The anticipation surrounding the projected vote on California’s updated privacy regulations raises significant concerns surrounding both financial burden and First Amendment implications. California’s move has sparked debate about aligning these privacy frameworks with constitutional protections for editorial and commercial speech, particularly in the context of a state where freedom of speech holds paramount importance.
As the state’s privacy protection agency gears up for a vote on proposed regulations in November 2023, the scope of these regulations is scrutinized. Beyond targeting cybersecurity audits and AI decision-making technologies, these regulations demand extensive corporate devotion to privacy risk assessments. However, the financial repercussions are daunting. An impact assessment forecasts that these regulations could cost businesses over $4 billion in the first year—a conservative estimate according to industry insiders.
Critics argue that the indirect costs cannot be overlooked. The U.S. Supreme Court’s decision in Sorrell v. IMS Health established that the “creation and dissemination of information” is a protected speech activity. Therefore, California’s regulatory demands must withstand at least intermediate scrutiny, and alternatively more, to justify the compelled speech they necessitate from businesses.
For instance, the U.S. Court of Appeals for the Ninth Circuit in NetChoice v. Bonta recently demonstrated the constitutional limits of such requirements, striking down certain regulations for being too burdensome. This suggests that while consumer protection is crucial, the regulations must consider less burdensome alternatives that achieve the same consumer protection goals.
A look at other states shows varying frameworks. Notably, Colorado delineates 35 specific aspects for businesses to evaluate, stopping short of prescribing that businesses must publish their conclusions. California’s approach, however, may exceed the boundaries of feasibility for businesses, possibly impeding growth and economic output, as well as triggering constitutional challenges.
Moving forward, California and its counterparts would do well to balance their admirable objectives with the practical needs of businesses operating under such complex regulations, ensuring that consumer protection does not unintentionally curtail fundamental free speech rights.