Inside Google

The measure (SB 761), introduced last month by California Sen. Alan Lowenthal, requires the state attorney general to issue regulations that would require Web companies to notify state residents about online data collection and allow them to opt out. The bill, sponsored by Consumer Watchdog, applies not only to so-called personally identifiable information like users’ names, but also to unique identifiers, such as customer numbers of IP addresses.

The measure specifically allows consumers to opt out of collection of data relating to the sites they visited, their geolocation, and the time and date of visits, among other items. Consumers would be able to sue companies that disregard the measure for up to $1,000 per violation.

Consumer Watchdog says in a letter to the state judiciary committee that the bill will “foster consumers’ trust in the Internet and be a win-win for consumers and businesses.”

But a host of industry groups and Web companies oppose the bill, arguing that it “would create an unnecessary, unenforceable and unconstitutional regulatory burden on Internet commerce.”

In a letter sent to Lowenthal last week, opponents say that consumers can already block data collection by directing their browsers to reject third-party cookies. The opponents also argue that the bill isn’t needed because the industry operates a self-regulatory program aimed at notifying consumers about online data collection and allowing them to opt out of receiving ads targeted based on sites they have visited.

The letter was signed by a host of industry groups, including the Interactive Advertising Bureau, Association of National Marketers, Direct Marketing Association and American Association of Advertising Agencies, as well as individual Web companies, including Google, ValueClick and 24/7 Real Media.

Those organizations argue that the bill would be unconstitutional because it would regulate interstate commerce. “Websites cannot restrict who visits their sites and cannot reliably know if a visitor is a California resident,” they state. “Therefore, every Internet website in

the world would need to change their practices in order to comply with the law or risk violating it and facing costly class action lawsuits.”

Courts have struck down other laws as unconstitutional because they would affect interstate commerce, says Stuart Ingis, general counsel to the Direct Marketing Association. California already has an online privacy law that requires companies to post privacy policies. That law might be unconstitutional, but has never been challenged in court, Ingis says.

The organizations lobbying against the bill criticize it for singling out ad networks for special treatment. The most recent

version of the measure appears to allow people who opt out of online tracking to make exceptions for some sites, but not for ad networks or other companies that derive most of their revenue from marketing. “The blatant discrimination in this approach is pointless and inappropriate,” the letter adds.

The bill is expected to move to an appropriations committee and, if it clears that committee, to the state Senate floor. The state Assembly also would have to pass the measure before it became law.