First Privacy Hearing of the 107th Congress

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Solveig Singleton Testimony for Subcommittee on Commerce, Trade, and Consumer Protection Privacy in the Commercial World March 01, 2001 Ms. Solveig Singleton Senior Policy Analyst Competitive Enterprise Institute 1001 Connecticut Avenue, N.W. , Suite 250 Washington, DC, 20036 ------------------------------------------------------------------------ Mr. Chairman, my name is Solveig Singleton and I am a lawyer and senior analyst at the Competitive Enterprise Institute. Thank you for this chance to comment on the history of privacy law and commercial enterprises. Based on my research, 1 I offer the following observations: The Fourth Amendment should not be a basis for asserting privacy rights against journalists or commercial businesses, for there is no "state action" and the private sector enjoys constitutional rights of free speech. The idea that people own or have a right to control information about themselves has no historical justification; it is a radical and extreme departure from the free flow of information that has made the U.S. the world's leading economy. Today, we take shocking uses of "private" information by journalists in stride; less sensibly, we fret about electronic databases and learning tools&emdash;although these represent a natural and beneficial evolution away from reliance on gossip and guesses about people's preferences. U.S. Privacy Law in the Nineteenth Century. In the nineteenth century, as today, the law of privacy consists of two different sets of rules. First, there is the Fourth Amendment of the U.S. Constitution, which protects our rights against brutal searches from the government. Obviously, in the nineteenth century and today, it was not applied to the private sector. 2 The private sector has no power to seize and search one's property without consent under color of law. This remains true today. Note that there was and is no conflict between the Fourth Amendment and the First Amendment's rights of free speech. One might say that the Fourth Amendment is an example of a modified free speech right; 3 just as the Supreme Court recognized that Jehovah's Witnesses cannot be compelled to pledge allegiance to the flag, we cannot compel people to show the content of their papers and homes without a showing of probable cause. This makes the Fourth Amendment a very inappropriate basis for asserting expansive privacy rights against journalists or businesses today, who are not the government and who do enjoy free speech rights. Second, there was a common law of privacy in the private sector. For example, privacy was recognized as an element in disputes over physical property boundaries and easements or nuisances, for example, when two buildings were built close together. 4 Because these private sector cases identify privacy with physical property rights, there is no conflict between the First Amendment and privacy; property rights mark the boundaries of free speech rights, too. 5 One's right to read books does not give one a right to steal books&emdash;or letters-- from a neighbor's house or out of his pocket. Privacy in the Early Twentieth Century. The concept of a right to privacy detached from physical property rights was not unknown during the early part of nineteenth century, 6 but it was not recognized in the courts until the early part of the twentieth century. A famous law review article by Brandeis & Warren calling for creation of a privacy tort for use against the press was cited in some of these cases. 7 Over the years, many of the four privacy torts that sprang up were often directed against journalists. It became obvious in these cases wh en no violation of physical property or a contract has occurred, privacy is in conflict with free speech rights. Over the years, privacy torts have been constrained narrowly by the courts; some are referred to as "dying torts." 8 The concept of privacy suit based on the mere fact that information was spread asserted a sort of new property right in information. This expanded right has not prospered in the legal system, for it is a troubling one. Taken literally, it would obliterate the practice of journalism and much ordinary conversation. Unlike intellectual property, the new right amounts to a claim of ownership of facts and ideas. Unlike defamation, which lets you sue when someone disseminates false information, a right to own or control information about oneself gives you a veto power over truthful information. 9 And, unlike intellectual property law, an expanded view of privacy is not sanctioned by the Constitution. Within U.S. legal history, there is little support for the concept that people own information about themselves and much support for the idea that facts and ideas and opinions are and should remain free to be communicated. This observation holds even as the focus of privacy has shifted from journalism to business. Journalist too is a commercial enterprise. And what has not been well-recognized by policymakers is the extent to which businesses, like journalists, rely on the freedom of information to produce goods and services, and the extent to which consumers rely on information produced by commercial enterprises to learn about those products. Economic studies have produced substantial evidence that advertising and marketing alerts consumers to flaws in existing products, to the existence of new competitors and choices in the market, and helps bring down prices.10 Broad privacy principles are represented as a moderate step towards giving consumer's "choice." In fact, these broad principles are a radical and extreme departure from the American tradition of the free flow of information. Writing broad privacy principles into a law for the commercial sector would amount to a sudden massive expansion of copyright or defamation law, a step that Congress would not dream of. Even supposedly moderate "opt-out" measures are far more radical than they seem. The evolution of formal information networks such as consumer credit reporting has important benefits for the public as a whole. Even the poor or those who are not well known in a given community may buy on credit, a relatively recent and beneficial development. The existence of credit reports gives consumers an incentive to make payments on time, which means that businesses can lower the losses they suffer from default. Note, however, that had a statute imposing an opt-out rule been in place in the late nineteenth century when all this began, credit reporting could never have evolved! All of the bad debtors would have opted out! Similarly, on the Internet today, Amazon.com and other e-commerce distributors rely on commercial services to confirm that the addresses and names of their customers are valid, to weed out fraud. But this would be impossible if the database were full of holes and gaps left by opt-outs, well-meaning or sinister. The Evolution of Databases from The Late Nineteenth Century to Today. Within the U.S. legal tradition that commercial enterprises are generally free to learn about and communicate with their customers, the way in which they have done so has evolved over time. Economists have documented how formal networks for checking credit and assessing the reliability of goods have grown out of informal networks. Dun & Bradstreet, which reports on the creditworthiness of businesses, originated with Lewis Tappan, who managed credit accounts in his brother's silk business and who exchanged letters with 180 correspondents throughout the country about the creditworthiness of businesses in their communities. 11 Forty years ago community-based nonprofit organizations handled consumer credit reporting, now handled by three nationwide for-profit firms. 12 The formalization of the collection of information about consumers portends nothing sinister. Databases are a natural entrepreneurial adaptation to a more urban world, freed of small-town gossip. This holds true of Internet web sites, who are at a tremendous disadvantage compared to real-space businesses. For decades, the ordinary shopkeeper with a little store on the streeet can stand at the counter and watch people come it. He can see if they are regulars or strangers, if they are locals or tourists, German or Spanish, young or old, male or female. Do they look longingly at the stuffed monkeys, but comment that the price is just a little too high? Are they missing the display in the back? The operator of a web site has none of this information. It is as if he is deaf, dumb, and blind. And thus he has little chance of improving his service to customers, unless he hits upon their needs by sheer dumb luck. Thus, cookies were born. They are more properly viewed as the eyes and ears of the Internet than as some kind of sinister surveillance device. Many of the same arguments that were deployed against the journalist are today deployed against business uses of information. But they have no more merit than in their original context. For example, it is alleged that the transmission of information in itself and represents a threat to human autonomy and dignity. But writing a story about Madonna is not the same thing as seizing and torturing her. Receiving an unwanted advertisement in the mail is not akin to stealing someone's identity. The fact that we tolerate the rights of journalists to promulgate stories that once would have been considered shocking and indecent is a good sign that human beings are as always tough, adaptable creatures. We are not going to wither away because Safeway knows we bought lettuce. Some may be a little wary of the Internet&emdash;but if that has any basis in reality it is the fear of real crimes like identify theft, which are already illegal and for which have little to do with legitimate businesses use of information. The fact of the matter is, human beings, whether they are consumers, voters, or businesses, rarely make better decisions with less information. Laws that view the spread of information itself as the enemy will not target any real problems, and will do considerable harm. Click here for link to this testimony on Subcommittee web site. Click here to go to web page with all testimony (including audio archives).