Why the FTC’s consumer data collection crackdown puts the entire economy at risk

With the appointment of a new commissioner, Alvaro Bedoya, the Federal Trade Commission has launched an inquiry into what it calls commercial surveillance: the “pervasive collection, tracking, and monetization of personal data” that “often thrives in the shadows” of “murky but flourishing marketplaces.”

It asks whether current protections are sufficient to protect consumers from harm.

Commercial surveillance sounds awful. Why shouldn’t we shut that down right away? Where there are clearly bad actors, of course we should. Consumer privacy is vital, and there is no debate on that question. But trying to govern how every U.S. business uses data is not only overreaching—it puts the entire economy at risk.

It would be like burning down the house in hopes of purifying it.

The commercial internet has impacted U.S. economic development like nothing else since the introduction of electrification in the last quarter of the 19th century.

There isn’t much in the American economy that doesn’t depend on electricity. There’s even less in the digital economy that doesn’t depend on data. The harder the FTC chokes data use, the more damage it will inflict on one of the most vital and fast-growing contributors to the overall economy.

The commercial internet contributed nearly $12.45 trillion to the country’s economy in 2020, a 22% growth rate over four years. The U.S. economy grew between 2% and 3% during the same period.

IAB research shows that severe restrictions could jeopardize more than 17 million jobs. Small businesses, increasingly reliant on data and digital advertising, could be hardest-hit.  

If the FTC chooses to aggressively define nearly every aspect of the digital economy as “commercial surveillance,” it will radically change how one of the most vital and fastest-growing sectors does business.

It’s hard to imagine that Congress ever intended to give the FTC such broad power. Even if we set that aside, FTC’s rulemaking process is wildly outside the norms for the agency. The usual process is for the FTC to propose a rule and ask for comment. But in this case, the FTC requires answering 95 prepared questions.

With the future of the entire digital economy at stake, this process can’t possibly end well. There is every chance that outcome will be challenged in litigation—an enormous, predictable and entirely avoidable waste of resources for the agency and stakeholders.

If the FTC enacts new rules on commercial surveillance, or approves specific forms of relief or damages, it could be bad for the government, bad for businesses, bad for the economy and probably not at all what Congress intended. Worse, what the FTC is contemplating would be bad for every consumer with an internet connection.

The simple reason the U.S. digital economy has such a powerful growth rate is that consumers love what it enables. However, the FTC is taking a rulemaking approach that sees harm everywhere and consumer choice, benefit and satisfaction nowhere.

The truth is, the necessary exchange of information that is at the heart of the free and open internet has created a staggering abundance of news and information, business opportunities and consumer choice. It generates opportunities for creativity, community and commerce. Safely and securely, millions of Americans earn their living using data responsibility on the internet.

Where we can all agree with the FTC is that consumer privacy is vital and must be protected. And the digital economy is equally vital and equally deserving of protection. 

These goals are not in conflict. America can have strong consumer privacy and a thriving digital economy. We understand the delicate balancing act of governments considering privacy, antitrust and other policies in response to concerns about fairness. Indeed, this is why we have long advocated for a federal privacy law, alleviating the confusing patchwork of state laws that makes it so difficult for smaller companies to compete.

We believe there is an intelligent, productive, efficient and fair way to balance the needs of all stakeholders. Congress should pass a federal privacy law that protects consumers privacy and enables businesses and our economy to thrive.  We have long advocated for the adoption of the Privacy for America framework which would accomplish this. 

The FTC’s ideology-heavy approach is not the answer.