Advertisement

The Effects of Regulation

  • Paul H. Rubin
  • Thomas M. Lenard
Chapter
  • 88 Downloads

Abstract

The absence of serious market failure or consumer harm suggests that the potential benefits of new privacy regulations are very small. We, therefore, focus on the potential costs of such regulations. We first discuss some general problems that are likely to occur if this market is subject to more regulation and then examine in greater detail the proposals of the FTC and others.

Keywords

Transaction Cost Privacy Policy Identity Theft Privacy Regulation Credit Reporting 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  1. 138.
    Margaret Barnett, “The Profilers: Invisible Friends,” The Industry Standard, March 13, 2000, p. 221.Google Scholar
  2. 139.
    In its 1998 Report, Part II, at 2.Google Scholar
  3. 140.
    Lorrie Faith Cranor, Joseph Reagle, and Mark S. Ackerman, “Beyond Concern: Understanding Net Users’ Attitudes About Online Privacy,” AT&T Labs-Research Technical Report TR 99.4.3, 1999 http://www.research.att.com/library/trs/TRs/99/99.4/.Google Scholar
  4. 141.
    Ben Vickers, “Europe Lags Behind U.S. on Web Privacy: More American Firms Let Customers Guard Data, Study Finds,” The Wall Street Journal, February 20, 2001.Google Scholar
  5. 142.
    Ira C. Magaziner, “Creating a Framework for Global Electronic Commerce,” Future Insight, The Progress and Freedom Foundation, July, 1999.Google Scholar
  6. 143.
    All definitions from FTC’s 2000 Statement to Congress.Google Scholar
  7. 144.
    Federal Trade Commission, Privacy Online: Fair Information Practices in the Electronic Marketplace, May, 2000, available online at http://www.ftc.gov/os/2000/05/index.htm#22 at 15.Google Scholar
  8. 146.
    John Schwartz, “Privacy Policy Notices Are Called Too Common and Too Confusing,” The New York Times, May 7, 2001.Google Scholar
  9. 147.
    Susan Stellin, “Dot-Corn Liquidations Put Consumer Data in Limbo,” New York Times, December 4, 2000.Google Scholar
  10. 148.
    TRUSTe is curently seeking comment on policies with respect to “Personally Identifiable Information Used in Mergers, Acquisitions, Bankruptcies, Closures, and Dissolutions of Web Sites.” http://www.truste.com/bus/spotlight.html.
  11. 149.
    At 26 in its 2000 Report.Google Scholar
  12. 150.
    This analysis is based in part on information provided by Tony Hadley and Marty Abrams of Experian. See also Experian, E-series White Paper Authentication, February 2001, available at http://www.experian.com/eseries/authentication_whitepaper.html.Google Scholar
  13. 151.
    Solveig Singleton, “Privacy and Human Rights: Comparing the United States to Europe,” in Competitive Enterprise Institute, The Future of Financial Privacy, Washington, 2000.Google Scholar
  14. 152.
    Kevin Maney, “Web develops amazing new tangles,” USA Today, March 1, 2001.Google Scholar
  15. 153.
    Discussed, for example, in Anick Jesdanun, “Wireless Tracking Device Coming Soon,” AP, October 29, 2000 and Pui-Wing Tam, “…Know Where We Are,” Wall Street Journal, November 13, 2000.Google Scholar
  16. 154.
    Rachel Konrad, “General Motors to ‘push’ ads to drivers,” CNET, News.com, January 8, 2001.Google Scholar
  17. 156.
    These issues are discussed in Paul H. Rubin., “Ignorance is Death: The FDA’s Advertising Restrictions,” in Roger D. Feldman, Editor, American Health Care: Government, Market Processes, and the Public Interest, The Independent Institute and Transaction Publishers, 2000, 285–311.Google Scholar
  18. 157.
    Truth in Lending Act (15 U.S.C. §§ 1601–1667f, as amended), Sec. 1664 (d), Advertising of credit other than open end plans.Google Scholar
  19. 158.
    Sanford Grossman, “The Informational Role of Warranties and Private Disclosure about Product Quality,” Journal of Law and Economics v. 24, December 1981, pp. 461–483.CrossRefGoogle Scholar
  20. 159.
    Eli Noam, “Privacy and Self-Regulation: Markets for Electronic Privacy,” in Privacy and Self-Regulation in the Information Age, U. S. Department of Commerce, Washington, 1997, http://www.ntia.doc.gov/reports/privacy/selfreg1.htm.Google Scholar
  21. 160.
    Alec Klein and Shannon Henry, “On Reflection, a Puzzling Ad Campaign,” The Washington Post, March 1, 2001, p. El.Google Scholar
  22. 161.
    “The Impact of Data Restrictions on Consumer Distance Shopping, available at http://www.the-dma.org/isec/9.pdf.
  23. 162.
    “Customer Benefits from Current Information Sharing by Financial Services Companies”Google Scholar
  24. 164.
    At 37 in its 2000 Report.Google Scholar
  25. 166.
    Note 21 in its 2000 Report.Google Scholar
  26. 167.
    Testimony by Parry Ponemon, PriceWaterhouseCoopers, at the FTC hearing, “Wireless Web, Data Services and Beyond: Emerging Technologies and Consumer Issues,” December 12, 2000, Vol. 2, p. 232.Google Scholar
  27. 168.
