Consumer Privacy on the Global Information Infrastructure

Consumer Alert appreciates the opportunity to comment on privacy issues relating to Internet. These comments are submitted as an extension of the public workshop held by the Federal Trade Commission on June 4-5, 1996.

A national, non-profit, non-partisan consumer group founded in 1977, Consumer Alert promotes the value of consumer choice and competition in advancing consumers' interests in the marketplace. Our comments on privacy issues are based on these principles.

Just What Is Privacy?
Privacy itself is a value-laden term: greater privacy is good, and less privacy is bad. Privacy is also an ambiguous term, as Judge Richard A. Posner in his book The Economics of Justice points out. Privacy means different things to different people in different situations and at different times. Posner discusses three distinct meanings of privacy: secrecy (the desire to conceal certain information), seclusion (the interest in being left alone), and autonomy or liberty (being allowed to do what one wants without interference).

People who desire "privacy" may seek any or all of these goals. And their privacy "ideals" may change from situation to situation. A person may desire privacy in the sense of limiting the use of information about herself, but not when those barriers cause her to be "excluded." For instance, an individual may wish to keep "private" (that is, "secret") credit data about herself, but she may not wish privacy in the sense of being "excluded" from offers for a no annual fee, low interest rate credit card. Similarly, an Internet user who enjoys gardening may want to keep information about herself "private," but may not want to shut herself off from an offer for "How to Control Aphids on Roses" that would come through her e-mail.

The concept of privacy seems to be undergoing a transformation that, while it may appear to be beneficial to consumers, will likely operate against consumers' interests, as noted in a private communication from Tom G. Palmer (Director of Special Projects, Cato Institute). Palmer observed that the right to shut the door to one's house and thereby to protect one's interest in privacy is being transformed to a right to control of information itself. But since information is in the minds and behavior of others, such a right to the information itself is a right to control other people. It is a right by some to stop others from engaging in peaceful commerce, the purely voluntary making of offers and acceptances.

Consumer Alert contends that privacy as a right to control others undermines freedom and the rule of law. It reflects an extreme approach and, if used to develop standards of privacy on the Internet, would unnecessarily restrict the free flow of information and the consumer benefits that result from that flow.

Privacy and Anonymity
The discussants who argued that users of Internet should be assured anonymity did not compare Internet with other transaction or communication media, which don't assure customer anonymity. Just about every interaction with a person face to face or through technological means involves some loss of anonymity.
For instance, if I go to a retail store and purchase a dress from a salesclerk, the salesclerk may ask me if I'm interested in purchasing shoes to go with the dress. Another customer behind me in line may mention that she makes hats and has one that would go perfectly with the dress. Those people have information about me, the purchaser -- my sex, and approximate height, weight, age. The salesclerk, who may record for marketing purposes some of my physical traits (such as sex and age), has further information about my home address, the specific credit card used and the credit card number. The retail store uses some of this information to send me flyers about offers that may be appealing -- anti-wrinkle cream designed for middle-aged skin.

How does a person ensure anonymity in that retail, face-to-face situation? Only by extreme means, I would offer. If someone values anonymity highly enough, a customer could wear a costume that disguises physical attributes and pay with cash. Or have someone else make the purchase. Or not engage in commercial or other transactions. On the Internet, such a person might want to use aliases, avoid Web sites that don't guarantee anonymity, and install "blocking" software as cyberspace equivalents.

Privacy and Trade-Offs
At the FTC's Public Workshop, several participants focused on that very narrow view of privacy as secrecy or anonymity and recommended "protections" to ensure that level. There was little discussion of trade-offs that are integral to privacy considerations. Legitimate companies collect and compile information about existing and potential customers for various purposes, such as improving the quality of their products or services; distinguishing consumers who qualify for a particular service; and making offers to people who are most likely to qualify for and accept those offers.
Thus, consumers receive real benefits from the collection of information: it results in service/product improvements or offers. If the collection of information were restricted, consumers would not be better off -- some would not get offers because of an inability to distinguish them from a larger group, while others would get numerous offers in which they would not be interested.

Consumer Benefits of Internet and the Free Flow of Information
The Internet is a dynamic and evolving medium that is still in its infancy. It is also a medium that is used for a variety of purposes: for communication, entertainment, education, research, and purchasing. Most of all, it is an interactive medium, with individuals, institutions, corporations, and government playing both the roles of distributing information and receiving information, commonly referred to as "speaker" and "listener," or "publisher" and "reader." And the information available is so diverse that it almost defies categorization. People exchange information and opinions about politics, food, home repair, authors, movies and television shows, diseases, weather, ad infinitum.
Many groups, including non-profit groups, collect information about users who access their materials. Commercial and non-profit organizations may collect user information for a variety of reasons: to discover more about users so that they will be able to tailor or improve their offerings; to survey for research or polling purposes consumer preferences, attitudes, or habits; to offer products or services to those most likely to be interested in them; and so on.

