Tech companies couldn’t force arbitration under bill (2)

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People who sue tech companies for certain privacy violations would not be forced into arbitration under a Sen bill. Maria Canwell (D-Wash.) drafted.

Lawmakers have been trying for years to pass federal privacy law as consumers worry about how their data is being used, while the tech industry worries about having to comply with a patchwork of state regulations. Negotiations had been stalled since 2019 so far as three of the four main committee heads reached an agreement.

“As an entity focused on promoting privacy, it is extremely exciting to see the bipartisan interest and potential for real action that we have been waiting for for many years,” said Alan Butler, executive director and president of the Electronic Privacy Information Center.

A major sticking point has been whether to allow individuals to directly sue companies such as Twitter Inc. and Zoom Video Communications Inc. for alleged privacy violations. Both companies have faced lawsuits from individuals in California, where state privacy law allows limited private rights of action.

Cantwell, chairman of the Senate Commerce, Science, and Transportation Committee, and a ranking member of the panel Roger Osier (R-Miss.) had agreed to allow private rights of action — when an ordinary person can assert their own rights, rather than relying on a state or the Federal Trade Commission to bring a lawsuit. But talks broke down over mandatory arbitration, a source familiar with the talks said on Wednesday.

Photographer: Anna Moneymaker/Getty Images

Senator Maria Cantwell (D-Wash.) arrives for a press conference at the United States Capitol on May 5, 2022.

Cantwell, in a bill obtained by the Bloomberg government, states that consumers can bring their disputes to public court, even if their product’s terms of service state that disputes will be resolved by binding arbitration. Specifically, consumers would not have to go through forced arbitration for “substantial harm to privacy,” which the bill defines as harm to an individual worth $1,000 or more, or certain physical and mental harm.

Giving consumers the choice to take legal action is important because arbitration is confidential, relies on a paid arbitrator, and tends to favor companies over consumers, the source said.

But Butler argues that banning forced arbitration in private rights of action shouldn’t be a dealbreaker for any legislation. It’s a piece of a piece in a bigger enforcement toolbox, and it’s more important to make sure there’s adequate funding for the FTC and the states to enforce the law, a he argued.

Wicker’s office did not respond to repeated requests for comment.

Learn more: Consumer privacy opt-outs specified in proposed California rules

Reconcile the drafts

Cantwell’s bill also includes a duty of loyalty provision, which says companies are prohibited from engaging in misleading or harmful data practices. This is another area where Cantwell and Wicker have reached an impasse, the source said, adding that the bill’s language is a placeholder and does not represent a strong position.

Cantwell has been sharing the draft over the past few days with stakeholders and other lawmakers, working to gain support and reconcile his bill with others, a staffer in Cantwell’s office said.

Meanwhile, Wicker, along with the chairman of the House Energy and Commerce committee Frank Pallone (DN.J.) and ranking member Cathy McMorrisRodgers (R-Wash.) have agreed on a separate project, according to two sources familiar with the matter. Binding arbitration is one of the main sticking points between the two projects.

Tech companies continue to oppose any form of private rights of action in federal privacy legislation. The Chamber of Commerce this week warned committee leaders against the practice, arguing it would lead to frivolous lawsuits.

A duty of loyalty provision would make private rights of action even less palatable to industry, as it could lead to years of trying to figure out what constitutes an invasion of privacy, and companies would fear sue and just settle, according to an industry source who spoke on the background to discuss sensitive conversations.

The Cantwell employee said her office is working to overcome opposition from the Chamber of Commerce.

Jeff Joseph, president of the Software & Information Industry Association, said Cantwell’s bill’s parameters for substantial harm to privacy “begin to approach some level of reasonableness.”

“We support a limited and specific allocation for private rights of action. We just don’t want that to be an excuse for new revenue streams for litigators,” he said, adding that any duty of loyalty must also be very specific.

To contact the reporter on this story: Mary Curi in washington at [email protected]

To contact the editors responsible for this story: Anna Yukhananov at [email protected]; Meghashyam Mali at [email protected]; Robin Meszoly at [email protected]

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