Senate Power Shift Puts Online Privacy In SpotlightSenate Power Shift Puts Online Privacy In Spotlight

The issue of Internet privacy and the likelihood of new privacy laws are back at the forefront of federal legislative initiatives thanks to this month's shift of power in the Senate.

The change is due to Democrats regaining majority leadership in the Senate after Sen. James Jeffords of Vermont switched his party affiliation from Republican to independent and aligned organizationally with the Democrats. Jeffords' switch gives Democrats a one-vote majority in the Senate, meaning that they control chairmanships and have single-vote majorities in all committees. This could give the Democrats the clout to set legislative priorities and facilitate or block passage of individual bills.

That's especially true in the Senate Commerce Committee, the all-important battleground for privacy issues where Sen. Ernest Hollings, D-S.C., a proponent of strict privacy laws, is now chairman. Hollings' chairmanship pushes the question of privacy protection from the bottom of the committee's agenda to the top and makes it likely that one of the 30 or so bills floating around Capitol Hill this summer will actually see the light of day, observers say.

Online privacy "is clearly something [Hollings] is very interested in," says a Hollings spokesman. Last year, Hollings introduced a bill that didn't pass but is likely to be the starting point for any privacy legislation he reintroduces this year, the spokesman says. The bill required Web-site operators to post clear and conspicuous notices on their sites describing how they use data collected from individuals. In a 1999 study (the most recent), the Electronic Privacy Information Center found that two-thirds of U.S. Web sites posted privacy policies voluntarily.

Hollings' bill also prohibited secondary uses of personably identifiable data unless consumers chose to opt in to such uses. Under an opt-in framework, Web sites need permission from individual consumers before they can use data for anything other than completing the transaction at hand. An alternative, an opt-out model, lets Web-site operators use customer data for other purposes unless customers request otherwise. Most Web sites use the opt-out model.

"In the Clinton administration, privacy was a big issue, but when President Bush came in, all that went away," says Pam Fredericks, a senior solutions specialist in the E-security and privacy practice at Unisys Corp. With the switch in the Senate, "those privacy issues are back on top."

Whether they become law with a Republican-controlled House of Representatives and executive branch remains to be seen. Odds are that any legislation passed by Congress will require little more of Web sites than to give consumers a way to opt out of the sharing of their personal data-something that most do without government intervention.

"It looked like online privacy legislation was dead, but now I'd say there's a 75% chance that a bill will pass," says Giga Information Group analyst James Grady. "The Republicans really appreciate how delicate their balance of power was, and now they'll have to be much more conciliatory and look for legislation that both sides can support."

That's not to say that a blatant case of misuse of private information might not spur both sides of the Hill into enacting a bill with some real teeth in it. A few more cases like Amazon.com Inc.-which last month got a green light from the Federal Trade Commission to change its privacy policy in midstream so it could sell data it collects from consumers-could cause a consumer backlash strong enough to get a movement started.

Some Capitol Hill observers see a bigger shift in the wind. Although Hollings alone doesn't have the power to make a bill law, he does have the power to stop opt-out bills in the committee, says Reed Freeman, an attorney at Washington law firm Collier Shannon Scott.

"That's a sea change in policy, and one that spells trouble for an opt-out paradigm making it through the committee," Freeman says. Even if an opt-out bill were to succeed in the Senate, Freeman says it will never pass the House Commerce Committee; the committee's chairman, W.J. "Billy" Tauzin, R-La., favors industry self-regulation over government intervention.

Congress isn't yet confident that it understands the issues involved in E-commerce and probably won't impose the huge cost of opt-in programs on Internet businesses. More likely, Freeman says, is that Congress this summer will charter a commission charged with looking into the cost of privacy protection.

"That's a consumer-friendly initiative everyone can get behind with a straight face, and it's got a groundswell of support," Freeman says. "A privacy commission has the best chance, no legislation has the second-best chance, opt-out is third, and opt-in is simply not happening."