The Federal Trade Commission is on Step Two.
The Federal Trade Commission is on Step Two.
The Federal Trade Commission issued a report today calling on companies “to adopt best privacy practices.” In related news, most people support airline safety… The report also “recommends that Congress consider enacting general privacy legislation, data security and breach notification legislation, and data broker legislation.”
This is regulatory cheerleading of the same kind our government’s all-purpose trade regulator put out a dozen years ago. In May of 2000, the FTC issued a report finding “that legislation is necessary to ensure further implementation of fair information practices online” and recommending a framework for such legislation. Congress did not act on that, and things are humming along today without top-down regulation of information practices on the Internet.
By “humming along,” I don’t mean that all privacy problems have been solved. (And they certainly wouldn’t have been solved if Congress had passed a law saying they should be.) “Humming along” means that ongoing push-and-pull among companies and consumers is defining the information practices that best serve consumers in all their needs, including privacy.
Congress won’t be enacting legislation this year, and there doesn’t seem to be any groundswell for new regulation in the next Congress, though President Obama’s reelection would leave him unencumbered by future elections and so inclined to indulge the pro-regulatory fantasies of his supporters.
The folks who want regulation of the Internet in the name of privacy should explain how they will do better than Congress did with credit reporting. In forty years of regulating credit bureaus, Congress has not come up with a system that satisfies consumer advocates’ demands. I detail that government failure in my recent Cato Policy Analysis, “Reputation under Regulation: The Fair Credit Reporting Act at 40 and Lessons for the Internet Privacy Debate.”
That’s the buzz in the face of the revelation that a mobile social network called Path was copying address book information from users’ iPhones without notifying them. Path’s voluble CEO David Morin dismissed this as a problem until, as Nick Bilton put it on the New York Times’ Bits blog, he “became uncharacteristically quiet as the Internet disagreed and erupted in outrage.”
After Morin belatedly apologized and promised to destroy the wrongly gotten data, some of Silicon Valley’s heavyweights closed ranks around him. This raises the question whether “the management philosophy of ‘ask for forgiveness, not permission’ is becoming the ‘industry best practice’ ” in Silicon Valley.
Since the first big privacy firestorm (which I put in 1999, with DoubleClick/Abacus), cultural differences have been at the core of these controversies. The people inside the offending companies are utterly focused on the amazing things they plan to do with consumer data. In relation to their astoundingly (ahem) path-breaking plans, they can’t see how anyone could object. They’re wrong, of course, and when they meet sufficient resistance, they and their peers have to adjust to the reality that people don’t see the value they believe they’ll provide nor do people consent to the uses of data they’re making.
This conversation—the push and pull between innovative-excessive companies and a more reticent public made up of engineers, advocates, and ordinary people—is where the privacy policies of the future are being set. When we see legislation proposed in Congress and enforcement action from the FTC, these things are whitecaps on much more substantial waves of societal development.
An interesting contrast is the (ahem) innovative lawsuit that the Electronic Privacy Information Center filed against the Federal Trade Commission last week. EPIC is asking the court to compel the FTC to act against Google, which recently changed and streamlined its privacy policies. EPIC is unlikely to prevail—the court will be loathe to deprive the agency of discretion this way—but EPIC is working very hard to make Washington, D.C. the center of society when it comes to privacy and related values.
Washington, D.C. has no capacity to tune the balances between privacy and other values. And Silicon Valley is not a sentient being. (Heck, it’s not even a valley!) If a certain disregard for privacy and data security has developed among innovators over-excited about their plans for the digital world, that’s wrong. If a company misusing data has harmed consumers, it should pay to make those consumers whole. Path is, of course, paying various reputation costs for getting it crosswise to consumer sentiment.
And that’s the right thing. The company should answer to the community (and no other authority). This conversation is the corrective.
Internet site Gawker says that Ashton Kutcher’s editorship of Details magazine was “a brazenly self interested and highly misleading act of journalism.” He helped produce a special online version of the mag that featured tech companies he’s invested in without disclosing that fact.
Having disclosed it for him—the article is called “Ashton Kutcher Is a Massive Whore“—Gawker now reports on how federal officials are looking over their glasses at the television personality and entrepreneur.
“It’s certainly a possibility that a case like this could be investigated,” assistant Federal Trade Commission director Richard Cleland tells the Times of Kutcher’s Details special online issue, in which eight of 12 recommended products in one article were Kutcher investments. “If you’re out there promoting individual products that you have a specific investment in, it needs to be disclosed… If you have a significant economic investment that is not otherwise apparent, that may potentially affect the credibility of your endorsement, and I see that as a potential problem.” The FTC has made a priority out of online conflicts of interest.
