The FTC as Internet Privacy Norm Entrepreneur

Abstract

I. INTRODUCTION This symposium explores the economic approach to intellectual property law. This Article concerns a particular type of intellectual good-personal data. Personal data is an increasingly important topic because of its connection to the issue of Internet privacy, which has recently taken center stage in the public policy arena.1 Boiled down to its core, the Internet debate is a debate about who should control personal data-Internet users (data subjects) or websites. The scope of website data collection practices is expanding dramatically, due in large part to technological advances such as cookies, Web-crawlers, and Web-cams.2 If Internet users are unable to exert control over this growing use of their data by commercial entities, their personal will be increasingly diminished. One proposed solution to the growing problem is to grant people intellectual property rights in their personal data. Rights of this sort would, however, create tension with other principles of intellectual property law.3 Furthermore, property rights in personal data also raise First Amendment concerns.4 Thus far, new attempts to regulate personal data have stopped short of granting property in this data. Instead, the Federal Trade Commission (FTC), the leading regulator of personal data up to the present time, has proceeded by means of protecting user control, as opposed to ownership, of the user's personal data.5 In particular, the FTC has attempted to provide visitors to websites with greater control over the circumstances under which their data is collected and used by websites. The FTC's main means to accomplish this is to promote the use of so-called privacy or privacy statements by websites.6 The FTC has met with a fair degree of success in encouraging websites to adopt policies. In the past few years, the percentage of websites that offer policies has gone up significantly.7 Nevertheless, the FTC's efforts have been met with skepticism from the well-organized, public-interest advocacy community that is active in promoting greater electronic protection.8 The main thrust of the criticism is that the FTC's approach is doomed because policies are not an adequate means to accomplish the task of protecting website visitors from the invasive practices of websites. Yet, the FTC persists in promoting policies as its primary instrument of reform. This raises a puzzle as to why the FTC would focus its efforts so heavily on policies when they may be of dubious value. The suspicion is naturally raised that the Agency is either incompetent or is in the pocket of the increasingly powerful online industry. Indeed, some critics have charged that talk of the ethos of self-regulation of the Internet is simply a ruse whereby this powerful industry will come to completely dominate the personal data of the consuming public, with the result that individual informational will completely disappear.9 This important charge calls for a closer look into the FTC's efforts to promote online by means of policies. In the following analysis, a public choice approach will be used to model the FTC's activities, with the hope of better understanding what may really be motivating their policy choices. 10 Public choice theory models government agencies as if they were businesses, and key government actors as if they were entrepreneurs. Whereas typical businesses seek to maximize their profit, agencies seek to maximize their power, size, and prestige.ll There are different activities an entrepreneur can engage in. In his classic study, Richard Posner analyzed the FTC as a provider of preferential treatment to important members of Congress who serve on committees that oversee the agency.12 This typically involves favoring those industries or companies found in the Committee members' districts or states. …

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