California’s AB 566 Could Endanger Digital Economy

News Summary

California’s Assembly Bill 566 may have severe economic consequences, potentially leading to job losses and decreased revenue. A report indicates that the bill would allow users to opt-out of data sharing, risking around $3.6 billion in advertising revenue, 73,000 jobs, and significant tax losses. Industry experts warn it could degrade online content diversity and hurt small businesses reliant on digital advertising. Existing consumer privacy rights may suffice, prompting calls for enhanced education over new legislation as the bill awaits Senate action.

California could face significant economic repercussions if Assembly Bill 566 (AB 566) is enacted, according to a recent report by Capitol Matrix Consulting, commissioned by the California Chamber of Commerce. The report, titled “Economic and Fiscal Impacts of AB 566: Global Opt-Out for Internet Users,” highlights potential threats to consumers, small businesses, and the overall digital economy in the state.

AB 566, introduced by Assemblymember Lowenthal (D-Long Beach), aims to create a “global opt-out preference setting” for internet users in California, allowing them to prevent their personal data from being sold or shared on websites. The report warns that this legislation could lead to numerous unintended consequences, including significant job losses and reduced revenue for both the state and local governments.

Specifically, the report predicts that if 25% of users opt out under this new system, California could experience a loss of approximately $3.6 billion in advertising spending. This decline would have a domino effect, potentially resulting in:

• A loss of over 73,000 jobs.
• A decrease of $6.4 billion in labor income.
• A drop of $550 million in state tax revenue.
• A loss of $270 million in local tax revenue.

The findings challenge the prevailing assumption that a global opt-out would preserve the availability of ad-supported content. Experts caution that an increase in opt-outs could degrade the online user experience, leading to a less diverse array of content and fewer free services available to consumers. Without adequate advertising income, websites may struggle to remain operational, reducing the variety of available online content.

Research indicates that a significant majority—71%—of consumers prefer personalized online services, highlighting the critical role that targeted advertising plays in the digital marketplace. This need is especially pronounced for small and medium-sized businesses (SMBs), which often lack the marketing resources of larger companies. With the U.S. Census data revealing that 87% of California businesses are SMBs, employing 47% of the state’s workforce, the proposed bill’s adverse effects would resonate throughout the state’s economy.

Industries significantly reliant on digital advertising, including online publishing, news organizations, retail websites, and non-profits, could suffer disproportionately under AB 566. The California Chamber of Commerce, alongside various business allies, has expressed concerns regarding potential job losses, declining revenues, consumer confusion, and internet disruptions stemming from the bill’s enactment.

Moreover, the report emphasizes that California residents already possess opt-out rights under the California Consumer Privacy Act (CCPA) and have available tools to manage their data without the need for additional legislation. In light of this, it is suggested that the California Privacy Protection Agency should prioritize consumer education rather than pursuing the enactment of AB 566.

As it stands, AB 566 is awaiting action from the California Senate following the summer recess. The growing concerns over the bill underscore the ongoing debates surrounding consumer privacy, data management, and the complexities of navigating a digital economy increasingly reliant on personalized advertising.

Deeper Dive: News & Info About This Topic

• California Chamber of Commerce: AB 566 Threatens Economy
• Google Search: California Assembly Bill 566
• California Chamber of Commerce: New Report on AB 566
• Wikipedia: California Consumer Privacy Act
• California Chamber of Commerce: Privacy Agency Report