It’s also possible Kutcher violated SEC rules. You’re not supposed to promote a company you partly own—say, in a magazine—if you know it’s soon to go public. And if a company’s shares trade on private secondary markets you must abide by federal rules on deceptive marketing, which a former SEC lawyer told the Times were “very broad… These rules apply any time there is a securities transaction.”
<sarcasm>You see, in the land of the free—where the government’s founding charter says it “shall make no law … abridging the freedom of speech”—you can’t just say any old stuff you want to in a magazine! Say things that help your business interests too much and you are obviously outside of what the quaint old Constitution says. The First Amendment is fuzzy on this. “[M]ake no law” might mean “make a law if you have a good reason.” Duh, Ashton! You’re pretty, but maybe not very smart, saying what you want in the United States of America.</sarcasm>
This episode itself illustrates why “make no law” works despite the fact that it allows sharp business practices. Gawker and other media outlets are actively curing any information deficit with plainly worded articles like “Ashton Kutcher Is a Massive Whore.” This is in aid of the caveat emptor rule, which works even better when people know they need to think for themselves and look for assistance from outlets like Gawker, of which there are an endless supply thanks to the Internet.
Caveat supplicantem if you think that the government is going to protect your interests as a consumer better than you can. Not even close. So there is no good reason for overturning the First Amendment here.
It might be tempting to laugh at France’s ban on words like “Facebook” and Twitter” in the media. France’s Conseil Supérieur de l’Audiovisuel recently ruled that specific references to these sites (in stories not about them) would violate a 1992 law banning “secret” advertising. The council was created in 1989 to ensure fairness in French audiovisual communications, such as in allocation of television time to political candidates, and to protect children from some types of programming.
Sure, laugh at the French. But not for too long. The United States has similarly busy-bodied regulators, who, for example, have primly regulated such advertising themselves. American regulators carefully oversee non-secret advertising, too. Our government nannies equal the French in usurping parents’ decisions about children’s access to media. And the Federal Communications Commission endlessly plays footsie with speech regulation.
In the United States, banning words seems too blatant an affront to our First Amendment, but the United States has a fairly lively “English only” movement. Somehow, regulating an entire communications protocol doesn’t have the same censorious stink.
So it is that our Federal Communications Commission asserts a right to regulate the delivery of Internet service. The protocols on which the Internet runs are communications protocols, remember. Withdraw private control of them and you’ve got a more thoroughgoing and insidious form of speech control: it may look like speech rights remain with the people, but government controls the medium over which the speech travels.
The government has sought to control protocols in the past and will continue to do so in the future. The “crypto wars,” in which government tried to control secure communications protocols, merely presage struggles of the future. Perhaps the next battle will be over BitCoin, an online currency that is resistant to surveillance and confiscation. In BitCoin, communications and value transfer are melded together. To protect us from the scourge of illegal drugs and the recently manufactured crime of “money laundering,” governments will almost certainly seek to bar us from trading with one another and transferring our wealth securely and privately.
So laugh at France. But don’t laugh too hard. Leave the smugness to them.
Is there something special about December? Perhaps it’s the spirit of giving that had the Federal Communications Commission voting yesterday to regulate Internet service. At the beginning of the month—December 1st—the Federal Trade Commission issued a report signaling its willingness to regulate online businesses.
No, it’s not the fact that it’s December. It’s the fact that it’s after November.
November—that’s the month when we had the mid-term election. The FCC and FTC appear to have held off coming out with their regulatory proposals ahead of the elections because the Obama administration couldn’t afford any more evidence that it heavily favors government control of the economy and society.
There was already plenty of evidence out there, of course, but the election is past now, and the administration has taken its lumps. It’s an open question whether there will be a second Obama term, so the heads of the FCC and FTC are swinging into action. They’ll get done what they can now, during the period between elections when the public pays less attention.
And that is a challenge to the Tea Party movement, which would be acting predictably if it lost interest in politics and public policy during the long year or more before the next election cycle gets into full swing. Politicians know—and the heads of independent agencies are no less political than anyone else—that the public loses focus after elections. That’s the time for agencies to quietly move the agenda—during the week before Christmas, for example.
So it’s not the spirit of giving—it’s the spirit of hiding—that has these independent agencies moving forward right now. It’s up to the public, if it cares about liberty and constitutionally limited government, to muster energy and outrage at the latest moves to put the society under the yoke of the ruling class. Both the FCC and the FTC lack the power to do what they want to do, but Congress will only rein them in if Congress senses that these are important issues to their active and aware constituents.
This work by Cato Institute is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 3.0 Unported License.