hand is whether we need a law to restrict social networking websites from publishing certain information from teenagers. And with any law, there’s always the corresponding principle of unintended consequences.

A bit more about the bill. It restricts a social networking website from displaying the home address and telephone numbers of minors who self-identify as being under 18. It only applies to “web fields specifically designated to display the registered user’s home address or telephone number” – recognizing the impracticality of having hundreds of thousands of websites police every area where kids can share information.

Arguing against bills that aim to protect children is really hard work – who can be against the children (or in this case, adolescents)? But I truly believe this bill has serious unintended consequences and sets a bad precedent for how minors are allowed to share information on the Internet.

Here’s why SB 1361 shouldn’t become law: Continue reading →

For the past month, online companies have considered the privacy legislation discussion draft from Rep. Boucher and Stearns. The legislation is a broad attempt to set privacy defaults for the collection, use and sharing of information on the Internet.

Last Friday, NetChoice submitted comments to Rep. Boucher and Stearns.

While there are some aspects of the bill to like (eg. no private right of action), we’re worried that the bill does too much, too soon, to set opt-in or opt-out defaults. We explored in a previous post why flexibility in setting user defaults is important for continued social network innovation.

Fortunately, open and thoughtful consideration of this matter can continue without undue pressures to find a quick fix for privacy. Because while there have been state legislative proposals on privacy, there is not now a patchwork of state laws creating unworkable compliance challenges for interstate e-commerce. In other words, we can take our time and get this right.

Our comments discuss how the draft bill would interfere with four commonplace scenarios for collecting and using information. Here’s one of ’em:

1. The Operational Purpose exemption in this draft legislation is too narrow, in that it does not permit use of covered information for marketing or advertising to existing customers.

Case 1: A consumer buys a new washer and dryer and writes her email address on a product registration card. That’s an Operational Purpose, so no consent is required to collect the info.

But if the retailer later wants to send an email offering an extended service contract, he has to first obtain consent to send the email, since that’s a use of covered information for marketing purposes.

Continue reading →

Companies often promote consistent and reliable customer experiences. KLM touts itself as “the reliable airline” while Michelin touts its dependability “because so much is riding on your tires.” And now we have Yahoo, who announced that it will be increasing the social networking functionality in Yahoo Mail. Yahoo has the ability to promote consistency in determining user defaults for sharing information.

But social networking is a product much different than most – it is participatory. Passengers can’t fly airplanes and drivers don’t design tire tread, but social networking users control what and with whom they share information.

So what happens when a social networking service changes functionality or adds new features? How does a company be consistent in carrying-over a user’s preference from the prior version to the new one? What assumptions should it make on user privacy preferences for new features?

These considerations matter whenever an online service tries to increase its social networking functionality. Last week, Facebook unveiled new privacy controls, and we blogged that it was a welcome response to clear-up confusion. In the coming weeks Yahoo will change how status updates work in Yahoo Mail. Michael Arrington’s TechCrunch article describes it well:

[C]urrently to see status updates for others in Yahoo Mail, you have to have a mutual follow, meaning both people have agreed to be “friends.” You can then see that user’s Yahoo status updates as well as updates on third party services that they have added to their Yahoo profile as well. In the new version there will no longer be a requirement for a mutual follow. So, like on Twitter, users can follow whomever they choose. This isn’t actually a dramatic change for Yahoo, since users can follow others in this way already on Yahoo Messenger.

Like Google and Facebook before it, Yahoo is adding features to make its service more “social.” And because of the scrutiny over the changes by Google and Facebook, Yahoo seems to be going out of its way to assure users that they can rely and depend on Yahoo. According to the Yahoo Corporate Blog: Continue reading →

In a nod to the popular Dos Equis commercials, Steve DelBianco blogs about the new Facebook privacy controls and says “Stay thirsty, Facebook.  We need you guys to keep innovating.”

Right now you might not care much about Facebook’s ad revenue.  But you might start caring if falling ad revenue forced Facebook to cut spending on things like server capacity and speed, content vetting, quality control, or development of new features and access for mobile devices.

You’d also start caring if Facebook over-reacted to privacy critics by slowing-down its innovation.  I’m talking about innovations like “instant personalization“, which helps selected websites customize your content based on your Facebook profile.   And innovation like a social plugin for content websites, which makes it so easy for you to refer articles or news to your Facebook friends.  Both of these innovations help create a personal, social Internet experience, and they do it though sharing of information.

As I’ve previously blogged, we’re just at the tip of the iceberg when it comes to socializing the web. Whether it’s over beers or on the Internet, users want to be social — even if we’re not the most interesting guy in the world. So keep innovating, Facebook.

In his op-ed today, Facebook founder Mark Zuckerberg promised further changes to give users better control of privacy settings.  It’s a clear signal that Facebook is seeking to meet user privacy preferences while still attracting enough ad revenue to keep the site free for everyone.  But will these signals even be heard above all the noise made by Facebook’s critics?

That’s the question posed by my colleague Steve DelBianco at the NetChoice blog:

Radio engineers speak in terms of signal-to-noise ratio when they want to measure usable signals against a background of useless static. There’s been a lot of noise over Facebook recently, driven by a feeding frenzy of technology bloggers and journalists.

