DISADVANTAGES – CONSUMER/INTERNET

DISADVANTAGES — CONSUMER/INTERNET — HURTS BUSINESS� 415

LINK: PRIVACY PROTECTION

GOVERNMENT PRIVACY PROTECTION WILL SABOTAGE THE ADVANTAGES E-COMMECE NEEDS TO SUCCEED

Business Week, March 20, 2000 SECTION: COVER STORY; ONLINE PRIVACY; Number 3673; Pg. 82 TITLE: It's Time for Rules in Wonderland // acs-VT2001

Bringing in the government, execs say, will pile bureaucratic layers on top of the Net. This could undercut the very promise of efficiency that many online businesses are counting on. The Internet, they say, is supposed to draw companies closer to their customers, allowing them to anticipate their desires. With profile data, they can target their ads, slash wasteful and random marketing costs, design products faster, and build higher profit margins. Profiling provides the underpinnings of a new way of doing business upon which the Net Economy is built.

PRIVACY REGULATIONS WHICH IMPEDE INFORMATION FLOW THREATEN THE STRENGTH OF THE NEW ECONOMY

EDMUND SANDERS, Los Angeles Times, March 28, 2000, SECTION: Business; Part C; Page 2; TITLE: CALIFORNIA; CALIFORNIA REVIEWING 3 BANKING PRIVACY BILLS// acs-VT2001

Bank industry leaders say the new protections would be costly to implement and stifle the development of new products and services.

"It would be hugely expensive if banks had to send out notices every time they provided a customer's name to a list," said Greg Wilhelm, lobbyist for the California Bankers Assn., a trade group. "The strength of the new economy is based on the availability of vast amounts of varied information."

PRIVACY REGULATION MAY FLATTEN E-COMMERCE

Barbara Young, senior vice president of the Financial & Professional Services Group of Shandwick-Minneapolis, Star Tribune (Minneapolis, MN) March 20, 2000, SECTION: BUSINESS; Pg. 3D TITLE: The thundering privacy train; Unless some of the steam is let out of this issue, businesses, consumers and the economy all could be derailed // acs-VT2001

FTC Commissioner Orson Swindle told business leaders last week: "It's your way, or the government's way." He might just as well said, "Hang together or you'll all hang separately."

The privacy-regulation train is approaching speeds that are out of control. If businesses do not act forcefully to address the problems, it will run right over them.

BROAD PRIVACY PROTECTION MEASURES ARE A DANGER TO BUSINESS

Most citizens would agree that we need some basic privacy protections. But there's a huge danger that policymakers _ in a rush to get their arms around this erupting public phenomenon _ might approve some broad-brush measure when what's really needed is a fine-line approach.

HUGE SECTORS OF THE ECONOMY COULD BE DAMAGED BY PRIVACY REGULATIONS

This speeding train is a recipe for disaster, whether or not you're a dot-com company.

Traditional businesses, such as financial institutions, health care organizations and telecommunications companies, are fully engulfed in the debate, as well, because of their massive databases and their ability to share data with the stroke of a key.

In today's economy, all information moves online. Every company is using online services somehow, whether it's to track customer-contact information or to share data among business partners. Therefore, any company that uses electronic means to store or share its information is vulnerable to a whole new regulatory clampdown.

INTERNET PRIVACY COMES AT THE EXPENSE OF INTERNET COMMERCE

Noble Sprayberry, The San Diego Union-Tribune, August 22, 1999, SECTION: BUSINESS Pg. I-9 TITLE: Confronting the cookie monster; The issue of privacy confounds business and the consumer // acs-EE2001

Plotting the Internet's future might prove as simple as solving a three- part puzzle: privacy, profits and politics.

Internet privacy groups want protections from anyone who stashes a surfer's digital footprints, but many Internet businesses argue that restrictions will dim the promise or revenue from electronic commerce.

