The Federal Trade Commission recently sent a report to Congress on Internet privacy, noting that the industry has not made enough progress towards self-regulation in this area, and asking lawmakers for authority to issue sweeping regulations. Sen. John Kerry (D-MA) quickly responded with a floor speech announcing his intention to introduce legislation that would provide consumers basic protections for Internet privacy while avoiding heavy-handed federal regulation of this critical and rapidly changing industry.

The issue of Internet privacy is becoming one of the hottest topics in American politics. Most "wired" Americans value the freedom and flexibility of the Internet, but also worry that the information they supply in using the Net may expose them to consequences ranging from unwanted "spam" communications and advertisements to electronic "profiles" that will adversely affect their daily lives. Most troublesome is the possibility that insurance companies, credit agencies, or other institutions that use personal information to make decisions about consumers may begin to access Internet data--either information voluntarily disclosed during a transaction or information gleaned from analyzing your Internet usage patterns. Unfortunately, the debate on Internet privacy has been dominated by the extremes. As was noted in the March 1999 Progressive Policy Institute paper On-line Privacy Standards: The Case for a Limited Federal Role in a Self- Regulatory Regime, by Randolph H. Court and Robert D. Atkinson:

"On one side of the issue are many who would adhere to the early industry consensus that in all Internet-related matters, government should lay off... On the other side are privacy advocates who favor a comprehensive, top-down regulatory regime that would define and protect individual rivacy rights in the Information Age."

Both these approaches are faulty. Overly burdensome federal regulation of the kind proposed by the FTC threatens to shut down the exchange of information about Internet usage, while endangering the commercial revenues that now make the Internet free for most consumers. On the other hand, if legitimate concerns about Internet privacy are not addressed, consumer mistrust will have an equally negative effect, especially on the growth of e-commerce. Furthermore, if the federal government does not act, a mishmash of state regulations will soon emerge that will confuse and frustrate both entrepreneurs and consumers.

Fortunately, Sen. Kerry's proposed bill offers a third way on Internet privacy: establishing basic privacy protections that empower consumers to make their own decisions about use of information, while setting goals for the adoption of self-regulation and encouraging the development of "software solutions" among Internet companies.

He would require Web sites to disclose their privacy policies "clearly and conspicuously," and in plain language rather than legal jargon. Aside from informing consumers, this disclosure requirement would give the Federal Trade Commission a legal "hook" for taking action against sites that violate their own policies to engage in unfair or deceptive uses of information. Beyond this minimum protection, Kerry has indicated he wants to set goals for industry on how to protect privacy without micromanaging the means industires use to develop to achieve these goals. Kerry has outlined four principles he believes every Web site should follow: providing notice of privacy policies; giving consumers choice in how much information to disclose; supplying access for consumers to information about them; and ensuring security against improper use of personal information by third parties, including hackers.

Consistent with PPI's proposals in their recent report How to Can Spam, Senator Kerry's legislation would also pass restrictions to protect Americans from unsolicited commercial e-mail. The bottom line on Internet privacy is that the federal government should establish minimum protections, set goals for the adoption of robust and comprehensive self-regulatory programs (such as BBB Online) by the industry, and then monitor the ability of industry to self-regulate within those parameters. The right of consumers to control the trade-offs between privacy and easy use of the Internet should be a paramount consideration.

Fortunately, there is a separate piece of legislation (H.R. 4049) sponsored by Reps. Jim Moran (D-VA) and Asa Hutchinson (R-AR) that would create a national commission to comprehensively study the issue of privacy protection in the Information Age. Such a commission should study the extent to which offline and online standards are and should be compatible; assess the costs and benefits of various privacy regulations; and investigate what kinds of additional policies, if any, are needed. In addition, like the federal legislation that established an Internet tax commission, this privacy commission legislation should be amended to include a temporary moratorium on state Internet privacy legislation until the study is concluded.

It's the perfect complement to the Kerry legislation, and both should command the support of New Democrats who want to promote the New Economy while shaping it according to our values and interests.