Testimony of Commissioner Orson Swindle
July 27, 1999
Mr. Chairman. Thank you for the opportunity to testify today.
Let me begin by painting a big picture. Last month, the University of Texas, backed by Cisco Systems, Inc., introduced a study of the current status of electronic commerce -- one of the very first attempts to measure the Internet economy. According to the study, the Internet economy generated an estimated $301 billion in revenue in 1998 and was responsible for more than 1.2 million jobs. (These estimates are based on worldwide sales of Internet-related products and services by U.S.- based companies.)
Let me put these figures in perspective. The Internet economy already is bigger than the energy industry ($230 billion), the telecommunications industry ($270 billion), and is almost as big as the automobile industry ($350 billion).
According to Commerce Secretary Daley, retail consumer purchases over the Internet were $3 billion in 1997, $9 billion in 1998, and are expected to approach $30 billion this year.(1)
We are witnessing an incredible economic engine just revving up. Consumers are not timidly engaging in this new form of commerce. As Chairman Pitofsky testified recently, "It is remarkable the extent to which people are becoming committed to doing commerce on the Internet."(2) Consumers seem to like it.
The Commission's 1999 Report on Privacy, recently submitted to Congress, ultimately reached the correct and obvious conclusion: no legislative action is necessary at this time. Significant self-regulatory progress has been made, but continued vigilance is needed if we are to obtain higher and higher levels of confidence in protecting personal privacy. The path to those higher standards is not through more laws and regulation. Rather, industry, advocates for privacy and consumers, and the Commission should be able to make further progress by continuing to work together toward what we all agree to be a mutually beneficial goal. Industry, however, must lead the way --- and, I am confident that it will and will do so far more effectively than will more laws and bureaucratic decision making.
There is an incredibly exciting new world of economic and educational power before us. The rapid convergence of technology, information, and entrepreneurship is ushering in one of the greatest expansions of freedom, choice, and independence mankind has seen, and democracy will be the better for it. However, without personal responsibility, democracy cannot flourish. Consumers definitely have a role to play. For certain, there are hazards associated with this new environment. How we balance protecting consumers and, at the same time, make it possible for this vast potential to develop is critical.
As reflected in our 1999 report, there is broad agreement on the core principles of fair information practices: notice, choice, access, and security. S. 809 addresses each of these principles. However, for those who wish to regulate online privacy, I ask, "how will we do it?" The devil is in the details. We are coming to realize that technology and cost, not to mention the exponential growth of the online world, are serious impediments. Recent data suggests there are now approximately 3.6 million commercial Web Sites, and they are increasing at over 275,000 a month.(3) We have a lot to learn about the Internet economy and how to deal with it, as our ongoing rule making to implement the Children's Online Privacy Protection Act of 1998 is revealing. The old adage of "looking before we leap" is still wise advice. Imposing additional laws and regulations on that which we do not yet fully understand could produce incredibly negative unintended consequences.
Imagine this scenario: First of all, massive numbers of unintended or innocent violations of the new law will likely occur. Commercial Web sites are increasing at almost 10% a month. The overwhelming majority of these violations would be by entrepreneurs seeking to market a product on the Internet without understanding the new requirements or not possessing the technology or the resources to comply. The regulators, armed with the new law, would, of course, have to enforce it. Imagine the scope of this task and the likely effects on entrepreneurs.
While this might be a nightmare for regulators, it pales in significance to the possibility of regulation impeding the growth of this economic engine.
Do I suggest throwing in the virtual towel? Certainly not. I suggest a different approach driven by practicality. More law and government regulation will not solve this problem. It is in the interest of businesses, large and small, to provide customers with safe transactions and secure privacy and business practices to win the confidence of those customers.
Because we are making progress, and because none of us fully understands where electronic commerce, entertainment, knowledge, information and education are heading, I strongly urge a more cautious approach. The rule of "Do no harm" seems most applicable here. Let's not add more laws and regulations at this time. Rather, let's continue to work together and allow this new economic engine and privacy policies to evolve.
For the most part, businesses have the creativity and motivation to lead the way. Companies like AOL, IBM, and Microsoft, who have led the way, also help countless other companies by their example. Organizations and seal programs such as the Direct Marketing Association, BBBOnline, TRUSTe, and others are also leading the way and progress is increasing day by day. Continued focus on the problem by the Congress, the Commission, advocates for consumers and privacy, and leaders in industry should bring about the progress we desire and the sound balance that is imperative.
1. Written Remarks by Secretary of Commerce William M. Daley, Press Conference on E-Commerce, Washington, DC, February 5, 1999.
2. Testimony of the Federal Trade Commission, Hearings on Electronic Commerce: The Current Status of Privacy Protections For Online Consumer, Tuesday, July 13, 1999, U.S. House of Representatives, Committee on Commerce, Subcommittee on Telecommunications, Trade, and Consumer Protection.