Privacy and Commercial Use of Personal Data: Policy Developments in the United States

Abstract

In the online and offline worlds, the value of personal information – especially information about commercial purchases and preferences – has long been recognised. Exchanges and uses of personal information have also long sparked concerns about privacy. Public opinion surveys consistently indicate that overwhelming majorities of the American public are concerned that they have lost all control over information about themselves and do not trust organisations to protect the privacy of their information. Somewhat smaller majorities favour federal legislation to protect privacy. Despite public support for stronger privacy protection, the prevailing policy stance for over thirty years has been one of reluctance to legislate and a preference for self‐regulation by business to protect privacy.Although some privacy legislation has been adopted, policy debates about the commercial uses of personal information have been dominated largely by business concerns about intrusive government regulation, free speech and the flow of commercial information, costs, and effectiveness. Public concerns about privacy, reflected in public opinion surveys and voiced by a number of public interest groups, are often discredited because individuals seem to behave as though privacy is not important. Although people express concern about privacy, they routinely disclose personal information because of convenience, discounts and other incentives, or a lack of understanding of the consequences. This disconnect between public opinion and public behaviour has been interpreted to support a self‐regulatory approach to privacy protections with emphasis on giving individuals notice and choice about information practices. In theory the self‐regulatory approach also entails some enforcement mechanism to ensure that organisations are doing what they claim, and a redress mechanism by which individuals can seek compensation if they are wronged.This article analyses the course of policy formulation over the last twenty years with particular attention on how policymakers and stakeholders have used public opinion about the commercial use of personal information in formulating policy to protect privacy. The article considers policy activities in both Congress and the Federal Trade Commission that have resulted in an emphasis on “notice and consent.” The article concludes that both individual behaviour and organisational behaviour are skewed in a privacy invasive direction. People are less likely to make choices to protect their privacy unless these choices are relatively easy, obvious, and low cost. If a privacy protection choice entails additional steps, most rational people will not take those steps. This appears logically to be true and to be supported by behaviour in the physical world. Organisations are unlikely to act unilaterally to make their practices less privacy invasive because such actions will impose costs on them that are not imposed on their competitors. Overall then, the privacy level available is less than what the norms of society and the stated preferences of people require. A consent scheme that is most protective of privacy imposes the largest burden on the individual, as well as costs to the individual, while a consent scheme that is least protective of privacy imposes the least burden on the individual, as well as fewer costs to the individual. Recent experience with privacy notices that resulted from the financial privacy provisions in Gramm‐Leach‐Bliley supports this conclusion.Finally, the article will consider whether the terrorist attacks of 11 September have changed public opinion about privacy and what the policy implications of any changes in public opinion are likely to be.