Privacy Groups Disturbed by California Governor’s Data-Dividend Plan

Advocates fear Gavin Newsom is proposing what they see as a counterproductive “pay-for-privacy” regime—and they’re wondering why the governor won’t clarify his proposal.

California Gov. Gavin Newsom after delivering his first state of the state address to a joint session of the legislature at the Capitol in Sacramento, Calif. on Feb 12
AP Photo/Rich Pedroncelli
Feb. 20, 2019, 8 p.m.

Gavin Newsom, the newly inaugurated governor of California, may have thought he was throwing privacy advocates a bone when he proposed the creation of a “data dividend” during last week’s state of the state address.

“California's consumers should also be able to share in the wealth that is created from their data,” Newsom said. “So I’ve asked my team to develop a proposal for a new data dividend for Californians, because we recognize that your data has value and it belongs to you.”

The notion that Facebook, Google, and other tech platforms should return a portion of the tremendous wealth that they’ve accumulated through the exploitation of their users’ personal data is a popular one. But if Newsom expected privacy advocates to enthusiastically endorse his plan to claw back Silicon Valley’s ill-gotten gains, today the governor is undoubtedly disappointed.

“We have no idea what the governor has in mind,” said Jeffrey Chester, the director of the Washington-based Center for Digital Democracy. “But thinking that you can pass on potentially a few cents of savings to individuals in exchange for agreeing to mass commercial surveillance and manipulation—it’s not just foolhardy, it undermines basic democratic protections.”

Chester’s concerns are echoed by a slew of privacy groups in California and nationwide. Though the phrase “data dividend” is a nebulous one, most observers suspect the plan would see consumers receiving a regular payout from the tech platforms in exchange for the use of their personal data for advertising and other profitable purposes. And if that’s the case, privacy groups are already pledging to oppose the proposal.

“The phrase ‘data dividend’ is not one that has a clear meaning to us,” said Adam Schwartz, a senior staff attorney with the San Francisco-based Electronic Frontier Foundation. “If what he’s talking about is pay-for-privacy, we’re very, very opposed.”

While ostensibly a boon for consumers, privacy advocates say a pay-for-privacy model is in fact an insidious way for tech platforms to legitimize and entrench their data-collection practices. That’s true whether companies offer a discount for their services—a scheme that some internet-service providers have tried in recent years—or fork over hard cash to consumers who are willing to waive their privacy rights.

“Pay-for-privacy, first of all, means that it’s privacy for the wealthy and no privacy for the rest of us,” said Richard Holober, the executive director of the Consumer Federation of California. “So we’re fundamentally opposed to any scheme that requires someone to pay for privacy or on the flip side, grants some kind of discount or special deal for someone to give up their privacy.”

“We would not support any proposal that starts with the assumption that companies have some right to get personal, confidential information and use it to their own profit,” Holober added.

Privacy advocates hope Newsom meant something different—an extra tax on the companies trafficking in consumer data, or perhaps a “dividend” in the form of increased privacy laws or the extension of property rights to personal information.

“I don’t know why the governor made the announcement the way that he did,” said Jacob Snow, a technology lawyer at the American Civil Liberties Union. “We’re just hoping that once the details do come out, that Californians' constitutional rights are properly protected.”

But more than one week after Newsom’s speech, multiple privacy advocates said they’ve reached out to the governor’s office for clarification and received next to nothing in response.

Jaime Court, the president of the Los Angeles-based Consumer Watchdog, told National Journal he sent an email to the governor’s office seeking more details on the data-dividend proposal, but came up empty.

“He doesn’t know what he’s doing,” Court said of Newsom. “He’s got an idea, not a proposal.”

Brian Ferguson, the deputy director of public affairs in Newsom’s office, did not answer a request from National Journal to explain whether the governor was considering a pay-for-privacy model or something else.

“Governor Newsom believes that Californians should also be able to share in the financial benefits that are being generated from their online data,” said Ferguson. “The Governor is open to constructive input on this issue and has directed his team to work with the experts in this area nationally as well as legislators to recommend a proposal.”

Chester said several privacy groups, including the CDD, are in the process of banding together to force a meeting with the governor’s office on the issue. Other advocates said they’ve heard similar rumblings about a coalition, but declined to say whether their group was involved.

Besides the governor, perhaps the only person who has details on the data dividend plan is Jim Steyer, the head of San Francisco-based technology group Common Sense. In an interview with TechCrunch on the eve of Newsom’s speech, Steyer took credit for the data dividend idea and said his organization would push legislation on the issue shortly.

“Governor Newsom is spot on that consumers deserve full transparency about how their data is being used, what their data is worth, and the right to share in the profits that companies are making off them,” Steyer said in a statement to National Journal. “While platforms are fast and loose with consumer data, they are not so willing to share what they are doing with the data or how much they are profiting. We fully support the governor's data dividend proposal and expect to introduce legislation that reflects that in the coming weeks.”

A spokesperson for Common Sense wouldn’t say whether the legislation being proposed represents the pay-for-privacy regime many advocates fear. But several said Steyer—the brother of billionaire Democratic donor Tom Steyer—has the ear of the governor on a variety of issues.

Court said Steyer has worked well with the privacy community in the past. But he also suggested that Steyer and Common Sense have significant ties to the tech industry, which may be seeking to blunt momentum on further privacy legislation through a data-dividend plan promoting a pay-for-privacy system.

“Jim Steyer is both a lawyer and smart, but he’s also in partnership with some of these companies,” said Court.

Still, most privacy advocates remain hopeful that they can impress upon Newsom the potential pitfalls of his data dividend proposal—as well as the political peril he’ll face should he challenge California’s privacy lobby.

“I think Governor Newsom’s a big supporter of the California Consumer Privacy Act,” said Court. “And he is clearly aware of the double edges of that sword, and I think he’s too smart to be cut by it rather than to wield it.”

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