- “We got nailed once because someone barehanded a bag of lettuce without a glove.” Kitchen-eye tales of NYC’s restaurant inspection regime [Saxon Baird, NY Eater]
- Positive reviews for new HUD regs on housing discrimination, affordability, and supply [National Review: Roger Clegg; Salim Furth]
- Sony isn’t making its robot companion dog available in Illinois because its facial recognition features fall under the state’s onerous Biometric Information Privacy Act; an earlier in-state casualty was Google’s “which museum portrait is your selfie like?” service [Megan Wollerton, CNet, earlier here and here] Is there any hope of slowing down the rush of class action suits filed under the law? [Chris Burt, Biometric Update]
- Victory on a-peel: “3rd Circuit rules maker of banana costume is entitled to ‘fruits of its intellectual labor'” [ABA Journal, earlier here, etc.]
- D.C. Circuit “Rips ‘Legal Artifice’ in Kasowitz Firm’s Megabillions Whistleblower Case” [Dan Packel, The American Lawyer; Cory Andrews, WLF]
- Congress passes a law framed as pro-veteran, doesn’t take the time to spell out quite how it works, years later we meet the (presumably unintended) losers in the form of nonprofits that employ blind and deaf workers [Julie Havlak, Carolina Journal, quotes me]
Cato event featuring David R. Burton, Richard Hay, Karen Kerrigan, & Diego Zuluaga:
Policymakers on both sides of the aisle have proposed new regimes for small-business beneficial ownership reporting. The aim of such legislation is to eliminate opportunities for money laundering and financial crime. However, the proposals before Congress would place heavy new compliance costs on millions of America’s small businesses while continuing to provide opportunities for bad actors to engage in illicit financial activities. Beneficial ownership reporting would add to an already onerous anti-money-laundering/know-your-customer (AML/ KYC) regulatory burden, cited by community banks as the single most costly financial regulation. Furthermore, international experience with beneficial ownership reporting requirements suggests that it will be difficult to make such requirements work in the United States.
The California Consumer Privacy Act, drawn up hastily to avert a threatened ballot initiative, purports to create six new categories of data-related consumer rights, “including the right to know; the right of data portability; the right to deletion; the right to opt-out of data sales; the right to not be discriminated against as a user; and a private right of action for data breaches.” Although sometimes compared to the European GDPR, the two laws are different and compliance with the one enactment (which has been immensely expensive already) does not accomplish compliance with the other. Expect uncertainty, fines, the California specialty of entrepreneurial class-action litigation, and more tilting of compliance cost structures to the benefit of tech companies and advertising intermediaries big enough to afford to spread the high expense over large revenue streams [Alec Stapp, Truth on the Market; more: Al Saikali, Washington Legal Foundation; Petrina McDaniel, Elliot Golding and Keshia Lipscomb, Squire Patton Boggs]
The European Union’s General Data Protection Regulation (GDPR), which went into effect just over a year ago, has resulted in a broad array of consequences that are expensive, unintended, or both. Alec Stapp reports at Truth on the Market, with more discussion at Marginal Revolution:
GDPR can be thought of as a privacy “bill of rights.” Many of these new rights have come with unintended consequences. If your account gets hacked, the hacker can use the right of access to get all of your data. The right to be forgotten is in conflict with the public’s right to know a bad actor’s history (and many of them are using the right to memory hole their misdeeds). The right to data portability creates another attack vector for hackers to exploit.
Meanwhile, Stapp writes, compliance costs for larger U.S.-based firms alone are headed toward an estimated $150 billion, “Microsoft had 1,600 engineers working on GDPR compliance,” and an estimated 500,000 European organizations have seen fit to register data officers, while the largest advertising intermediaries, such as Google, appear to have improved their relative competitive position compared with smaller outfits. Venture capital investment in Euro start-ups has sagged, some large firms in sectors like gaming and retailing have pulled out of the European market, and as of March more than 1,000 U.S.-based news sites were inaccessible to European readers.
The plain language of the GDPR is so plainly at odds with the business model of surveillance advertising that contorting the real-time ad brokerages into something resembling compliance has required acrobatics that have left essentially everybody unhappy.
The leading ad networks in the European Union have chosen to respond to the GDPR by stitching together a sort of Frankenstein’s monster of consent,a mechanism whereby a user wishing to visit, say, a weather forecast is first prompted to agree to share data with a consortium of 119 entities, including the aptly named “A Million Ads” network. The user can scroll through this list of intermediaries one by one, or give or withhold consent en bloc, but either way she must wait a further two minutes for the consent collection process to terminate before she is allowed to find out whether or it is going to rain.
This majestically baroque consent mechanism also hinders Europeans from using the privacy preserving features built into their web browsers, or from turning off invasive tracking technologies like third-party cookies,since the mechanism depends on their being present.
For the average EU citizen, therefore, the immediate effect of the GDPR has been to add friction to their internet browsing experience along the lines of the infamous 2011 EU Privacy Directive (“EU cookie law”) that added consent dialogs to nearly every site on the internet.
Police officers in Wisconsin “drew Gerald Mitchell’s blood while he was unconscious—to test his blood alcohol content after a drunk-driving arrest. The state has attempted to excuse the officers by citing an implied-consent statute, which provides that simply driving on state roads constitutes consent to such searches.” Although the right to privacy are not absolute, there are problems with that approach, made worse by a strange Wisconsin Supreme Court opinion extending to highway searches a Fourth Amendment search exception for “pervasively regulated businesses.” [Ilya Shapiro and Patrick Moran on Cato cert amicus brief urging the Supreme Court to review Mitchell v. Wisconsin]
The EU’s General Data Protection Regulation (GDPR), along with similarly heavy-handed regimes such as California’s Consumer Privacy Act, entrenches established platforms that have the resources to meet their onerous compliance requirements. Since the GDPR’s implementation in May, the rank and market share of small- and medium-sized ad tech companies has declined by 18 to 32 percent in the EU, while these measures have increased for Google, Facebook, and Amazon.
