Senate Committee Holds Hearing on Children's Online Privacy Bill

(September 24, 1998)  The Senate Communications Subcommittee held a hearing Wednesday on S 2326, the "Children's Online Privacy Protection Act of 1998."   The bill would require children's websites to obtain parental consent before collecting information from children under thirteen.

Federal Trade Commission Chairman Robert Pitofsky, whose agency would receive new regulatory powers under the S 2326, testified in its favor.  Deirdre Mulligan, of the Center for Democracy and Technology, who has testified often in favor of Internet privacy legislation, also spoke in favor of the bill.

Significantly however, an industry representative gave a qualified endorsement.   Time Warner's Arthur Sackler conceded that legislation to protect children's online privacy is needed.  He spoke on behalf of the Direct Marketing Association, which has long argued for industry self-regulation, instead of government regulation.  He praised the efforts of industry, but concluded:

"We recognize that this may not be enough in the context of disclosure of personally identifying information by children under the age of thirteen online.   Therefore, although DMA usually supports industry self-regulation of electronic commerce, we believe that it may be appropriate to consider target legislation in this area.  For that reason we are happy to be working with you ... in refining S 2326 for consideration by the committee ..."

Sen. Richard Bryan

Sen. Richard Bryan (D-NV) is the lead sponsor of the bill.  He stated that "technology has made the collection and dissemination of information that is collected on each of us easier than ever before. ...  There is a growing concern about private medical records and the release of personal financial data.  Indeed today our personal privacy is threatened."

Sen. Bryan continued that "children by their very nature are honest and trusting, and when approached on the Internet by their favorite cartoon, or offered the chance to win a prize or to participate in some kind of a contest, children will provide very personal and private information.   Children under the age of twelve years old are not likely to have the judgment to know what is appropriate."

"The FTC has looked into a number of privacy areas, and this summer released a privacy report that makes the case for legislative action in the area of protecting children's privacy."

Sen. Bryan concluded:

"Website operators should get parental consent prior to soliciting personal information.  The legislation that Senator McCain and I have introduced will give parents the reassurance that when their children are on the Internet they will not be asked to give out personal information to commercial website operators without parental consent."

Sen. Conrad Burns (R-MT) presided at the hearing.  He stated that:

As personal and financial information moves more and more into the Internet, privacy of the online world is becoming an increasing area of concern. The revolution in communications technology has allowed unscrupulous actors to intrude on the privacy of Americans. And particularly troublesome to all of us, the lowest of the low invade the privacy, and it becomes very troublesome where children are concerned.  (See, Opening Statement.)

The Internet industry has long resisted efforts to impose legislative or regulatory constraints.  Rather, representatives of industry have argued for industry self-regulation.  And recently a group, Online Privacy Association, was formed to promote self-regulation.

The Internet industry has been supported on this issue by the Commerce Department and many in Congress.  (See for example, Daley Speech at Privacy Conference, 6/23/98.)

The FTC, in contrast, has long been maneuvering to increase its regulatory power over the Internet.

The FTC released a Report to Congress in June which contained the results of a survey of websites. This Report has since served as the rationale for many to demand new legislation.  The Report included a survey of 212 children's commercial websites. It found that almost 90% collected information from children. 54% of the children's sites surveyed provided some form of a statement about the site's information practices. 23% tell children to seek parental permission before providing information. Only 1% actually obtain parental permission.

More recently, Vice President Al Gore endorsed the concept contained in the Bryan-McCain bill.  He hosted a White House event to announce several privacy initiatives on July 31.  He stated: "Before children innocently forfeit personal information, parents should have a say.  So today, I call on Congress to pass legislation that gives parents the right to say yes or no before information can be collected from children under the age of thirteen."

The bill would require that the operators of commercial websites that are directed to children, and that collect personal information from children, first obtain parental consent.

The bill does not set forth specifications for this procedure. Rather, it delegates to the Federal Trade Commission the authority to promulgate regulations to enforce this restriction.

The bill would not affect non-commercial websites, websites located outside of the U.S., or websites that are not directed towards children.

The FCC would also be given authority to prosecute, as "violation of a rule defining an unfair or deceptive act or practice", any website operators who violate this restriction. 

However, the FTC would not have exclusive enforcement authority. The bill would also give the states concurrent authority to prosecute violators.  Sec. 5(a)(1) provides that: "In any case in which the attorney general of a State has reason to believe that an interest of the residents of that State has been or is threatened or adversely affected by the engagement of any person in a practice that violates any regulation of the Commission ... the State, as parens patriae, may bring a civil action on behalf of the residents of the State ..."

The bill also contains a safe harbor section, to encourage, and allow for a degree of industry group self-regulation.

The hearing was conducted by Sen. Conrad Burns (R-MT), the Chairman of the Senate Communications Subcommittee, and Sen. Richard Bryan (D-NV), lead sponsor of the bill.  Sen. John McCain (R-AZ), Chairman of the full Commerce Committee, is cosponsoring the bill, but was not present.

The witnesses at the hearing were:

• Robert Pitofsky, Chairman, Federal Trade Commission.  (Copy of statement, HTML.)
• Kathryn Montgomery, President, Center for Media Education.  (Copy of statement: PDF version in Commerce Comm. website.)
• Deirdre Mulligan, Staff Counsel, Center for Democracy and Technology.  (Copy of statement: PDF version in Commerce Comm. website.)
• Jill Lesser, Director of Law and Public Policy, America Online.
• Arthur B. Sackler, VP for Law and Public Policy, Time Warner.

Pitofsky supported the bill.  He stated:

The proposed Children's Online Privacy Act contains many provisions that we believe are necessary and appropriate for effective protection of children online. The Commission supports the enactment of legislation such as S. 2326, because it places parents in control of the online collection and use of personal information from their children. Children are not fully capable of understanding the consequences of divulging personal information online. Moreover, given the nature of this new medium, parents do not always have the knowledge, or the opportunity, to intervene in their children's choices about giving personal information to Web sites. The proposed legislation would allow parents to know about and control the online collection of information from their children by requiring Web sites to provide actual notice and to obtain prior parental consent.  (See, Prepared Testimony.)

Kathryn Montgomery, who testified on behalf of both the Center for Media Education and the Consumer Federation of America, also supported the bill.

"... self-regulation will not be an effective safeguard for protecting children's privacy online.  The FTC's recent report on online privacy demonstrates dramatically the failure of industry self-regulation to protect children's privacy online.   Congress should act swiftly to develop a national policy for protecting the privacy of children and families in interactive media.  S. 2326 can be a beginning to that process."

Sen. Burns did not endorse the bill as it is currently written.  However, he said in his opening statement that "While I have some minor technical concerns about a couple of the bill's provisions, I am sure they can be worked out and I look forward to eventually co-sponsoring the legislation."

Prospect for passage of some form of this bill in the Senate are good.  Sen. Burns chairs the Communications Subcommittee, while Sen. McCain, who is co-sponsoring the bill, chairs the full Commerce Committee.  Sen. Burns stated that while "the remaining legislative days available are few, I will work with the Chairman of the Full Committee, Sen. Bryan and others to move the bill to markup and passage by the full Senate as quickly as possible."

The House Commerce Committee, in contrast, contains many members opposed to regulating the Internet.