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Privacy and the economics of self regulation

Alex Christie

30 June 2009

facebook-001What do social networking companies care more about? Money or users privacy? Personally I believe they are all there to try and make money (and why not), however this primary objective means that when it comes to a choice between protecting consumers privacy or making a profit, consumers will most likely lose out.

It is for this reason that I was concerned to read in the Guardian this week that Facebook have hired lobbyists in both Washington and Brussels to lobby its position on internet privacy and data sharing.

Facebooks’s head chief privacy officer was quoted as saying : “There is a concern we’ve had for some time that – in a well-meaning attempt to protect consumers – legislators or regulators would end up passing laws that would keep people from the beneficial sharing of information.”

Whilst this sounds very utilitarian, I have a somewhat more pessimistic take on it. One of the subjects I studied at university was on corporate governance, and more importantly the economic benefits to a firm or industry for undertaking self regulation.

It has been proven across a variety of industries that is far cheaper for an industry to self regulate than it is to adhere to government imposed legislation. Some might therefore argue that Facebook will try to protect consumer privacy in an attempt to self-regulate and avoid government intervention, however the problem with this is that they will only be motivated to do the bare minimum required to avoid regulation, not what is required to really ensure consumer privacy.

It is my hope therefore that the governing bodies listen to what organisations such as Facebook have to say, but at the end of the day make privacy legislation which protects consumers, not profits.

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