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Conflicting Online Privacy Legislation Threatens to Strangle Innovation

WASHINGTON -- NetChoice's 2011 "iAWFUL" list of bad Internet laws has identified a confusing and contradictory surge in state and federal online privacy legislation that is threatening to tie the hands of online innovators. Proposals in Washington, D.C., California and Tennessee all use the cover of online privacy to insert government regulators between consumers and the online services on which they depend.

The Internet Advocates' Watchlist for Ugly Laws (iAWFUL) ( tracks the 10 pieces of state and federal legislation that pose the greatest threat to the Internet and e-commerce. In its first update for 2011, iAWFUL identifies several new measures that threaten to undermine the freedom and openness that lie at the core of the Internet's global appeal.

"Our 2011 iAWFUL list catalogues the disturbing willingness of legislators to micromanage how consumers and businesses communicate," said Steve DelBianco, executive director of NetChoice. "The continued evolution of free online services is imperiled by state and federal legislators tripping over themselves to jump on the privacy bandwagon."

The number one offender on the iAWFUL list is a bill by Rep. Jackie Speier (D-CA) to let the Federal Trade Commission create regulations to dramatically reduce the use of tracking data that drives Internet advertising, by enforcing a global opt-out preference by users.

The effect of a global opt-out will reduce the population of users for whom targeted ads can be delivered. If ads aren't targeted, advertisers will pay less and sites may be forced to show a greater quantity of lower-paying ads. And if that doesn't make up the lost revenue, sites will likely spend less on new features and services. Do Not Track will harm consumers and businesses alike.

Neither Rep. Speier nor the FTC have been able to demonstrate to Americans why the world needs Do Not Track. Two of the FTC's own commissioners doubt whether such a measure is useful and suggested that the same goals might be accomplished through improved enforcement rather than rule making.

At the state level, an avalanche of proposed legislation seeks to regulate everything from online speech (Tennessee's SB 487), to sharing personal information (California's SB 242), to a website's ability to use consumer information to display relevant content and advertising (New York's AB 4809).

All of these proposals threaten to swamp online retailers with an impossible patchwork of conflicting state laws. Rather than adding additional burdens on users and websites, state governments should educate consumers about Internet data collection while ensure that companies comply with their privacy policies.

"We are witnessing an onslaught of network nannies," said DelBianco. "While protecting consumer privacy and minors is important, legislators need to remember that consumers have an important role in managing their own relationships with online service providers they choose to do business with."

Published March 9, 2011

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