August 30, 1999
DIGITAL COMMERCE
Consumers' Desire for Information Privacy Ignored
By DENISE CARUSO
f privacy is indeed the pivotal concern for people who use data
networks -- and by every objective indication to date, it is -- then
why are companies and law enforcement agencies still getting away
with monitoring and collecting, and using and selling, as much of
our personal data as they can get their hands on?
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Tom Bloom
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What is it about "no" that these folks don't understand?
Several new, sweeping Internet surveillance initiatives, for
example, have been introduced by the Clinton White House over the
last few weeks -- including one that would monitor private
industries for illegal transactions. Another would allow law
enforcement agents with a court order to secretly enter private
homes or offices to "wiretap" the hard disks and Internet
connections of computer users.
Even the Federal Trade Commission, which a few years ago had
shown such enthusiasm for making Internet-based businesses toe the
consumer privacy line, has backed down from consumer advocacy and
is now advocating for industry. The agency officially concluded
last month, in its 1999 Report to Congress on Self-Regulation and
Privacy, that voluntary industry practices were working just fine
and that "no legislative action is necessary at this time."
This summation came despite comments from one FTC commissioner,
Sheila F. Anthony, who said in a written statement to a Senate
subcommittee in July that she was dismayed by the results of
studies that show a gap as large as 89 percent between the number
of sites that gather personal information and those that post
substantive privacy policies. Self-regulation "is not enough if
the privacy practices themselves are toothless," wrote Ms.
Anthony, who dissented in part from last month's report.
More recently, a telephone industry posse, led by U S West,
persuaded a federal appeals court in Denver to reverse some recent
FCC rules that had been specifically designed to protect private
customer data.
According to the chairman of the Federal Communications
Commission, William E. Kennard, who said the agency would appeal
the decision, those rules were the result of a request by Congress
to provide "meaningful protection for consumers' privacy rights."
The FCC rules had required phone companies to get explicit
permission from their customers -- a method known as "opt in" --
before using or sharing customers' records, calling patterns and
other personal information to market new services to them.
"You call your doctor, your clergyman, your therapist,"
Kennard said. "You order products. And when you pick up that
telephone, most consumers have no earthly idea that call might be
used by someone to market another service to them. When you pick up
that telephone, you should have ownership of that information. It's
the way we live our lives and it's private to us."
But in a 2-1 ruling published on Aug. 18, which has obvious
implications for the data-hungry Internet economy, the 10th U.S.
Circuit Court of Appeals said that rules protecting consumers from
having information like the numbers they call and the services they
subscribe to used without their permission interfered with the
phone companies' First Amendment rights to free speech.
"Although we may feel uncomfortable knowing that our personal
information is circulating in the world," the ruling said, "we
live in an open society where information may pass freely."
One wonders how many circuit court judges would be willing to
have the form and substance of their phone bills "pass freely"
among the employees of U S West or its partners.
The court's decision does not allow U S West and others to sell
proprietary customer data to outsiders, but it does give the
telephone companies permission to scrutinize this highly personal
data -- data gathered only as a byproduct of subscribing to their
services -- without the subscribers' explicit permission. Not
incidentally, it gives the companies an enormous edge over others
selling competing services.
Kennard said he was disappointed that the court came down on the
side of the business interests of telephone companies. "If that's
the way privacy laws will be interpreted," he said, "then I think
consumers will have a lot to worry about."
Oddly enough, the ruling -- which, if it stands, would seem to
hamper any future attempts to limit the ability of companies to
disclose consumers' personal information -- got very little play in
the national news media.
Certainly, the victorious companies -- U S West, Vodaphone
Airtouch, Sprint, SBC Communications, MCI Worldcom, Bell South and
Frontier -- did little to call attention to the ruling.
And who can blame them? Consumers do not like it when companies
do not protect their privacy, as Amazon.com found out this week
when it started publishing lists of its products purchased by
specific companies, nonprofit groups and government agencies. But
refusing to flaunt data mining and refusing to practice it are two
different matters. "The technology generates a lot of information
that's very valuable, and everybody wants to get their hands on
it," says David L. Sobel, general counsel for the Electronic
Privacy Information Center in Washington.
Sobel does not buy the "corporate First Amendment" argument
that he said won the day for U S West et al. "We do, in fact, have
existing federal laws that restrict companies from disclosing
personal information, like video rentals," he said. "It's not a
violation of free speech rights to forbid people to divulge inside
information. Why should it be a violation to pass laws restricting
the use of private data?"
And Kennard said he saw a broader issue around the collection of
detailed consumer data in every transaction from the supermarket
scanner to the credit-card number on the Internet. "As a society,
we have to come up with a way of protecting that information for
benefit of consumers," he said. "It doesn't necessarily mean that
government has to do it, but government is certainly a logical
place for it to be done if industry isn't going to step up to the
plate."
Ms. Anthony, the FTC commissioner, has also become a believer in
a government role. In her statement to the Senate subcommittee, she
wrote that "industry progress has been far too slow" since the
FTC encouraged voluntary fair information practices in 1996. "I
believe that the time is ripe for federal legislation to establish
at least baseline minimum standards upon which meaningful
self-regulation can flourish."
And despite their protests, that may be the only "no" that
industry will understand.
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