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?

	Tom Bloom

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.

Related Article Amazon Tries to Ease Privacy Worries (August 30, 1999) Gain for Online Industry on Privacy Issue (July 13, 1999)

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.

Click here for a list of links to other Digital Commerce columns.

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• FTC: Report to Congress on Self-Regulation and Privacy