FITUG e.V. Förderverein Informationstechnik und Gesellschaft

FC: Privacy laws could cost U.S. firms over $30 billion,

------- Forwarded message follows ------- Date sent: Tue, 8 May 2001 11:34:48 -0400 From: Declan McCullagh <declan@well.com> To: politech@politechbot.com Subject: FC: Privacy laws could cost U.S. firms over $30 billion, study says Send reply to: declan@well.com

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The study: http://www.actonline.org/press_room/releases/050801summary.asp News coverage: http://interactive.wsj.com/articles/SB989273081791113183.htm

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http://www.actonline.org/press_room/releases/050801.asp

FOR IMMEDIATE RELEASE Tuesday, May 8, 2001 For more information, contact: Vince Sampson

(202) 331-2130 x103 vsampson@ACTonline.org

Analysis of Internet Privacy Regulation Says Costs Could Exceed $30 Billion

WASHINGTON, D.C. U.S. companies doing business online would pay a hefty price, estimated from $9 billion to $36 billion, to modify their websites to comply with proposed privacy laws. Moreover, small businesses would be hit hardest, since they own the great majority of working websites. The study, to be released on Tuesday May 8, reveals that the access and enforcement provisions in current legislative proposals carry a staggering cost for businesses that collect personal information online.

The study concludes that further regulation of online privacy is premature, for three reasons:

The direct costs of compliance could be substantial.

Benefits of such regulation have yet to be quantified.

The market continues to respond to consumer concerns about online privacy.

The study examines how proposed legislation could impact businesses that collect personal information via the Internet, focusing on immediate, direct costs of modifying existing websites and their back-end information systems.

The study was authored by Robert W. Hahn, Director of the AEI-Brookings Joint Center for Regulatory Studies, Resident Scholar at the American Enterprise Institute, and Research Associate at Harvard University. The Association for Competitive Technology (ACT) supported this research effort.

Using what I believe to be fairly conservative assumptions, I find that these costs easily could be in the billions, if not tens of billions of dollars. This fact alone suggests that proposed regulations that would flow from these laws could have a substantial economic impact on consumers and businesses, Mr. Hahn concluded.

"Our economy is at a fragile juncture, and we're counting on the information technology industry to pull us through. In a market where cash and labor are scarce commodities, shortsighted privacy regulations will lead to fewer choices and higher prices for consumers, said Jonathan Zuck, President of ACT.

Its ironic that the Law of Unintended Consequences applies especially to the unintended consequences of laws. Let's just make sure we get it right, and not unduly penalize the online economy," added Zuck. These direct costs, coupled with an Opt-In requirement, could endanger free online content and services that are paid for by targeted advertising and marketing, he added.

The study was released in Washington, DC today, where ACT member companies met with over 25 Congressional offices and Administration officials to talk about the impact privacy legislation could have on their businesses.

ACT is a national education and advocacy group for the technology industry. Representing mostly small- and mid-sized companies, ACT is the industry's strongest voice when it comes to preserving competition and innovation in the high tech sector. ACT's members span the industry, including software developers, systems integrators, IT consulting and training firms, and dot-coms.

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