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Public Statements

Hearing of the Senate Commerce, Science & Transportation Committee - Privacy Protection

Statement

By:
Date:
Location: Washington, DC

U.S. Senator Pat Toomey (R-Pa.) delivered an opening statement at a today's Senate Commerce, Science & Transportation Committee hearing on privacy protection.

Today's witnesses were:

Jon Leibowitz, Federal Trade Commission chairman
Maureen Ohlhausen, FTC commissioner
Cameron Kerry, Commerce Department general counsel
A transcript of Sen. Toomey's opening statement is below:

"Thank you very much Mr. Chairman, and thank you for holding another hearing on the topic of privacy. It is a very important topic. As I have said in this committee in the past, I still remain skeptical of the need for Congress to pass privacy legislation or, for that matter, for the FTC to have increased authority to enforce new privacy rules, regulations or principles on the private sector. Seems to me that neither this committee nor the FTC nor the Commerce Department fully understands what consumers' expectations are when it comes to their online privacy.

"Consumer expectations of privacy can vary based on the particular application they're using or by the general privacy preference of any given individual consumer. It's important that companies have maximum flexibility to work with their customers to ensure their customers' needs and preferences are met, and that the application of service functions as consumers expect.

"As the recent FTC report correctly points out, companies are already currently competing on privacy and are promoting services as having stronger privacy protections than what is being offered by marketplace rivals for instance. This is a sign of a healthy, functioning and competitive market. This type of competition is something that we should be encouraging.

"Overly restrictive privacy rules and regulations handed down from Washington may threaten this innovation by shifting the incentive to compliance over competition. I don't think anyone desires such a result, which is why I caution my colleagues and the administration to proceed with caution. Proponents of federal privacy legislation and of granting the FTC authority to regulate online activity really should clearly demonstrate the market failure and consumer harm that they seek to address.

"The benefits of online tracking and data collection are very clear. Facebook is free. Gmail is free. Google Maps is free. There are thousands of mobile device applications that are free. It's often said that information is the currency of the internet. A detailed cost-benefit analysis of a do-not-track regulation or other new privacy rules would better inform our discussion, but to my knowledge, one has not been completed. We need to fully understand the impact these proposals will have on the marketplace and the many online services consumers have come to expect for free or at a minimal cost.

"The less information available is very likely to result in fewer free online services and an increase in pay walls. I think it's irresponsible for the federal government to require companies to radically alter a successful business model that's provided many consumer benefits without knowing all the facts first.

"I also question whether specific consumer harms currently occurring in the marketplace cannot be addressed under the FTC's current statutory authority. Section 5 of the FTC Act grants the commission broad authority to investigate unfair or deceptive acts or practices, and the commission has broad enforcement actions using this authority. In fact, the commission highlights a number of these enforcement actions in the beginning of its recently released report.

"When the commission sees what it believes to be unfair or deceptive practices, it has acted. Just yesterday it was reported that the FTC and Myspace reached a privacy settlement that will subject the company to biannual privacy assessments for the next 20 years. In addition, Google and Facebook recently entered into consent decrees that subject the companies to outside audits for two decades. I have not yet heard a persuasive argument as to why the FTC needs even greater authority.

"Lastly, I find it interesting that the commission seems very concerned about consumer trust in the private sector. Consumer trust is very, very important, but there is no one for whom it's more important than the company that's hoping to attract and maintain customers. So I think trust in the marketplace is something that's the marketplace tends to sort out pretty well.

"Companies in all sectors of the economy have a powerful interest in building a strong, trusting relationship with their customers. If consumers don't trust Company A, they quickly flee to Company B. In the online space, this incentive is even stronger. The Internet has made leaving one company or service provider for another very easy, and it can often be done at little or no cost. As one major online company likes to say, the internet is where 'competition is one click away.'

"While this is an important topic and certainly worthy of our consideration, I do think it's premature to begin discussing specific legislative fixes or increase FTC authority when we don't fully know whether or not and to what extent the problem exists.

I look forward to hearing from our witnesses today; I thank them for coming. And I thank you, Mr. Chairman."

A transcript of Sen. Toomey's questioning is below:

SEN. TOOMEY: "Thanks very much, Mr. Chairman. Just to be very clear - I think I know how you all will answer this. But Section 5 of the FTC Act does authorize and empower the commission to make enforcement actions against a company that violates its own stated privacy policy. Do any of you believe that you lack sufficient enforcement authority in that regard and need any kind of legislative change in that respect?"

LEIBOWITZ: "So I would say it is a terrific tool for us, but it doesn't do everything. So we have brought a number of cases, as Commissioner Ohlhausen mentioned, about companies that have violated their privacy commitments to consumers, probably more than 40, including ones against Facebook and Google.

