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APRA’s Data Restriction Changes Fail to Protect American Innovation, US Competitiveness

by Policy

This session of Congress, leaders of the House Energy and Commerce Committee unveiled the American Privacy Rights Act (APRA). Its most recent iteration introduced several changes to previous drafts of the bill. While some of these changes are a good faith effort to address concerns about previous versions, a closer look shows that there is still work to do.

One area of particular concern is the bill’s attempt to right-size regulations on how American companies can use data for research and development. While it is critical for lawmakers to address concerns surrounding data use restrictions, APRA’s updates ultimately take a backward approach to the issue and fail to properly solve the problem.

The latest version of APRA would expand the authority of the Federal Trade Commission (FTC) to empower the agency to license new uses of data. While the language might be well-intentioned to introduce flexibility to otherwise rigid data minimization restrictions, this top-down approach essentially outlaws many of the ways information is used by the small businesses, innovative startups, and American companies responsible for developing new technologies. Additionally, this approach fails to consider how data usage needs may change as technology – and the methods businesses use to innovate – evolve over time from the ground up.

Unfortunately, these changes pose a real risk to American innovation and the United States’ capacity to compete globally. Data is at the center of AI development, and the ability for companies – both large and small, and across all sectors of the economy – to access, use, and deploy data in a responsible way is critical in ensuring U.S. businesses can continue to innovate. However, broad data minimization provisions paired with top-down licensing requirements would stifle U.S. advancement on the frontier of AI capabilities.

While Congress is right to take steps to protect Americans’ data from misuse, leaders in Washington, D.C. must account for the wide-ranging consequences of sweeping federal privacy legislation. Unfortunately, this latest iteration of APRA raises more questions than it answers regarding responsible data usage, and ultimately, a more flexible, bottom-up approach designed to advance – not stifle – American innovation is needed to address these concerns.

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The Remedy in the Google Search Case Must Protect Innovation and Consumer Interests

by Policy

In the coming months, a federal judge will begin to weigh potential remedies following his ruling  in the Google search case.  Throughout this process, the court will consider a wide range of potential corrective measures that could dramatically shift the search engine marketplace that millions of American consumers currently rely on. Ultimately, the goal of any remedy in this case should be to maintain competition in the search engine market, without inadvertently harming both consumers and the existing competitive landscape that drives American innovation.

Currently, Google and other businesses are major drivers of American innovation, with private companies contributing more than 75% of all U.S. research and development. These investments have made the United States into a global technological leader. However, a heavy-handed remedy in this case that punishes a company that – as even the court’s merits decision acknowledged – earned its success by “making shrewd business decisions,” risks setting a dangerous precedent for other private businesses and could chill innovation. Such an outcome would threaten to create a less competitive and less innovative marketplace at a time when the United States is competing with foreign rivals, including China, to maintain its technological advantage on the global stage.

Additionally, the remedy phase of the trial could have serious ramifications for American consumers. For example, forced changes prohibiting Google from participating in the contract bidding process for default search engine deals would risk raising prices and reducing choices for consumers. Given that these contracts are often a significant source of revenue for manufacturers and developers, this type of remedy could force these companies to pass costs onto consumers or shut down altogether, which would only further entrench dominant players in those markets. Other potential remedies, such as forcing Google to spin off products and services like Android or Chrome, would risk undermining key features consumers have come to rely on for security and privacy. Currently, these services are integrated with each other and fall under a single, convenient security umbrella. Without this integrated ecosystem, users could face greater risks from malware, data breaches, and other cyber threats, leaving millions of users more vulnerable.

Ultimately, the imposition of heavy-handed remedies risk harming American consumers and may ironically make the search engine landscape and other internet-based industries less competitive. As this case moves toward its conclusion, the court should prioritize competition without undermining American innovation or the products that millions of Americans enjoy and prefer to use.

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The Draghi Report: A Warning for U.S. Policymakers

by Policy

While much of Washington last month was focused on Congress’s most recent struggle to fund the government, across the Atlantic a prominent European politician released a report with significant implications for policymakers here in the United States.

The report, which has come to be known in policy circles as “The Draghi Report,” was written by Mario Draghi, an Italian economist, banker, and statesman who also once served as the prime minister of Italy. The report is fascinating, especially given the remarkable honesty and clear call to action for a sea change in the way that the European Union (EU) has typically done business, particularly regarding its regulatory and enforcement approach to the tech sector.

As Draghi notes, “Europe’s fundamental values are prosperity, equity, freedom, peace and democracy in a sustainable environment…If Europe can no longer provide [these fundamental freedoms] to its people – or has to trade off one against the other – it will have lost its reason for being. The only way to meet this challenge is to grow and become more productive…And the only way to become more productive is for Europe to radically change.”

Throughout the report, Draghi contrasts the state of the European economy to that of the U.S., and how the EU continues to fall behind. He points to the lack of growth in the European innovation and tech sector as a significant reason for these failures, as well as the areas in which change and investment are needed in order to drive the productivity that he says Europe so desperately needs to increase.