PRIVACY PROTECTION WOULD DESTROY NEW WEBSITE BUSINESSES

Rebecca Christie, Financial Times (London), July 28, 1999, SECTION: THE AMERICAS; Pg. 06 TITLE: Delay in internet privacy law urged // acs-EE2001

Two other FTC commissioners echoed Mr Pitofsky's call for more time before taking federal steps. Orson Swindle said that hasty legislation could swamp regulators with "massive numbers" of unintended violations. Commercial websites have increased by 275,000 each month, he said, and many new entrepreneurs would unwittingly fall foul of the requirements.

POORLY CRAFTED PRIVACY PROTECTION POSES A DIRECT THREAT TO E-BUSINESS

Jim McIntire; The Seattle Times January 26, 2000, SECTION: EDITORIAL; Pg. B5 TITLE: Protecting the privacy of consumers // acs-EE2001

Balance is vital. The Task Force heard repeatedly that excessive privacy regulations could choke off information businesses need to verify credit or consumer orders, print checks for customers, tailor products to customer needs, or alert customers to sales. The wrong rules could add little to privacy protection but add greatly to business and consumer costs.

PRIVACY REGULAION THREATENS THE INTERNET ECONOMY

HAROLD McGRAW III: Financial Times (London), February 12, 1999, SECTION: PERSONAL VIEW; Pg. 18 TITLE: Privacy on the line// acs-EE2001

Providers of electronic information face a stark choice: self-regulate or be regulated:

Listen to any discussion of the economic potential of the internet, and the numbers start flying. Billions. Trillions. It's enough to make any chief executive's head spin. But dizzying as the numbers may be, the fact is that they all point in the same direction: electronic commerce, which totalled about $ 10bn in 1998, will reach by sound estimates more than $ 320bn in the US by 2002 and four times that amount globally.

Change is coming and without doubt it is mostly beneficial. But any growth that swift and steep is destined to transform the economic landscape, including the regulatory front. One transformation is the pressure building on the private sector to step up its self-regulatory efforts on the issue of online privacy. That pressure is building in Europe, in the United States, and throughout the global economy.

NEW PRIVACY RIGHTS WOULD SEVERELY DAMAGE THE ECONOMY

Solveig Singleton, director of information studies at the Cato Institute, January 22, 1998 Cato Policy Analysis No. 295 PRIVACY AS CENSORSHIP: A Skeptical View of Proposals to Regulate Privacy in the Private Sector http://www.cato.org/pubs/pas/pa-295.html // acs-EE2001

Furthermore, the creation of new privacy rights such as mandatory opt-in and restrictions on the sale of lists of customer information would have pernicious economic effects. Well-established, older companies that have collected consumer information for years would have an advantage over new companies, which, to get started, must rely on lists that sort consumers by their interests and preferences. Some more extreme regulatory solutions that would bar the use of existing customer lists are no better; they would make marketing as a general matter much more burdensome, which again would work to the advantage of established companies.

PRIVACY PROT�CTIONS WILL HURT SMALL BUSINESSES

New restrictions on speech about consumers could disproportionately hurt small businesses, new businesses, and nonprofits. Older, larger companies have less need for lists of potential customers, as they have already established a customer base.

EXAMPLE -- PRIVACY PROPOSAL THREATENS TO CRIPPLE E-COMMERCE IN BRAZIL

Dana James and Kathleen V. Schmidt, Marketing News TM, September 27, 1999; Pg. 40 TITLE: Get 'em in, move 'em out; Brazil Net: Growing demand tempered by privacy regulations // acs-VT2001

But there are hurdles to overcome, Prescott warned. At least one privacy proposal has been brought before Brazil's government similar to the European Union Data Privacy Directive, and it could require organizations to inform individuals about the type of information it collects, how it is collected, the information's purpose and the types of organizations to which the information could be disclosed, with permission required for different uses. In addition, the legislation would give individuals the right to access and amend personal information and restrict its use, especially in commerce.

"For an industry whose heart is the database and whose lifeblood is marketing data, the issue of privacy has serious potential," Prescott said.