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The FTC and Privacy: We Don’t Need No Stinking Data

The FTC and Privacy: We Don’t Need No Stinking Data

Lenard and Rubin’s Critique of FTC Recommendations Published in ABA’s Antitrust Source

Contact: Amy Smorodin
(202) 828-4405

October 25, 2012 – “The privacy debate is taking place in an empirical vacuum,” state Thomas Lenard and Paul Rubin in “The FTC and Privacy: We Don’t Need No Stinking Data” published in The Antitrust Source, a journal of the American Bar Association. The article evaluates two recent Federal Trade Commission privacy reports and concludes that they suffer from a lack of data and analysis and therefore “are seriously deficient as a foundation for new policy recommendations.”

Lenard, TPI president and senior fellow, and Rubin, TPI senior fellow and Samuel Candler Dobbs professor of economics at Emory University, note that the FTC’s recommendations appear to be based on a series of roundtable discussions the FTC held leading up to the reports. “However,” the authors explain, “‘themes and concepts’ developed from roundtables are an inadequate substitute for a careful evaluation of the benefits and costs of alternative privacy regimes (including the status quo) to determine which will best serve the interests of consumers.”

Lenard and Rubin identify five specific areas that should be looked at by the FTC before they offer privacy recommendations. These include:

  • Collecting current data on the privacy and data management practices of major websites. The most recent data referenced by the FTC are from 2000.
  • Producing systematic evidence showing whether current practices are harming consumers. Although the FTC rejects a harm-based approach, its proposed framework will only produce benefits to the extent it alleviates identifiable harms.
  • Reviewing what is known about how consumers value privacy and undertaking additional studies as a basis for estimating the benefits of a new privacy framework.
  • Estimating the costs of the proposed framework and alternatives, including direct pecuniary costs to firms from devoting more resources to privacy and the indirect costs of having less information available. The FTC does not acknowledge that its proposal would entail any costs.
  • Producing sufficient evidence of a reasonable expectation that the benefits of the proposal are greater than the costs. Otherwise, the proposal should not be adopted.

The article is available at ABA’s The Antitrust Source website and on the TPI website.

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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