Published on houstonchronicle.com, January 22, 2019.
It is no secret that Texas likes to compete and win against California. Former Gov. Rick Perry used to actively recruit California businesses to relocate to Texas, and companies have been relocating from California to Texas for years. U.S. Sen. Ted Cruz loves pointing out in public appearances that renting a truck to move from Texas to California costs four to five times as much as moving from Texas to California. These are all good things for Texas, and that’s why Gov. Greg Abbott goes out of his way to warn Texas will be “California-
A recent example of a bad California policy is “The California Consumer Privacy Act of 2018” (The “Act”), which requires businesses, upon consumer request, to immediately disclose all information they collect about that consumer. This includes personal information, information sold to third parties, and a list of those third parties. “Personal information” is broadly defined as information that “identifies, relates to, describes, is capable of being associated with, or could reasonably be linked, directly or indirectly, with a particular consumer or household.” The bill also requires disclosure of basic digital information, such as IP addresses and search history. The Act applies to any business with gross revenues exceeding $25 million, or that annually processes the information of more than 50,000 California residents, or derives at least half of its gross revenue from the sale of personal information.
These purported protections must be weighed against the burdensome nature of the obligations they impose. Additional staff or contract services will likely need to be hired to address consumer data requests. Data professionals will have to be hired or utilized to analyze what data each company holds, and how to organize and present it for consumer requests. And lawyers will likely be needed handle the inevitable lawsuits.
With these burdens comes a choice: Comply or don’t participate. Though burdensome for everyone, larger companies such as Google, Facebook and Amazon have the resources to fully fund entirely new divisions dedicated to complying with these impositions, but a smaller startup may not have that luxury. For that company, it’s possible that the best choice is simply to not offer an innovative new product, or to limit itself to 49,999 residents processed because the juice isn’t worth the squeeze. The real losers in that case are the consumers who miss out on what might have become the next Google, Facebook, or Amazon. Such is the case with heavy handed universal regulations. They stifle innovation and competition.
Spotify is good at creating playlists. Netflix is good at suggesting movies and shows based on our preferences. Facebook reminds me that I was shopping for something on eBay. These services are provided at an increasing rate because they are popular. It is precisely this type of innovation that makes the internet such a great place to do business and to be a consumer. If we don’t like these services, we are not obligated to use them, but it would be a mistake for government to make this kind of innovation cost prohibitive. If that becomes the case, we’ll see fewer services in general, but we’ll certainly see fewer free services, more paywalls, higher subscription costs, and a less adaptive online environment.
Once again California has gone too far. Texas should enjoy all of the benefits of the California Consumer Privacy Act of 2018 when more of its companies relocate here in response. But let’s leave the bad regulatory choices in California. Any attempt to pass a similar law in Texas next legislative session should be roundly rejected.