"Until they become conscious they will never rebel, and until after they have rebelled they cannot become conscious." This chilling prediction by George Orwell in the critically-acclaimed book, 1984, outlines America's contemporary data privacy crisis. Generally dismissed as a dramatic, dystopian novel used to promote readership sales, 1984 's futuristic commentary recognizes that without awareness of a problem, its solution ceases to exist. As a result, this paper will first define what data privacy is, recent cases of data privacy misuse, and introduce Gavin Newsom's proposal for consumer "digital dividends". Data privacy is defined as involving the handling and protection of sensitive personal information that individuals provide within the course of everyday transactions. Although understanding data privacy's definition is essential to comprehending the United States' data privacy crisis, without looking at relevant data privacy failures, it is impossible to determine the magnitude of this issue. Just technology giant Facebook alone, has had numerous data privacy violations that resulted in the exposure of millions of consumers' private information. In 2013, Facebook revealed that lt had discovered a bug that disclosed the personal data of over six million of its users. Five years later, Facebook's lack of regard for consumers' privacy struck again, when it was discovered that eighty-seven million users' private data was exposed via the Cambridge Analytica scandal. Lastly, in April of 2019, Facebook confessed that hackers had gathered information data on "most of" Facebook's two billion worldwide users. These scandals outline how frequently data privacy issues are occurring and show that hackers are able to attain this data on a global scale. In an attempt to curb this issue, California governor, Gavin Newsom proposed a bill that would provide consumers with a "digital dividend" in exchange for the collection of their private data. This dividend would allow users to make a data passive income and encourage large technology firms to take greater ownership of their data privacy practices. Newsom continued to campaign for the bill by emphasizing that companies that are "collecting, curating, and monetizing our personal data have a duty to protect it." Overall, this paper will seek to explore the proposal's viability of passing when considering the U.S constitution, state's rights, and economic impacts.
Similar to the constitution's potential support or opposition of Newsom's data dividends proposal, states' rights also play a pivotal role in the bill's success. To fully understand the magnitude of future states' regulatory data privacy policies, we must first examine the contemporary landscape. Today, states currently have the rights to set their own data privacy protection laws. One of the reasons why Gavin Newsom's "digital dividends" bill may pass, is because California is known to have some of the strictest data privacy laws in the country. The coastal state recently implemented the Consumer Privacy Act of 2018, which among other things, provided users with access to their own data. This law was created as a result of unethical data privacy violations including Facebook's infamous Cambridge Analytica scandal. Currently, thirty-six states have created over two hundred fifty-six resolutions regarding their data privacy stance. Based off of the sheer number of states and resolutions alone, it is evident that this issue is viewed with the utmost importance. However, an essential question to answer when predicting the future of states' data privacy rights is whether an overriding federal law will be approved.Technology companies' have been lobbying for a sweeping federal bill that would require states to have a unified front regarding dataprivacy. These companies are looking to avoid having to comply with varying data privacy policies state to state, as they would be expensive and difficult to uphold. If the potential federal resolution was as strict as California's Consumer Privacy Act, both states and watchdog groups alike would approve it. This type of overarching bill would easily aid Gavin Newsom's resolution, and may give it the ability to be enacted on a national scale. However, states and watchdog groups are not in favor of a national data privacy resolution because it would contain less privacy regulations than states have already implemented. In this scenario, California, Illinois, and New York would be forced to strip away protections from their data protections policy and comply with the federal resolution. If the federal bill was approved, there would be no possibility that Newsom's “digital dividends"”bill would pass, as it requires greater regulation than California's Consumer Privacy Act. This issue is both time-sensitive and politicized as republicans seek to undermine the California Act before it goes into effect in 2020. Republican Greg Waldon furthered this plan by saying, "Your privacy and security should not change depending on where you live in the United States." In the end, the battle for states data privacy rights versus the implementation of a federal privacy resolution will be a strong determinant about whether Newsom's proposal will pass.
If Newsom's data privacy bill were to pass in California, it is important to consider the macro and micro economic impacts on technology companies and consumers. One consequence of the bill would be an increase in lawsuits against technology companies, as the resolution specifically states individuals would "have the right to file against companies directly for data misuse." Although this would increase these businesses' litigation costs, it would allow consumers to hold them financially accountable for any data violation. This bill also has the potential increaselawsuits without reasonable cause, which may draw attention away from legitimate data privacy violations. Another aspect of the bill would force companies to employ a visible “don't sell my data” button and not increase users' subscription fees if this option were chosen. Although this ability initially sounds like a positive initiative, many technology companies' business models rely upon data sales or subscription fees. As a result, the businesses would not be able to create such a sustainable business model if they weren't able to spike prices in exchange for lack of data revenue. In addition, Pinterest, Twitter, and Facebook's business models solely revolves around advertising as a revenue stream. As a result, if data collection regulations similar to the CCPA were overbearing enough to detract from the amount or quality of data these companies would struggle to remain in business. If companies were not allowed to raise subscription prices, the only way to remain profitable would be to increase advertisement frequency. This would create a poor user experience for consumers, as no one is interested in seeing an advertisement every ten seconds while you are scrolling through your Twitter feed. In addition, without data to aid in predictive analytics and machine learning, consumers would be forced to view a greater number of advertisements with less relevancy to them. However, this data privacy protection would ensure that consumers would not be left defenseless against another massive data privacy scandal. Another economic impact if Newsom's bill passes is a lack of advertising efficiency for hundreds of thousands of companies. Without access to Facebook's exclusive database, many of these companies would lose their most cost-efficient advertising method and leads would become much more expensive to generate. For many struggling startups, where every dollar spent is absolutely essential, this technological regulation alone could be enough to take them out of business. In addition, other well-established businesses will offset the loss of advertising effectiveness by raising consumer pricing for goods and services. For families with a small disposable income, this unforeseen consequence could also be the financial breaking-point. With a recession looming, the U.S economy is projected to undergo an elongated period of volatility. In addition, with a stock market driven by California technology companies: Facebook, Amazon, Netflix, and Google, the passing of Newsom's bill could send the market into a downward spiral. On the other hand, consumers' data privacy is a problem that must be addressed effectively and immediately. Ultimately, it is evident that a resolution needs to be created that fully protects consumers' privacy, but allows technology companies to still successfully run their businesses.
It's time for a change.
Michael Garas is a student in Jon Pfeiffer’s media law class at Pepperdine University. The class covers copyright and social media. Michael is an Integrated Marketing Communications major.
Pfeiffer Law Corp is an entertainment law firm based in Santa Monica, California.