Statement by ITIF Senior Analyst Daniel Castro on Privacy Legislation Proposed by Senators Kerry and McCain

WASHINGTON - ITIF has long argued that any federal privacy regulation balance the need for privacy with the need for a robust commercial Internet ecosystem. The Commercial Privacy Bill of Rights Act of 2011 introduced today by Senators John Kerry and John McCain correctly recognizes that a balance must be struck between regulations that slow down innovation and those that protect consumers. ITIF is also pleased that the legislation recognizes that importance of "growing the information economy." As ITIF has proposed, we agree that the Department of Commerce should take the lead on crafting data policies that can foster beneficial types of data sharing. And as ITIF has written previously, the goal of any privacy legislation should be to protect consumers while fostering competition, choice and innovation. While the ideal privacy legislation would focus on protecting consumers from harm rather than legislating data handling requirements, the legislation introduced today does provide a co-regulatory framework that allows industry to partner with government to potentially create more flexible rules for businesses that could help reduce the negative impact on the Internet ecosystem.

However, as ITIF has detailed repeatedly over the past few years, all of the economic evidence suggests that strict privacy regulations can have a negative impact on the Internet ecosystem. Misguided privacy legislation or the misguided administrative implementation of it could significantly erode the $300 billion in annual economic activity generated by the Internet in the United States. Before acting, policymakers should carefully consider the potential economic consequences of certain requirements, such as data minimization, that restrict current business processes, do not harm consumers, and can lead to the development of new products and services. Congress should also take the time to assess the efficacy of current enforcement mechanisms and the progress of industry self-regulatory efforts launched late last year before enacting potentially new policies that might impair these efforts.