FTC Correct to Focus on Consumer Injury

FTC Correct to Focus on Consumer Injury

Lenard Submits Comments to Commission

The Federal Trade Commission is correct to focus on consumer injury in its December 12 Workshop on Informational Injury, according to comments submitted by TPI Senior Fellow and President Emeritus Thomas Lenard.

In his comments, Lenard explains that a privacy regime likely to help consumers needs to be based on actual harms: “The existence of harms is necessary for any meaningful cost-benefit analysis, whether in the context of privacy liability litigation, FTC enforcement, or regulatory policy.”

Lenard discusses a list of potential injuries that privacy advocates have enumerated. He suggests that injuries related to security, specifically identity fraud, are of most concern to consumers. Javelin Strategy and Research, which has conducted an annual identity fraud survey since 2003, estimates that about 15 million individuals were victims of identity fraud in 2016 at a cost of $16 billion. The costs of the Equifax breach remain to be seen.

Lenard notes that the market provides information on how consumers evaluate the tradeoffs involved in sharing information. He indicates, “The widespread use of free, advertising supported services suggests that people routinely give up some information in return for access to content and other services.” Moreover, that they typically do this “without reading and understanding privacy notices suggests that most consumers do not find it rational to spend the time and effort to do so.”

With respect to business decision making concerning the collection and use of information, Lenard explains, “Firms have a strong incentive to avoid data security breaches because markets penalize them if breaches occur.” These costs are reflected in stock prices as indicated by a review of a large number of studies of the impact of information security events on stock prices.

Lenard’s comments can be found here.

Contact: Ashley Benjamin, 202-828-4405, [email protected]

The Technology Policy Institute

The Technology Policy Institute is a non-profit research and educational organization that focuses on the economics of innovation, technological change, and related regulation in the United States and around the world. More information is available at https://techpolicyinstitute.org/.

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