Privacy legislation raises questions

Pending federal, state laws may be at odds

Columbus, Ohio

For companies worried that the potential approval of new privacy laws could affect their data collection practices, it may not matter who wins tomorrow's presidential election. The reason is simple, said attendees at a privacy conference here: The push for privacy legislation is coming from all sides of the political spectrum.

The U.S. Congress and individual state legislatures next year are all but certain to consider a wide range of legislation that could affect many industries, said privacy experts and corporate officials at last week's Privacy2000 conference here. And while e-commerce companies and industry groups have urged the government to favor self-regulation over new rules, that sentiment may be changing because of potential conflicts between federal and state privacy laws.

The ability of the federal government to override state law is one of the reasons why Walt Disney Internet Group in North Hollywood, Calif., backs a bill proposed last summer by Sen. John McCain (R-Ariz.) and two other senators. The bill, which isn't expected to win approval this year, would require Web sites to disclose what they plan to do with the personal data they collect and compel them to give customers a chance to limit how the information is used.

"We're supporting that legislation more because of business predictability than . . . the fact that we don't think self-regulation is working," said Alden Schacher, privacy director at the Walt Disney Internet Group, an independent company that manages the Internet businesses of Burbank, Calif.-based The Walt Disney Co..

The proliferation of proposed state-level privacy bills "creates a very unpredictable environment," Schacher said. Federal legislation preempting state laws would make the privacy issue less complicated for companies to manage, she added during an interview.

But federal laws don't automatically preempt state legislation: Congress has to choose to include that provision in the bills it passes. The Gramm-Leach-Bliley Act, a financial deregulation bill that was approved last year, wasn't preemptive - which is creating problems for companies looking to follow its provisions.

For example, Kirk Herath, chief privacy and public policy officer at Nationwide Financial Services Inc., said 17 states have prohibitions on data sharing among financial services firms that remain in force after the passage of the Gramm-Leach-Bliley Act. Included on the list is Ohio, the corporate home of Columbus-based Nationwide Financial.

Complying with conflicting sets of state and federal law isn't easy for companies, Herath said. "You can't create two different systems," he noted. "It's not easy to take your customer base and segment it 50 different ways, or even two or three different ways." As a result, Herath said, the most restrictive state laws often become the de facto national standard.

Companies that have spent most of their attention focusing on federal privacy legislation are going to have to start paying more attention to state legislatures, said Emily Hackett, the state policy director at the Internet Alliance, a trade group in Washington. Privacy legislation at the state level is "going to be very active," Hackett said. "Any company that is interested in the privacy issue cannot ignore the states."

Hundreds of State Bills

At least two-thirds of the 50 states are considering an aggregate total of privacy bills numbering in the hundreds, according to estimates made at last week's conference, which was organized by the Technology Policy Group of the Columbus-based Ohio Supercomputer Center. And data privacy has become an issue that cuts across party lines, attendees said.

"If you're in business and you think that one party is going to help you on this issue . . . I think you are sorely mistaken," said Steve Emmert, director of government affairs at London-based Reed Elsevier PLC, which owns the Lexis-Nexis information service and other businesses.

Copyright © 2000 IDG Communications, Inc.

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