    Jeff Sovern, “Opting In, Opting Out, Or No Options At All: The Fight for Control of Personal Information,” 74 Washington Law Review 1033, October 1999, at 1102, footnote omitted.Google Scholar
  28. 169.
    Cited in Michael A. Turner, “The Impact of Data Restrictions on Consumer Distance Shopping, available at http://www.the-dma.org/isec/9.pdf.
  29. 170.
    Discussed in Fred H. Cate and Michael E. Staten, “Protecting Privacy in the New Millennium: The Fallacy of ‘Opt-In,’” Information Services Executive Council, available http://www.the-dma.org/isec/optin/shtml.
  30. 171.
    Ronald H Coase, “The Problem of Social Cost,” 3 Journal of Law and Economics 1, 1960. Professor Coase was awarded the Nobel Prize in Economic Science in 1991 for this work.Google Scholar
  31. 172.
    E.g. Richard A. Posner, Economic Analysis of Law, Aspen Law and Business, 5th Edition, 1998.Google Scholar
  32. 173.
    Eli Noam, “Privacy and Self-Regulation: Markets for Electronic Privacy,” in Privacy and Self-Regulation in the Information Age, U. S. Department of Commerce, Washington, 1997, http://www.ntia.doc.gov/reports/privacy/selfreg1.htm.Google Scholar
  33. 174.
    Hal Varian, “Economic Aspects of Personal Privacy,” in Privacy and Self-Regulation in the Information Age, U. S. Department of Commerce, Washington, DC, 1997 http://www.ntia.doc.gov/reports/privacy/selfregl.htm.Google Scholar
  34. 175.
    Federal Trade Commission (2000a), Final Report of the FTC Advisory Committee on Online Access and Security, May 15, 2000, http://www.ftc.gov/acoas/papers/finalreport.htm. A fair reading of the report is that the Committee was strongly opposed to regulation of access and security. We indicate some of the areas in which it was opposed, but reading the Report leads one to wonder why the FTC commissioned it if the plan was to proceed independently of the Committee recommendations, which is exactly what occurred.
  35. 176.
    From the FTC Report, p. 29, footnote omitted.Google Scholar
  36. 177.
    Available Online from the FTC website at http://www.ftc.gov/os/statutes/fcra.pdf.
  37. 178.
    Robert W. Hahn, “An Assessment of the Costs of Proposed Online Privacy Legislation,” May 7, 2001, available at http://www.actonline.org/pressroom/releases/050801summary.asp This study has been criticized by Peter Swire. See May 9 press statement, http://www.osu.edu/units/law/swire1/pshome1.htm Google Scholar
  38. 179.
    Government Accounting Office, Information Security: IRS Electronic Filing Systems, February, 2001, p. 4, footnotes omitted.Google Scholar
  39. 180.
    Advisory Committee Report, at 33.Google Scholar
  40. 182.
    At 34. The other options discussed are: “Rely on Existing Enforcement Options”, “Third-Party Audit of Other Assurance Requirements;” and “Create Express Private Cause of Action.” FTC Advisory Commission Report, at 34.Google Scholar
  41. 185.
    Paul H. Rubin “Economics and the Regulation of Deception,” Cato Journal, 1991, 667–690, 1991.Google Scholar
  42. 186.
    John E. Calfee, Fear of Persuasion: A New Perspective on Advertising and Regulation, American Enterprise Institute, Washington, 1997.Google Scholar
  43. 187.
    Kemba J. Dunham, “The Jungle: Focus on Recruitment, Pay and Getting Ahead: A New Playing Field,” The Wall Street Journal March 20, 2001.Google Scholar
  44. 188.
    For the general point that firms may gain when costs of competitors increase, see Steven C. Salop and David T. Scheffman, “Raising Rivals’ Costs,” 73 American Economic Review (Papers and Proceedings) 267 1983.Google Scholar
  45. 189.
    Discussed in Peter P. Swire and Robert E. Litan, None of Your Business: World Data Flows, Electronic Commerce, and the European Privacy Directive, Washington: Brookings Institution Press, 1998, at 78–79.Google Scholar
  46. 190.
    For a contrary argument in favor of state regulation, see Bruce H. Kobayashi and Larry E. Ribstein, “A State Recipe for Cookies: State Regulation of Consumer Marketing Information,” American Enterprise Institute, Washington, January 16, 2001, available online at http://www.federalismproject.org/conlaw/ecommerce/cookies.html. For their proposal to work, courts would have to enforce contractual choice of law and forum; this would require a major change in the behavior of courts with respect to contracts accepted by consumers at the time of purchase.Google Scholar
  47. 191.
    Discussed in Rubin, 1991.Google Scholar
  48. 192.
    Paul H. Rubin, John Calfee and Mark Grady, “BMW vs Gore: Mitigating The Punitive Economics of Punitive Damages,” Supreme Court Economic Review, 1997, 179–216.Google Scholar

Copyright information

© Springer Science+Business Media New York 2002

Authors and Affiliations

  • Paul H. Rubin
    • 1
    • 2
  • Thomas M. Lenard
    • 2
  1. 1.Emory UniversityUSA
  2. 2.The Progress & Freedom FoundationUSA

Personalised recommendations