Via Alex Stamos thread on Twitter (“Anybody wonder why the big tech companies didn’t really fight that hard against GDPR? It isn’t due to a newfound love of regulation”) by way of James Pethokoukis; more, Antonio García Martínez.
Another valued little piece of financial privacy being lost: in the name of enforcing money laundering and know your customer regulations, the Treasury Department’s Financial Crimes Enforcement Network has expanded a program the effect of which is to require disclosure of your identity if you buy a home in some parts of country [Kathleen Pender, San Francisco Chronicle]
Related: British financial regulators adopt new approach of “shifting the burden of proof onto foreign investors; they must now prove their wealth is legitimate.” [Jeffrey Miron, Cato]
New York City police have employed the equivalent of DNA dragnets, combining voluntary with covert (e.g., grabbing a discarded cup) collection methods. Thus, before identifying a suspect in the Howard Beach jogger case, “the NYPD collected well over 500 DNA profiles from men in the East New York area….But things get worse from there. For those people excluded from the jogger case, the Office of the Chief Medical Examiner, the city’s crime lab, permanently keeps those profiles in their databank [with more than 64,000 others] and routinely compares profiles to all city crimes.”
In other words, cooperate with police by giving a DNA sample in order to help solve (or clear yourself in) some dreadful crime, and you’re in the database to nail for anything and everything else in future. “In this respect, [you] will be treated just like someone convicted of a crime.” And did you guess this? “Under their labor contract with the city, rank-and-file officers don’t give the lab their DNA, which means the lab can’t easily rule out possible crime-scene contamination.” [Allison Lewis, New York Daily News]
Readers who watched the Cato forum last November on prosecutorial fallibility and accountability, or my coverage at Overlawyered, may recall the story of how a Federal Trade Commission enforcement action devastated a thriving company, LabMD, following a push from a spurned vendor. Company founder and president Mike Daugherty, who took part on the Cato panel, wrote a book about the episode entitled The Devil Inside the Beltway: The Shocking Exposé of the U.S. Government’s Surveillance and Overreach into Cybersecurity, Medicine and Small Business.
Last month two separate federal appeals courts issued rulings offering, when combined, some consolation for Daugherty and his now-shuttered company. True, a panel of the D.C. Circuit Court of Appeals, finding qualified immunity, disallowed the company’s claims that FTC staffers had violated its constitutional rights by acting in conscious retaliation for its criticism of the agency. On the other hand, an Eleventh Circuit panel sided with the company and (quoting TechFreedom) “decisively rejected the FTC’s use of broad, vague consent decrees, ruling that the Commission may only bar specific practices, and cannot require a company ‘to overhaul and replace its data-security program to meet an indeterminable standard of reasonableness.’” [More on the ruling here and here]
As usual, John Kenneth Ross’s coverage at the Institute for Justice’s Short Circuit newsletter is worth reading, both descriptions appearing in the same roundup since they were decided in such quick succession:
Allegation: Days after LabMD, a cancer-screening lab, publicly criticized the FTC’s yearslong investigation into a 2008 data breach at the lab, FTC staff recommend prosecuting the lab. Two staffers falsely represent to their superiors that sensitive patient data spread across the internet. (It hadn’t.) The FTC prosecutes; the lab lays off all workers and ceases operations. District court: Could be the staffers were unconstitutionally retaliating for the criticism. D.C. Circuit: Reversed. Qualified immunity. (Click here for some long-form journalism on the case.)…
Contrary to company policy, a billing manager at LabMD—a cancer-screening lab—installs music-sharing application on her work computer; a file containing patient data gets included in the music-sharing folder. In 2008 a cybersecurity firm finds it and tells LabMD the file has spread across the internet. (Which is false.) When LabMD declines to hire the cybersecurity firm, the firm reports the breach to the FTC, which prosecutes the case before its own FTC judge. LabMD does not settle; the expense of fighting forces the company to shutter. The FTC orders LabMD to adopt “reasonably designed” cybersecurity measures. Eleventh Circuit: The FTC’s vague order is unenforceable because it doesn’t tell LabMD how to improve its cybersecurity.
Our friend Berin Szóka of TechFreedom sums it up: “The court could hardly have been more clear: the FTC has been acting unlawfully for well over a decade.” He continues by calling this “a true David and Goliath story”:
Well over sixty companies, many of them America’s biggest corporations, have simply rolled over when the FTC threatened to sue them [over data security practices]. … Only Mike Daugherty, the entrepreneur who started and ran LabMD, had the temerity to see this case through all the way to a federal court. …After losing his business and a decade of his life, Daugherty is a hero to anyone who’s ever gotten the short end of the regulatory stick.
[cross-posted from Cato at Liberty]
The European Union’s new privacy law, the General Data Protection Regulation, or GDPR, is sometimes defended as a response to the prospect that too much data will concentrate in the hands of the biggest corporate data users. Per the WSJ, however, one of its earliest effects “is drawing advertising money toward Google’s online-ad services and away from competitors that are straining to show they’re complying with the sweeping regulation.” In particular, Google is showing a higher rate of success in gathering individuals’ consents to be marketed to. [Tyler Cowen] With bonus mention of CPSIA: “The Inevitable Lifecycle of Government Regulation Benefiting the Very Companies Whose Actions Triggered It” [Coyote]