ACT Letter to Small Biz Committee on COPPA

Honorable Mike Pence, Chairman, House Small Business Committee, Subcommittee on Regulatory Reform and Oversight

Honorable James DeMint, Chairman, House Small Business Committee, Subcommittee on Workforce, Empowerment and Government Programs

Dear Chairman Pence and Chairman DeMint:

The Association for Competitive Technology (ACT) represents over 3,000 technology companies and professionals. The bulk of our membership is comprised of small and mid-size companies and their executives. This reflects the fact that nearly 80% of technology companies can be classified as small business. ACT members have one goal: the creation of innovative e-commerce business models. We believe that the costs of invasive government regulation have already and will continue to stifle our members. ability to accomplish this goal.

The costs of government regulation can be measured in terms of actual dollars spent on compliance as well as lost productivity and business opportunities. There is one striking example that brings this point home. The regulations that flowed from the Child Online Privacy Protection Act (COPPA) are a disaster that has tainted an otherwise laudable goal.

In terms of privacy there is no greater concern than protecting children. In 1998, Congress passed COPPA as part of an omnibus budget proposal and left the details to FTC regulators. While much remains unknown as to what benefits will come from regulating privacy, there is already evidence that this attempt was a costly mistake. The FTC concluded in its certification to avoid a Regulatory Flexibility analysis that, .any additional costs of complying with the Rule, beyond those imposed by the statute or otherwise likely to be incurred in the ordinary course of business, are expected to be comparatively minimal.. Were they ever wrong.

Each and everyday, small IT companies make decisions critical to their survival. The complexity and costs associated with a regulatory scheme such as COPPA force these companies to forgo other needed investments or incur significant additional costs. For example, Wall Street Journal Interactive reported that FreeZone, a web portal for kids between 8 and 14, estimates it will spend about $100,000 per year to comply with COPPA. Another company, Zeeks.com, pulled all of its interactive content because the $200,000 per year cost to employ chat-room supervisors, monitor phone lines to answer parents’ questions, and process COPPA permission forms was “the straw that broke the camel’s back.”

Another and more egregious problem is that COPPA rulemaking did not actually solve the problem identified in the underlying legislation. COPPA doesn’t apply to sites that don’t target minors–like porn sites. So, the costs of compliance are imposed only on web sites that are “good actors” by acknowledging that they want to responsibly serve minors.

ACT believes that because of the myriad of costs, there is no way to impose a “light” regulatory hand. Further, the right public policy goal should be to resist regulating where innovation exists to meet the needs of all interested parties. I thank you for convening this important hearing and look forward to working with you on this and other technology issues of interest.

Sincerely,

Jonathan Zuck,

President