On September 15, 2011, the House Energy and Commerce Subcommittee on Commerce, Manufacturing, and Trade (“CMT Subcommittee”) held a hearing to investigate how the complexity and compliance costs of European Union (“EU”) regulations impact U.S. companies. Rep. Bono Mack (R-CA), Chairman of the CMT Subcommittee, commented that the EU Data Protection Directive (“EU Directive”) has created uneven regulatory regimes and unintended consequences for commerce. Rep. Stearns (R-FL) cautioned CMT Subcommittee members against embracing an EU framework. He said the EU has stifled innovation through regulation, and that if the United States had adopted a similar approach, many of the great U.S. companies and their services valued by U.S. consumers would not exist today.

Among other witnesses, Dr. Tucker from the MIT Sloan School of Management appeared and explained that her research shows that strict regulation can damage online innovation and the advertising industry. According to Dr. Tucker, the 2002 EU e-Privacy Data Directive has limited the ability of companies to collect user data for behavioral advertising and is associated with a 65% decrease in online advertisement performance.

The CMT Subcommittee’s September hearing was the second in a planned series to examine privacy issues. A third hearing focusing on children’s online privacy is expected to occur in October. The first hearing, held on July 14, 2011, was a joint subcommittee hearing exploring the regulation of Internet privacy, featuring witnesses from the Federal Trade Commission, Federal Communications Commission, and the National Telecommunication and Information Administration. Rep. Bono Mack has said the hearings are intended to explore how to balance innovation and privacy.