Internet Privacy: Congress Starts Feeling The Heat

As online privacy fears have exploded into a national wave of techno-angst, Web companies have tried to stave off new federal regulations by promising self-policing measures to keep Internet snooping under control. But Congress, prodded by angry voters, may be losing patience. The upshot: More pressure for tougher controls on e-commerce outfits whose zeal for turning clicks into bucks seemingly knows no bounds.

The catalyst for change is a string of privacy initiatives and watchdog reports that will put the industry on the defensive. On Apr. 30, President Clinton called for a new law that lets consumers limit the ability of financial institutions to share customer data. Starting in mid-May, the Federal Trade Commission will issue a series of reports on online privacy policies, consumer access to digital dossiers, and the practice of tracking the electronic footprints of Web shoppers.

OUT OF CONTROL? While there's no consensus on Capitol Hill on how to regulate privacy, lawmakers and regulators could be forced into action if Net companies keep engaging in digital eavesdropping. Case in point: A February flap in which DoubleClick, the leading Net ad company, announced plans to link anonymous customer data collected online to real individuals. Consumers howled and the company backed down. But another such episode "could cause privacy [regulation] to explode," says Representative Billy Tauzin (R-La.), chairman of the House telecom subcommittee.

Even without headline-grabbing abuses, privacy has become a hot political issue. The Clinton proposal is being pitched as a joint initiative with Vice-President Al Gore--a sign that Democrats want to get out front on a potent issue, despite their desire for campaign contributions from the financial-services and high-tech industries. That could be a smart move. A February survey by the AARP (formerly known as the American Association of Retired Persons) found that 93% of computer users aged 45 and older thought personal info they provide online should not be shared without their permission.

Privacy advocates plan to stoke support for new regs by turning up the heat on the FTC. In June, the nonpartisan Electronic Privacy Information Center will issue a blistering report on allegedly lax policing of Net privacy. "The FTC has not done enough to respond to consumer complaints and should take a more activist role," asserts EPIC Executive Director Marc Rotenberg.

Naturally, Net execs are mapping a counteroffensive. On May 18, the Information Technology Industry Council will fly a gaggle of CEOs to Washington to push for a go-slow approach. And industry execs will sing the praises of self-policing at a May 19-20 "privacy summit" called by House Republicans. An industry coalition led by America Online and IBM is also mulling a $20 million PR blitz to warn the feds not to kill the electronic golden goose. Many techies privately say they could support a modest privacy measure but won't out of fear that it might evolve into something more draconian in an election year. "Everyone's afraid that the process could spin out of control," frets one Net company lobbyist.

The industry is playing a high-risk game by digging in its heels against any regulation. "The longer this issue festers, the more difficult it will be to find middle ground," frets Scott Cooper, a lobbyist for Hewlett-Packard Co. The fear is that privacy issues could become high tech's Vietnam. Indeed, policies that were anathema a year ago--such as giving consumers access to info collected about them online--are gaining more acceptance each day. By stalling now in the face of a spreading consumer revolt, the tech industry could pay a steep price later.

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