FC: Privacy laws could cost U.S. firms over $30 billion, study says

[Declan McCullagh <declan () well com>]

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The study:
http://www.actonline.org/press_room/releases/050801summary.asp
News coverage:
http://interactive.wsj.com/articles/SB989273081791113183.htm

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http://www.actonline.org/press_room/releases/050801.asp

                                      
   FOR IMMEDIATE RELEASE
   Tuesday, May 8, 2001
   For more information, contact:
   Vince Sampson
   
   (202) 331-2130 x103
   vsampson () ACTonline org
   
    Analysis of Internet Privacy Regulation Says Costs Could Exceed $30
                                  Billion
   
   WASHINGTON, D.C.   U.S. companies doing business online would pay a
   hefty price, estimated from $9 billion to $36 billion, to modify their
   websites to comply with proposed privacy laws.  Moreover, small
   businesses would be hit hardest, since they own the great majority of
   working websites.  The study, to be released on Tuesday May 8, reveals
   that the access and enforcement provisions in current legislative
   proposals carry a staggering cost for businesses that collect personal
   information online.
   
   The study concludes that further regulation of online privacy is
   premature, for three reasons:
   
   The direct costs of compliance could be substantial.
   
   Benefits of such regulation have yet to be quantified.
   
   The market continues to respond to consumer concerns about online
   privacy.
   
   The study examines how proposed legislation could impact businesses
   that collect personal information via the Internet, focusing on
   immediate, direct costs of modifying existing websites and their
   back-end information systems.
   
   The study was authored by Robert W. Hahn, Director of the
   AEI-Brookings Joint Center for Regulatory Studies, Resident Scholar at
   the American Enterprise Institute, and Research Associate at Harvard
   University.  The Association for Competitive Technology (ACT)
   supported this research effort.
   
   Using what I believe to be fairly conservative assumptions, I find
   that these costs easily could be in the billions, if not tens of
   billions of dollars. This fact alone suggests that proposed
   regulations that would flow from these laws could have a substantial
   economic impact on consumers and businesses, Mr. Hahn concluded.
   
   "Our economy is at a fragile juncture, and we're counting on the
   information technology industry to pull us through. In a market where
   cash and labor are scarce commodities, shortsighted privacy
   regulations will lead to fewer choices and higher prices for
   consumers, said Jonathan Zuck, President of ACT.
   
   Its ironic that the Law of Unintended Consequences applies especially
   to the unintended consequences of laws. Let's just make sure we get it
   right, and not unduly penalize the online economy," added Zuck.  These
   direct costs, coupled with an Opt-In requirement, could endanger free
   online content and services that are paid for by targeted advertising
   and marketing, he added.
   
   The study was released in Washington, DC today, where ACT member
   companies met with over 25 Congressional offices and Administration
   officials to talk about the impact privacy legislation could have on
   their businesses.
   
   ACT is a national education and advocacy group for the technology
   industry. Representing mostly small- and mid-sized companies, ACT is
   the industry's strongest voice when it comes to preserving competition
   and innovation in the high tech sector. ACT's members span the
   industry, including software developers, systems integrators, IT
   consulting and training firms, and dot-coms.
   
                                    -30-
   
     _________________________________________________________________



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