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March 4, 2019, 9:09 a.m. EST

Capitol Hill split on preemption will let Facebook, Google escape federal data privacy legislation, analyst says

Analyst: ‘Low odds’ given that Democrats are ‘critical of the idea of federal preemption of the states’

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By Victor Reklaitis, MarketWatch


Getty Images
Posters last year depicted Cambridge Analytica’s CEO behind bars.

Top lawmakers in Washington this week talked up the potential for a bipartisan law that would lead to better protections of personal data.

“I plan to work with my colleagues on both sides of the aisle to craft strong, comprehensive privacy legislation that puts consumers first,” said New Jersey Democratic Rep. Frank Pallone , chairman of the House Energy and Commerce Committee, at a subcommittee hearing on Tuesday addressing privacy issues.

Mississippi Republican Sen. Roger Wicker, chairman of the Senate Committee on Commerce, Science and Transportation, made a similar comment ahead of that panel’s Wednesday hearing on privacy. “It is this committee’s responsibility and obligation to develop a federal privacy standard to protect consumers without stifling innovation, investment or competition,” Wicker said in a statement . He added that he was hoping to see “meaningful bipartisan legislation.”

But one analyst covering technology, media and telecom companies sees “low odds” for a new nationwide privacy law this year in the wake of a couple of Capitol Hill hearings on the matter this week.

“The reason for our continued low odds is commentary from Democrats critical of the idea of federal preemption of the states, which industry and Republican allies have been advocating for to prevent a ‘patchwork’ of state-level privacy law,” said Robert Kaminski of Capital Alpha Partners in a note Thursday.

GOP politicians largely want federal action on privacy in order to preempt a California law that’s viewed as tough and set to take effect next year, Kaminski wrote. And while Democrats have had a role in developing bipartisan legislation, he said that some preemption provisions could “cause the bill to fail to win the broader support needed to pass.”

Related: California vs. the U.S. has a new battleground — tech regulation

And see: Google CEO gets grilled on Capitol Hill as possible privacy bill looms

The easiest bipartisan privacy bill would be one that “punts” to the Federal Trade Commission and tells that agency to develop new rules and fines. But that approach “would not materially affect company operations and thus might fail due to not being ‘strong’ enough,” Kaminski wrote.

Lawmakers and watchdog groups have been increasingly scrutinizing Alphabet Inc.’s /zigman2/quotes/205453964/composite GOOG -0.22% Google, Facebook Inc. /zigman2/quotes/205064656/composite FB -1.18% , Apple Inc. /zigman2/quotes/202934861/composite AAPL +0.99% and other tech heavyweights over how they handle their users’ data, as well as how they deal with misinformation and political bias. The attention has come thanks to recent scandals and Big Tech’s growing power. In a recent report on what the new Congress is likely to deliver, lobbyists at Hogan Lovells said fresh privacy standards were “possible.”

Related: Sen. Marco Rubio rolls out online-privacy legislation

The European Union’s General Data Protection Regulation took effect in May.

This report was first published on Feb. 28, 2019.

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$ 1,347.30
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Volume: 550,223
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/zigman2/quotes/205064656/composite
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$ 194.43
-2.32 -1.18%
Volume: 9.81M
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$561.22 billion
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$1.57M
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$ 274.14
+2.68 +0.99%
Volume: 17.46M
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P/E Ratio
23.11
Dividend Yield
1.12%
Market Cap
$1206.17 billion
Rev. per Employee
$1.98M
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Victor Reklaitis is MarketWatch's Money & Politics reporter and is based in Washington, D.C. Follow him on Twitter @VicRek.

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