"Having said that, you know, there are a lot of gaps. So, for example, in the law, for example, we did a report on kids' privacy applications - apps - that go to kids through either the Android-Google system or through the Apple Store. So these apps are great for kids, but only about a quarter of them had privacy policies. We can't mandate a privacy policy, but I think everyone understands that privacy policies would be a useful thing to have.

"Now, we've gone back and talked to Apple and Google, and they want to work with us to ensure that there are privacy policies so parents know what they are giving to their children when they're putting kids apps on their iPhones or their smartphones. But part of the reason, I think, that the majority of the commission is supportive of general privacy legislation - and you have to get it right of course - is because it would fill in gaps. Part of it is because I think a lot of businesses want more certainty that you can get when you're not taking a case-by-case approach, which is what we sort of have to do. We do case-by-case, and we do policy. We really don't do regulations except for where it comes to kids' privacy. And that's because Congress gave us specific authority to."

OHLHAUSEN: "So that is one of the things that I want to examine as I get more settled in as a commissioner is if there are things that the FTC current authority can't reach. But initially, I would say that if there is a deceptive statement in a privacy policy that is a very straightforward case for the FTC, and it's successfully brought very many of them."

SEN. TOOMEY: "And that was my question. So with respect to a violation of the stated policy, nobody feels as though there's any ambiguity or insufficient authority."

OHLHAUSEN: "Correct."

LEIBOWITZ: "None."

SEN. TOOMEY: "Okay. I think everyone here acknowledges, but just to be clear, do you all agree that there are many companies operating on the Internet that actively compete on the basis of the privacy policies that they offer, that that is one of the features that they bring attention to?"

LEIBOWITZ: "I think that's a good point, and I think that we have started to see that. And of course, one side of our agency is consumer protection and the other side is competition so we like to see that. I believe when Google changed its privacy policy - I think, effective the beginning of March - Microsoft had full-page ads in The New York Times saying, you know, if you want more privacy protection, use Bing. So yes, we're starting to see that."

OHLHAUSEN: "I believe that companies are starting to compete on those issues and starting to do that, but of course, that has to be based on consumer interests. That's an attribute that consumers care about so it's a littler circular - "

SEN. TOOMEY: "Well, but that's the nature of the beast it seems to me, if there is a feature that is important to consumers, business, pursuing their own self-interest, will, in fact, try to attract consumers by providing that feature and they will compete on that basis. I find your discussion about do not track very interesting, as I understand it this is an industry effort - this is not mandated by legislation?"

LEIBOWITZ: "Correct."

SEN. TOOMEY: "It's not mandated by regulation. It is a voluntary approach which you are commending and which the industry apparently sees as in its own interest to pursue, so what do you think of this dynamic, whereby an industry, presumably with input from consumers, discovers a process that works for both?"

LEIBOWITZ: "Well, on do not track, I think the majority of the commission is very supportive of this process, they are making meaningful progress. Now, I think part of that is that companies want to do the right thing, part of it may be that the chairman's legislation is out there and I think probably has a fair amount of support. We see progress, and we are hopeful that one way or another we get to the finish line by the end of the year. Again, some of it depends on what is precisely in the do-not-track effort, but we do commend their progress."

SEN. KERRY: "Sen. Toomey, there is competition on privacy offerings, we would like to see more competition, part of the reason to introduce a set of privacy principles, including transparency and control, is to create more of an active conversation between businesses and consumers, so consumers can make choices and understand the benefits. The problem with existing law today, the reason that we believe that additional FTC authority is required is that too much hangs on privacy policies. There is research out there that indicates that you would have to spend 250 hours a year to read every single privacy policy for the average consumer, and that is not something that people are able to do. So people don't really have a choice about the contents of what is in a privacy policy.

"As Chairman Leibowitz mentioned, there are companies out there that do not have privacy policies and the existing authority doesn't reach those. What the FTC found about mobile apps is consistent with what a broader survey of the top 50 applications found, only a third of them have privacy policies. How do you deal with people that don't have privacy policies? There are no promises that you can hold them to under Section 5."

SEN. TOOMEY: "I just would want to point out, if I could, very briefly in closing. The premise here is, of course, that consumers want these privacy features that you're advocating - they are not available. The premise is that there is this huge untapped potential in the marketplace that no one has been smart enough to figure out. Because if all of that is true, there is a huge incentive for a company to simply offer those policies, advertise extensively, and then take all kinds of market share away from the not-so-clever competitors who haven't figured out that that is important to consumers. So I think that we should proceed very cautiously when that is an underlying assumption."


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