FTC to Drop Push for More Privacy Laws
Reversing a Clinton administration policy, the new head of the Federal Trade Commission is withdrawing the agency’s call for tougher new privacy laws and instead focusing on increasing the enforcement of existing rules and boosting education efforts.
Under the initiative--to be formally announced Thursday by FTC Chairman Timothy J. Muris--the agency plans to increase staffing for privacy-related programs by nearly 50% and reallocate funding from other programs to combat identity theft and educate consumers about how they can safeguard their privacy, according to sources familiar with the plan.
The new policy will substantially darken the prospects for more than a dozen online privacy bills currently pending on Capitol Hill, though the Sept. 11 terrorist attacks already had put those bills on a back burner as Congress focuses on more-pressing issues.
FTC officials declined to comment Monday, saying details about staffing and funding levels under the new policy would be unveiled in a speech by Muris to business and privacy leaders in Cleveland. The agency has about 1,049 employees and a 2001 budget of $147 million.
Muris, a Bush appointee and a frequent critic of government regulation, spent nearly four months studying the privacy issue, meeting with consumer groups, business leaders and academics.
The chairman concluded that new laws would provide little benefit to consumers and would place costly burdens on businesses, according to sources close to Muris.
Instead, Muris will emphasize industry self-regulation and stronger enforcement of existing laws and regulations that protect consumer privacy and prohibit unfair or deceptive practices. That will include an increase in FTC enforcement actions taken against Web sites and other companies that fail to live up to their privacy policies, according to a source at the FTC.
Though the commission has used the threat of lawsuits and regulatory action to get the private sector to improve privacy protections, the agency’s enforcement record on privacy has been relatively thin. In the past, FTC officials argued that they lacked the necessary legal authority to crack down on abuses.
The FTC’s best-known enforcement action came against the now-defunct Web retailer Toysmart, which attempted to sell its customer information after filing for bankruptcy, even though it had promised to keep the data private. The company eventually agreed to destroy the database.
The stance against new privacy laws differs from that of Muris’ predecessor, Robert Pitofsky, who had concluded last year that current laws were inadequate to protect consumers online.
Under Pitofsky, the agency called upon Congress to enact legislation that would provide a minimum level of protection, including requirements that Web sites disclose what sort of personal information they collect and give consumers a chance to keep their data private.
That policy led the FTC’s two Republican commissioners--then in the minority--to dissent, arguing that the agency’s stance went too far.
The arrival of Muris in June gave the FTC a Republican majority. In a speech this summer, Orson Swindle, one of the Republican commissioners, said that the new FTC majority is “more concerned about the cost of regulation.”
Privacy advocates welcomed increased FTC enforcement and funding for privacy issues, but they reiterated the call for tougher federal laws.
“The stance against new legislation is a big step backward,” said Sarah Andrews, research director for the Electronic Information Privacy Center, an advocacy group in Washington. “It really negates all the work that the staff did last year. There’s really no reason to think that the situation has gotten any better.”
Opponents of new privacy laws say the issue is too complicated to address through legislation. They point to this summer’s implementation of a financial privacy law that required banks and insurers to mail disclosure notices to their customers outlining what sort of information they collect and how they use it. The law cost the industry several billion dollars and left many consumers confused.
Even before the FTC’s new stance, momentum in Congress for approving new online privacy laws was slowing, particularly after Sept. 11.
“The attacks took much of the wind out of the sails for privacy issues on the Hill,” said Jeffrey Eisenach, president of the Progress & Freedom Foundation, a conservative research organization in Washington.