Their hyperbole hit a high note when some equated Facebook’s privacy drill to BP’s giant oil spill, while others wrote articles (or op-eds? It’s so hard to tell sometimes) that insult Facebook employees and impugn their motives.  Just when you think nothing could rival the noise of Washington’s echo chamber, the technology pundits show us how a real shout-down is supposed to work.

Steve hits hard against the pile-on “feeding frenzy” on Facebook, going so far as to call critics “Chicken Little.” Strong, but also accurate.

While we all support the process of vocal user feedback to improve a product/service, with Facebook there’s more going on. Even Senators with a love for the limelight have jumped on the bandwagon by telling Facebook how to manage a service it gives us for free. Of course, management by Congress is the fastest way to suck innovation and competitiveness out of one of America’s fastest growing industries.

To the extent that productive criticism turns into deafening noise, Facebook’s positive signals will be unfairly distorted.

What makes a joke funny is that there is often a kernel of underlying truth. And  when Senator Rockefeller quipped that COPPA’s age should be extended beyond 12 to age 18, or even 25, nervous laughter followed. Because unfortunately there’s existing movement afoot from some advocates to expand COPPA’s reach and scope to adolescents.

I attended this morning’s Congressional hearing on the Children’s Online Privacy Protection Act (COPPA), where I heard TLF’s own Berin Szoka deliver masterful testimony. Based on what we heard at the hearing, we’ll have to be on the lookout for efforts to create a new privacy regime for adolescents (13-17).

Senate Commerce (Consumer Protection Subcommittee) heard testimony from Facebook, Microsoft, PFF, Kathryn Montgomery, EPIC, and the FTC.  Members at the hearing were: Rockefeller, Pryor, Wicker, and Klobuchar. The hearing was convened to learn about how new technologies impact children privacy in the context of the FTC’s current review of COPPA. Through the prepared testimony, it was clear that there were two camps for the role of Congress:

1. Congress doesn’t need to amend or propose new legislation. The FTC has sufficient authority to make changes to COPPA, as only minor changes are needed Continue reading →

Facebook is in the spotlight—unfairly.

Yesterday, four Democratic U.S. senators — Charles Schumer (D-N.Y.), Michael Bennet (D-Col.), Mark Begich (Alaska) and Al Franken (D-Minn.) — published a letter to Facebook expressing their concern over Facebook’s privacy policies.  They asked Facebook to “fix” its privacy policy?

Privacy is a complex and often personal concept – how do these four senators know it’s broken?

Well, the letter follows the announcement of Facebook’s new Open Graph API that could revolutionize social networking. As one commentator wrote on ReadWriteWeb, “the bits of this platform bring together the visions of a social, personalized and semantic Web that have been discussed since pioneered Web 2.0 back in 2004.” The future of the web is not just knowing whether a user is interacting with a webpage, but knowing whether users are liking a specific kind of thing (referred to as the semantic web).

This sounds like very interesting stuff (understatement intended). And here’s the thing that many people (including many members of Congress) forget:  Facebook is a new model of business that has shaken up the way we communicate. And it’s operating in uncharted territory, miles ahead of the Washington, D.C. crowd that would like to put their own stamp on the company. This is a company that is driving innovation, the last thing we need are politicians attempting to fine-tune the engine.

Which company is the next target of a letter? What’s the precedent being set by these demands for Facebook and other innovative web-based companies? I imagine there are a lot of concerned entrepreneurs across the country wondering if they’re next.

It’s April 15, so hopefully nobody’s waiting in long lines at the post office (though we think you should be using the Internet to file electronically). Unfortunately, it’s only April but already it has been a taxing year for online commerce.

We’ve seen six tax-related categories of bills that have been introduced in state legislatures this year: (1) Privacy-invading purchase reporting laws; (2) Bounty hunter bills; (3) affiliate advertising as a nexus for requiring sales tax collection; (4) imposing hotel taxes on online travel companies; (5) expanding Internet sales taxes based on inadequate simplification; and (6) new taxes on digital downloads.

Colorado law turns online companies into the purchasing police (and snitch)

Colorado passed HB 1193 earlier this year (it takes effect in May), and in an effort to get consumers to pay the use tax on Internet purchases it requires out-of-state companies to share purchasing data with the state Dept of Revenue.

Out-of-state retailers must track and report the purchases of Coloradans and: (a) file an annual statement with purchase data for each purchaser to the Department of Revenue; (b) send buyers a summary statement of all their purchases so they know how much use tax to pay (like a 1099 form we receive on investments, only would it be called “Form 1984”?); and (c) on every invoice and receipt, notify Colorado purchasers of their need to file a sales and use tax return with the state; Colorado’s Department of Revenue will now know all the vendors where residents made online or catalog purchases from remote sellers. This would include sensitive items of a particular kind of merchandise — sex items, specialty books, items that reveal political views, etc.

Declan McCullagh wrote a good article on this yesterday. California has an almost identical bill pending (AB 2078). So does Tennessee (HB 1947). Continue reading →