Specifically, he surmises that the reason Europe has fallen behind the U.S. (and subsequently China) in the digital space is due to weak growth and productivity, and a regulatory system that more often than not kills innovation. “The problem is not that Europe lacks ideas or ambition,” he notes. The issue is that “innovation is blocked at the next stage: we are failing to translate innovation into commercialization and innovative companies that want to scale up in Europe are hindered at every stage by inconsistent and restrictive regulations.”

Draghi details some of these barriers to success in his report. He notes that Europe claims to value innovation, but that the EU imposes regulatory burdens that are particularly costly and self-defeating for small- and medium-sized enterprises. He also faults the EU’s failures to focus its resources appropriately and coordinate its industrial strategies effectively.

In suggesting a revamp of the EU’s strategy to help bolster the private sector and drive productivity and growth, the author presents interesting ideas about how to, among other things, reorient its current merger policy to make it more innovation friendly.

Draghi examines what exactly is driving the rising productivity gap between the EU and the US, and concludes that, ultimately, it’s due to the differential in the EU and US tech sectors. Europe’s failure to capitalize on the digital revolution, he notes, has resulted in some digital sectors likely already being “lost,” because it will be too costly and difficult to catch up. And in doing so, he points the finger rather directly at a regulatory environment which imposes barriers to innovation in Europe:

“Over the past two decades, the top-three US companies for spending on Research and Innovation (R&I) have shifted from the automotive and pharma industries in the 2000s, to software and hardware companies in the 2010s, and then to the digital sector in the 2020s. In contrast, Europe’s industrial structure has remained static, with automotive companies consistently dominating the top 3 R&I spenders. In other words, the US economy has nurtured new, innovative technologies and investment has followed, redirecting resources towards sectors with high potential for productivity growth; in Europe investment has remained concentrated on mature technologies and in sectors where productivity growth rates of frontier companies are slowing.”

So why should lawmakers in the U.S. care what Mr. Draghi has to say? In his report, Draghi provides a roadmap for how to avoid regulatory failures here in the United States that would have similarly negative impacts on U.S. businesses, particularly those that drive innovation, growth, and productivity in the United States. While the U.S. system certainly isn’t perfect, it has served its purpose well. Given all the challenges for Europe that Draghi details in his report, it is hard to see the case for moving in a more European direction.

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SIIA’s Insights on the New York Child Data Protection Act

by Policy

The Software & Information Industry Association (SIIA) expresses gratitude for the opportunity to comment on the Advanced Notice of Proposed Rulemaking regarding the New York Child Data Protection Act. SIIA emphasizes the importance of balancing child privacy with access to critical online tools and information, advocating for clarity in the law to support educational systems. They highlight concerns about potential conflicts between the Child Data Protection Act (CDPA) and existing Education Law § 2D, which protects student data, urging the Office of the Attorney General (OAG) to clarify that educational technology products used by schools should not be classified as primarily directed at minors. This clarification is crucial to ensure that schools can effectively collect and protect student data without undue restrictions.

SIIA also provides recommendations for various aspects of the CDPA, including the definition of personal data and the processing of such data without consent. They argue that anonymized data should be excluded from the definition of personal data to avoid disincentivizing data protection efforts. Additionally, SIIA urges the OAG to adopt a consistent approach in assessing what constitutes a website or service primarily directed at minors, suggesting that existing frameworks like the Children’s Online Privacy Protection Act (COPPA) be leveraged. They call for careful consideration of how informed consent is obtained and propose that regulations should facilitate the provision of age-appropriate content without imposing excessive burdens on operators. Overall, SIIA advocates for a balanced approach that prioritizes both privacy and the educational needs of minors.

Full Letter Here
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SIIA’s Comments on the New York SAFE for KIDS Act

by Policy

In response to the Advanced Notice of Proposed Rulemaking, the Software & Information Industry Association (SIIA) expresses its appreciation for the opportunity to provide feedback on the SAFE for Kids Act. SIIA advocates for protecting children’s mental health from the adverse effects of social media while ensuring that they have access to vital information and online tools that keep them engaged in their communities. The association emphasizes the need for a balanced approach that safeguards children’s privacy and empowers parents in their children’s online activities. SIIA raises concerns about the potential privacy risks associated with age determination methods, urging that any regulations implemented should prioritize user privacy, limit unnecessary data collection, and recognize the limitations of current technology.

SIIA also highlights the importance of crafting regulations that avoid imposing undue burdens on parents while seeking consent for their children’s online activities. They advocate for a streamlined approach to obtaining parental consent, which would disclose collected information and its usage clearly, thereby minimizing the need for multiple consent requests. By ensuring that regulations are flexible and adaptable to technological advancements, SIIA believes policymakers can create a framework that protects children without stifling innovation or access to essential services. The letter concludes with an offer for further collaboration and assistance in refining these policies for the benefit of children and families.

Full Letter Here