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FTC Commissioner Phillips on Balance Between Privacy Law and Competition

The discussion of privacy law in the United States is heating up following GDPR and the California Consumer Privacy Act. FTC Commissioner Noah Phillips spoke at the Internet Governance Forum USA in Washington D.C. on Friday and expressed concerns that changes in privacy regulation could hamper competition by hindering the ability of new companies to enter markets and grow while large companies which “already possess significant amounts of data about people” have the money for compliance.

Comparing U.S. Privacy Law vs. EU and California

The speech articulates a contrast between the United States approach and the privacy protections of Europe and California. According to Commissioner Phillips, the U.S. approach has been one that takes a risk-based, sector approach that implements privacy and security rules in the economy in the areas where Congress determines there is the most need. In economic sectors where the need for protections are less, Congress has imposed less costs on those businesses.

Commissioner Phillips describes Europe and California as regimes that “require everybody to adhere to one set of standards (and one set of costs) that apply to all online entitities … regardless of risk.” His prepared remarks suggest that “we need an honest discussion about the costs and benefits” of such privacy regulations. “[W]e do not want the regulatory burden to be so onerous that it excludes potential market entrants or inhibits innovation ….”

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How does Privacy Regulation Hinder Competition and Innovation?

The speech sets forth a few different ways. First, large businesses have more staff and lawyers to ensure that they are able to meet the law. They may oppose change, but it ultimately benefits them because they have the resources to cope with new laws while less well-funded, smaller competitors do not.

Not only do large businesses have the money to spend on compliance, consumers are “more likely to trust the companies they know.” Consumers are more likely to be willing to give them affirmative user consent. If businesses need to obtain opt-in consent for data processing, it could provide an advantage to large businesses who were able to obtain their growth and trust during a period of less regulation on data collection and usage.

Commissioner Phillips also expressed concerns about stifling innovation, citing to studies of state privacy laws showing they have reduced the adoption of electronic medical records. The more complex the regulatory compliance system, the fewer providers and less customers. There is even the potential for it to impact the competitiveness of American tech companies. In the footnotes, he cites to a quote from Senate Intelligence Committee Democrat Mark Warner: “One of my hesitancies, though, would be if we kneecapped American companies and they were simply replaced by Chinese tech companies.”

The balance between privacy and competition is among the topics that the Federal Trade Commission plans to hold hearings on in the fall to give the public an opportunity to weigh in. The Washington Post suggested that the White House will be coming out with its privacy proposal this fall. But it may be too early to suggest quick adoption as questions like this one need to be considered.

FTC Commissioner Phillips on Balance Between Privacy Law and Competition

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