A privacy proposal from the House Energy & Commerce Committee can severely hurt lucrative advertising business of Facebook and Google. The draft legislation wants to control how tech giants monitor user activity and share their data.
If this bipartisan proposal becomes law, companies will have to seek permission from consumers to share their data. Moreover, consumers will also be able to opt-out of getting ads from businesses with which they already deal.
For instance, businesses will not be able to send promotions to consumers if they already have their mailing address for other purposes, such as order delivery, without their permission.
Usually, tech giants do not just keep track of users on their own platform, but also on third-party websites. This is possible because of partnerships between different companies. This means Google and Facebook usually know which websites you frequent and which apps you use. This is the reason why something that you look for on a search engine shows up on your news feed.
If the House bill is passed, consumers will need to provide consent for tracking. So, firms will have to ask consumers before transferring information to third parties. Those companies will also have limits regarding the use of data.
So, essentially, users will be able to stop companies from snooping on them. And without such tracking, tech giants will not be able to gather a lot of data regarding the interest of users.
Additionally, the law will also ask firms to put up easily understandable privacy policies, Moreover, the duration for which companies hold data will likely reduce.
Tech Companies Will Likely Attempt To Water Down The Privacy Proposal
Since companies will require explicit consent to share data, they will not be able to share that information with Facebook and Google to buy advertising. So, the law will affect the entire ad ecosystem.
One of the biggest assets of internet companies is the knowledge they have on consumers. It is the basis of their advertising business. With restrictions like the ones proposed, their advertising technology will be disrupted. Thus, they are likely to resist the changes.
At the same time, some people believe that this bill can backfire. That's because it can harm small businesses, which will further strengthen the monopolistic position that large companies enjoy. That's because compliance is easier for large businesses.
As is the case with other drafts, we can expect some changes in the House Proposal before it becomes law. Currently, the Republicans and Democrats have differences on some key issues.
Stakeholders will file comments by January 24. Given the political environment in the U.S., it doesn't look like the privacy law will be passed before 2021. However, politicians want to finalize a bill in 2020 and have made it a top priority.
The law might even be stricter than the new California Consumer Privacy Act (CCPA) which will be enforced in July. It will limit the time companies can use customer data and layout rules about how that information should be managed. Until the new House draft is adopted, the California rule will likely become the main unofficial national privacy law.