Without a Federal Privacy Law, States Are Left to Figure Out How to Protect Consumer Data

Facebook CEO Mark Zuckerberg

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Representatives of the technology industry, and some state officials, say having broad privacy laws in each state could curb innovation. But other states leaders argue intervention is necessary to protect consumers.

WASHINGTON — State attorneys general should target specific bad behavior within the data economy instead of backing broader privacy laws that stifle innovation, some state officials and technology advocates argued Wednesday.

Others have argued that states need to step in to protect consumers, as California has done with a landmark privacy bill, unless Congress moves to implement a federal law. 

While the Cambridge Analytica scandal made Facebook the face of U.S. online privacy concerns, the data economy includes everything from financial services offering customers more digital tools to transportation companies reducing traffic congestion using geolocation.

Speaking at the National Association of Attorneys General winter meeting, Vermont Assistant AG Ryan Kriger said consumers longing for the days of do-not-call lists are increasingly dissatisfied with companies that fail to protect their data or wind up with it without their knowledge.

“At the state level, I think that we all kind of agree that some sort of federal solution—some sort of uniform solution across the board that has strong consumer protections—would be a great thing,” Kriger said. “Based on my conversations, I don’t think it’s happening this year.”

That lack of certainty has led AGs to encourage state legislatures to test solutions that protect citizens, he added.

In 2018, California passed its Consumer Privacy Act, which goes into effect in 2020 and grants consumers the right to know what personal information businesses have collected on them; opt out of the sale of that information to third parties; have most businesses delete that information; and equal treatment if they exercise those privacy rights. The law was expedited before a similar ballot measure could be voted on in the 2018 general election, which backers said would have been harder to amend as problems reveal themselves.

Proponents have called the California law a necessary step to protect consumers and said it should be used as a blueprint, either by other states or the federal government. Last month, California Attorney General Xavier Becerra unveiled a new proposal to strengthen his ability to enforce the law before it goes into effect.  

The originally measure has come under criticism from technology companies, with representatives arguing they don’t want to have to follow many different sets of state regulations. At a House committee hearing last week, some argued that Congress needs to act and overrule state measures.

Daniel Castro, vice president Information Technology and Innovation Foundation, a tech industry think tank, said the California law created two problems—the first being the compliance and potential legal costs it imposed on businesses. Any company averaging as few as 137 transactions a day is affected, he said.

The second problem is other states are now contemplating their own data privacy laws, Castro said. While the California law is based off what the European Union did with its General Data Protection Regulation, proponents forget that rule ended up harmonizing the numerous data protection laws of 28 member countries, he said.  

“What’s interesting in the U.S. is we’re saying, ‘Well, let’s copy Europe, but let’s do it with 50 different laws,’” Castro said. “Which is exactly the thing that they were trying to prevent in the first place.”

Most consumers are willing to make tradeoffs like supplying companies with biometric data if it means a discount or signing into an app easier, but they’re concerned about financial fraud or revenge porn, he added.

Maneesha Mithal, an associate director with the Federal Trade Commission, noted that people also find the unexpected sharing of health information, such as a battle with depression, damaging to their reputations.

“I think the challenge will be where to draw those lines and what conduct is harmful,” Mithal said.

Plenty of companies’ business models revolve around sharing or monetizing data, and some are more transparent about that than others, Castro said.

State AGs can promote a culture shift by asking questions earlier on about the appropriateness of those behaviors, he added, and targeting companies that fail to secure data properly or share it with the wrong third parties.

Nebraska AG Doug Peterson agreed that offices like his need to pinpoint particular companies that aren’t acting in good faith.

“If you try to do a blanket approach, you’re really going to affect innovation,” Peterson said. “But target the bad actors.”

Dave Nyczepir is a News Editor at Route Fifty and is based in Washington, D.C.

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