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News Release
May 16, 2002
CONTACT: David Fish
(202) 289-8928

Hollings Privacy Bill: Costs Outweigh Benefits
Eisenach to Senators: Market Forces Are Already Working

WASHINGTON, D.C. - Online privacy legislation by Senator Ernest F. Hollings (D-SC) under consideration Thursday by the Senate Commerce committee (S. 2201) would impose significant costs without providing commensurate benefits for consumers. That is the view of Progress & Freedom Foundation President Jeffrey A. Eisenach who has sent letters to Hollings and other members of the panel.

“Our research suggests: market forces are leading commercial Web sites to address consumer concerns about privacy; regulation of the sort proposed by the bill would likely impose substantial costs; and, regulations that apply only to online information collection practices would create still further distortions,” Eisenach wrote to Senate Commerce committee members. “On balance, our research suggests that the costs to consumers of legislation like S. 2201 would substantially exceed the benefits.”

Eisenach cited the report he co-authored, "Privacy Online: A Report on the Internet Practices and Policies of Commercial Web Sites," which found that “market forces are producing substantial improvement in privacy practices.” Modeled after a survey conducted by the Federal Trade Commission in May 2000, it showed that Web sites are collecting less information, privacy notices are more prevalent, more prominent and more complete, and more sites are offering choice. The survey also showed progress on such ‘hot-button’ issues as information sharing and the use of third-party ‘cookies’.

He also cited a book by PFF Vice President Thomas M. Lenard and Senior Fellow Paul Rubin, Privacy and the Commercial Use of Personal Information. “Regulation imposed on a medium like the Internet that is changing so rapidly would have unpredictable consequences,” write Lenard and Rubin. “The costs would take many forms. Regulation could create market failures where none now exist. Perhaps the most serious cost would be a loss of innovation - new uses of information and of the Internet itself that would be frustrated by a new regulatory regime. All this would slow the progress of the IT revolution with potentially adverse implications for growth and productivity.”

The Progress & Freedom Foundation is a market-oriented think tank that studies the digital revolution and its implications for public policy. It is a 501(c)(3) research & educational organization.



The Progress & Freedom Foundation