Congress looks to reset the ad tech regulatory map

I’m Alan Chapell. I’ve been working at the intersection of privacy, competition, advertising and music for decades and I’m now a pundit writing for The Monopoly Report. I’m hosting an ASK ME ANYTHING session this Friday, May 23 at 11:30am EDT.

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The end of great state regulatory experiment?

A number of Republican members of Congress have reportedly slipped a provision into the latest budget reconciliation bill that would prohibit U.S. states from regulating on artificial intelligence for a period of ten years. The bill – if passed – also impacts state laws covering “automated decision systems”.

To be clear, I don’t believe this particular bill is likely to pass for a whole bunch of reasons. But it’s still worth thinking about because:

1. There is an ongoing debate amongst policymakers regarding where privacy rules leave off and the AI rules take over - and it’s creating all kinds of tension.

2. There are a number of rich and powerful people who seemingly don’t want any regulation of AI whatsoever.

3. This will not be the last time Congress attempts to pre-empt state laws and rules.

4. The outcome of the above debates will have a much larger impact on the ads space than most people reading this realize.

As a result, it might be worthwhile as a thought exercise to take this initiative to its logical conclusion. If you ask me, the stakes are pretty high.

Isn’t it better to regulate AI in the U.S. at the federal level?

This new bill is designed to eliminate any state or local attempt to regulate AI. And maybe that’s not a bad thing - if the larger goal here is to clear the path in order to regulate AI at the federal level. Having a single set of rules for the entire U.S. could be helpful. And removing the question of how to approach the super thorny question of state pre-emption COULD help get a federal law passed (i.e., because half of our lawmakers view state pre-emption as a must have, and the other half view it as NFW).

But here’s the thing: I’m not really sure that’s the goal. It’s just as likely that the goal here is to pre-empt state laws and then have Congress do little or nothing when it comes to regulating AI. And if I’ve learned anything over the past twenty years, failure to create baseline rules will often leave what is sometimes called a “regulatory void” - and that void ends up being filled somehow. And whomever fills that void often has its own set of interests.

Case in point: Apple and Google have spent the past decade “helping” to fill the regulatory void on privacy left by a do nothing Congress.

What are the ramifications of a state level regulatory freeze?

Given the lack of clarity around the overlap between AI and privacy, the impact of this type of initiative is likely to be fairly broad… potentially covering:

• Artificial Intelligence - That’s certainly the primary goal here. More on that below.

• Privacy Laws - If the states can’t regulate machine learning, automated decision-making or profiling, what’s left?

• Copyright - Some people have claimed that - in absence of federal level protections - the states might look to regulate copyright. While I don’t see that happening, it’s worth noting that there are separate initiatives in the U.S. (not to mention UK and EU) to “relax” copyright protections surrounding AI.

Anyway, there’s lots of stuff that could happen as a result of this type of initiative.

How will this impact the ads space?

I know that’s the type of question I’m supposed to be addressing here at the Monopoly Report. So here are a few potential implications off the top of my head:

• Reduction in the scope of rule making by California and New Jersey (which could eventually drown those of us in the ads space)

• Resets the definitions of personal information and de-identification in way that might make more sense.

• Your sales and privacy ops teams no longer have to spend time completing privacy RFPs and sending them to agencies who may or may not be reading them.

• You no longer need to deal with deletion requests from authorized agents (at least not in the U.S.)

• Ethnicity, race and religion are no longer sensitive profiles (which could actually help certain advertisers reach and communicate with certain communities more effectively)

• Fewer rules around health targeting profiles.

• No more data broker registration requirements.

• The various privacy self-reg codes re-emerge as our collective north star(?)

Some of the above may sound pretty good to you - in a 2009 era wild west kind of way.

But wait - there just might be a downside…

There are certainly parts of state regulatory efforts that I view as problematic - starting with the fact that they generally don’t account for size, scale, or sensitivity of the data processed in their collective rulesets. But at least those rules attempt to force businesses to adopt basic data governance principles and identify risk - which are building blocks for creating trust.

If one pulls that rug out from under our industry, do you honestly think it’s going to help (or hurt) the overall level of trust in the ads space?

In my view, the impact of this type of initiative would be to create a race to the bottom around privacy and AI at the very moment the U.S. appears to be getting its act together on addressing the competitive imbalance. All of this will: (a) invite others (e.g., ad blockers, browsers) to step into the regulatory void, and (b) make it even more difficult for honest business to thrive in the ads space.

And It’s not “just” the ads space

Keep in mind that almost everything created from now on is going to have an AI component. How would any of the below potentially impact your life?

• No more safety standards involving the AI used with self-driving cars.

• Nothing protecting content creators from scraping for AI.

• Denial of your healthcare coverage based on AI decisioning without explanation or ability to appeal.

• AI agents run by a handful of oligarchs becoming our collective source of truth.

Like I said, I think this particular legislative initiative is unlikely to be successful. But equally, I don’t think it’ll be the last initiative of this type. And while I’m the first to criticize certain state regulatory attempts - in general, they are far less problematic to the health of the ads space than widespread deregulation.

Like I said - I’m open to reasonable alternatives to the current patchwork of states. It’s just that the ones currently under discussion at the federal level strike me as wildly unreasonable.

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