Many discussants at the Public Workshop on Internet privacy focused on perceived hazards of information collection and not the benefits -- the enormous consumer benefits that are made possible through such information compilation. Information collected and maintained by organizations whose purpose is to gain profits by providing valuable services and products to willing consumers poses no danger to privacy. The point of such information is not to violate rights, but to provide goods and services more effectively, at lower cost, and to those who desire them.

People who don't want to consider an offer can protect themselves by the "opt out" option; they can decide to reveal information only on the condition that it won't be shared with others. This allows those who seek to secure complete privacy or anonymity to do so by exercise of their rights, and with relatively low transaction costs overall, in contrast to restricting the rights of others. Proposals to reverse this principle, and to require that individuals actively "opt in" by means of some legal instrument before any information about them can be shared, would create enormous barriers to the free flow of beneficial information.

Numerous groups that use Web sites to collect information voluntarily disclose how that information will be used and if it is to be sold. Adults accessing Web sites can make decisions for themselves about whether they want to access sites without disclosures. They can also make their individual decisions about whether to disclose the information requested through surveys, questionnaires, etc.

One important issue raised by a discussant was the fact that people on the Internet are not homogeneous -- Internet users include diverse individuals with many different preferences, including preferences regarding privacy. Yet the tenor of much of the day and a half discussion was that standards or regulations that reflect an extreme view of privacy are needed to protect all users.

Such "one size fits all" standardization would run roughshod over consumers' own preferences and values.

During the first day's discussion, the refrain "people don't know what they're giving up" in terms of privacy on the Internet was often heard. Consumer Alert would offer that people really don't know what they would be giving up if restrictions on information flow were mandated.

Consumer Alert urges policymakers to consider the importance of the information industries in extending benefits to consumers and how consumers may suffer individually if useful and benign information is bottled up by ill-conceived regulations.

Children and the Internet
Consumer Alert recommends more rigorous enforcement of existing laws designed to protect children from those who would prey on them, whether in person or in cyberspace. However, in protecting children from material that a child accesses in the home through books, magazines, TV, videotape, and computer, the parents, as the protectors of their children, hold responsibility.
And they have tools to do so. From the presentations at the Public Workshop, it is apparent that a vast array of technology is available for parents, schools and libraries to screen materials on the Internet and to block objectionable material (e.g., Net Nanny, SurfWatch, CYBERsitter). Some panelists expressed the view that many parents aren't as competent as their children in using computers. However, that doesn't mean that government "nanny" should be looked to as the solution. One participant noted that parents' technology lag is likely to disappear as the young people who grew up on computers themselves become parents.

This very point of parental responsibility was addressed in the recent decision (June 11, 1996) on the constitutionality of the Communications Decency Act of 1996 by the U.S. District Court for the Eastern District of Pennsylvania. In addressing the issue of offensive material on the Internet in relation to minors, Judge Dalzell, in his opinion, stated his point forcefully: "Parents, too, have options available to them. As we learned at the hearing, parents can install blocking software on their home computers, or they can subscribe to commercial online services that provide parental controls. It is quite clear that powerful market forces are at work to expand parental options to deal with these legitimate concerns. More fundamentally, parents can supervise their children's use of the Internet or deny their children the opportunity to participate in the medium until they reach an appropriate age." (p. 178)

From the discussions throughout the workshop, although industry representatives provided numerous examples of self-regulation in terms of providing notices and opt-out mechanisms for consumers, some discussants expressed skepticism about that approach.

Responsible companies -- those that plan on being around over the long term -- have a real interest in meeting their customers' wants and needs, including those relating to privacy. They know that running roughshod over consumer preferences is not a way to gain customers and earn profits. Thus, companies are extremely sensitive to real consumer concerns about privacy and about information use, especially relating to children. Those companies, not the "bad apples," are the ones that will survive and thrive.

Self-regulation is not just a way to avoid government regulation -- it is a better way to ensure that consumers' varied needs are being addressed. Market solutions to concerns also respond to rapid changes, such as those taking place in cyberspace. And the market is better able to respond with technological innovations than can government with statutory regulations.

A strong case was made throughout the workshop that self-regulatory guidelines established by industry groups and new technological approaches to allow Internet users to choose their own levels of privacy are able to adapt much more rapidly to concerns that arise.

The technological and institutional changes that are occurring as Internet becomes more widely used are certainly substantial. Consumer Alert views these changes not as threatening but as providing new opportunities to advance consumer interests, specifically those consumers least well served in today's world. This confidence is based on the fact that Internet will reduce the cost of information and thus will make it possible to serve an ever greater proportion of the consumer population.

Restricting the evolution of this communication phenomenon will thus be a disservice to consumers.

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