29 September 2000

Privacy Intrusions Seen to Threaten Growth of E-Commerce

By Phillip Kurata
Washington File Staff Writer

Washington -- The former general counsel of the U.S. Commerce Department, Andrew Pincus, says fears about privacy intrusions threaten to fragment the global electronic market place.

Pincus said finding ways to transcend national boundaries on privacy issues is the greatest challenge to making global electronic commerce viable.

Pincus, who recently resigned from the government, participated in a Commerce Department seminar September 27 on creating security and privacy in the cyber marketplace.

Data collection pervades life in the United States in ways that most citizens are not aware of, Pincus said. For example, highway billboards are equipped with devices that record the radio stations that the passing motorists listen to, he said.

Pincus said technology exists to build comprehensive dossiers on the drugs people take, the clothes they wear, the books they read, the food they eat, and the habits and preferences of their children.

When people realize the extent that such detailed personal data about them can be collected by the Internet, they tend to have strong negative reactions, Pincus said.

He said such fears were at the root of the controversy between the United States and the European Union (EU) over privacy protection. The EU has enacted privacy protection legislation while the United States has followed a policy of allowing industry to self-regulate.

Several months ago, the EU accepted what are called safe harbor guidelines for data protection offered by the United States. The guidelines spell out how U.S. companies handle the privacy of data received from Europe. The safe harbor standards are voluntary. European companies have the option of refusing to do business with U.S. companies that do not adhere to the guidelines.

Pincus said resorting to legislation for privacy protection could bring tragic consequences for electronic commerce. He said legislation could suppress imaginative solutions to the problem.

Sitting next to Pincus on the panel were two U.S. businesswomen who said the government has a role to play in developing privacy protections.

Harriet Pearson, who handles privacy issues for IBM, said both good business practices and strong statutory protections are necessary to strengthen consumer trust. She said IBM manages data in 130 countries, many of which have no privacy laws established during the Internet era.

"One thing is clear," she said. "No one wants to get hurt."

She said industry can not bear the full burden of this responsibility. She said that software giant Microsoft is developing privacy protection technology such as Internet browsers that detect "cookies" [devices embedded in websites that gather personal data when a person visits that website].

The question is, "will policy makers put protections in place?" Pearson asked.

Tara Lemmey, a venture capitalist involved in Internet advertising and data mining, said she frequently has to deal with "data Valdez" incidents. A company's spillage of sensitive information about its customers is often caused by "a failure to think," she said. "The companies never considered all the implications of data rights and practices."

She said the issues related to data management have become so complex that "no one person can see the whole picture."

At the urging of the technology industry, the Clinton administration and Congress laid down a policy of minimal government regulation of electronic commerce in order to allow it grow in its infant stage.

Lemmey said that "grace period" needs to end in order to establish rule of law in the electronic market place. She said industry and government need to cooperate in developing privacy protection guarantees.

Last week, Commerce Secretary Norman Mineta said privacy is "a make-or-break issue" for electronic commerce. "We don't think this growth [of e-commerce] will continue unless both consumers and businesses are confident about their experiences on the Net," Mineta said.

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