Looking At the Impact of the California Consumer Privacy Act

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MIT SMR Strategy Forum

Each month, we pose a question about business, management, technology, or public policy to our panel of academic experts. Here you can see what they think and why.
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California’s new privacy law, the California Consumer Privacy Act (CCPA), has recently gone into effect after being passed in 2018. Similar to the General Data Protection Regulation (GDPR) that went into effect in 2018 in the EU, the CCPA aims to give consumers more rights and autonomy over their data and how companies can use it. Given California’s size (it is the largest economy in the United States and the fifth largest in the world) and its central location in the technology sector — where companies like Facebook and Google are based — the privacy act will have widespread effects for businesses nationwide. For this month’s MIT SMR Strategy Forum, we dialed in to an industry at the center of many conversations around data privacy rights: targeted advertising.

We asked our panel of strategy experts to respond to the following statement:

The California Consumer Privacy Act will undermine the targeted advertising market by giving consumers the right to opt out of allowing companies to sell personal data to third parties.
RAW RESPONSES
WEIGHTED BY CONFIDENCE

Raw Responses

Responses weighted by panelists’ level of confidence

Panelists

Panelist Vote Confidence Comments

Joshua Gans

University of Toronto
Profile
Disagree 7 “My guess is that there are ways to get data in any case by self-collection rather than a market. But even so, it is unclear how many consumers will opt out as a result of this law. So in the end, targeted advertising will likely be just fine.”

R. Preston McAfee

Economist
Profile
Disagree 8 “The California law won’t stop Facebook significantly, and the targeted ad market has a glut of inventory. Reducing the supply may help the market by increasing prices. The law will tend to favor big sites that can force opt-in: Facebook, Gmail, YouTube, TikTok, Amazon, and disfavor many others, an unfortunate unintended consequence. Free sites like Facebook may need to start charging to compel opt-in.”

Erik Brynjolfsson

Massachusetts Institute of Technology
Profile
Disagree 7

Steve Tadelis

University of California, Berkeley
Profile
Disagree 8 “Consumer behavior suggests that most people give away their privacy for the equivalent of a candy bar. It is very unlikely that a meaningful fraction of people actually opt out of marketing or even put serious restrictions on the use of their personal data.”

Tom Lyon

University of Michigan
Profile
Strongly Disagree 10 “If the targeted advertising market must rely on violating the wishes of consumers, it is very unlikely to be improving welfare. Should this cause it to fail, then good riddance.”

Ashish Arora

Duke University
Profile
Disagree 8 “Many consumers will likely consent (not opt out) in return for access. Instead, the Act will provide a sounder foundation for targeted advertising.”

Olav Sorenson

Yale University
Profile
Strongly Disagree 8 “Many consumers will not bother to take advantage of these rights. Even for those who do, companies can still target their advertising based on non-identifying information, just not to the degree that they have been able to do.”

John Roberts

Stanford University
Profile
Agree 8

Anita McGahan

University of Toronto
Profile
Agree 5 “Much depends on detection and enforcement. If the State of California does not dedicate expertise and talent to the prosecution of violations of the CCPA, then its impact could be deferred until the courts resolve private action. However, if resources are committed to enforcement, then the CCPA’s impact could be quite significant.”

Petra Moser

New York University
Profile
Strongly Disagree 10 “Not being able to sell consumer data won’t prevent companies from developing their own targeted ads.”

John Van Reenen

Massachusetts Institute of Technology
Profile
Agree 3 “It would be a good thing to reduce personalized targeted ads.”

Timothy Simcoe

Boston University
Profile
Disagree 5 “So far, experience suggests that most people do not opt in to these programs. It’s hard to see a change unless no-sale becomes the default.”

Scott Stern

Massachusetts Institute of Technology
Profile
Neither Agree nor Disagree 3 “Like GDPR, the CCPA will shift targeted advertising — and involve more clicks (!) and perhaps more public information in targeting efforts — but is unlikely to significantly reduce the overall incidence of targeted ads over the long term.”

Shane Greenstein

Harvard University
Profile
Disagree 6 “There is a lot of ambiguity in this statute. Enforcement/fines are also unclear. Requires practices that most users say they want. Leaves many channels open for targeting. Do not expect we will see an effect for a while, if any.”

Lori Rosenkopf

University of Pennsylvania
Profile
Disagree 7 “It’s too extreme to say that the CCPA will ‘undermine’ the targeted advertising market. CCPA (and similar efforts in other states) will require targeted advertising firms to be more creative in obtaining data from knowledgable consumers who opt out, analogous to GDPR; these costs are likely to be passed along to advertisers and, in turn, consumers.”

Richard Holden

University of New South Wales
Profile
Agree 7

Raffaella Sadun

Harvard Business School
Profile
Neither Agree nor Disagree 5

Topics

MIT SMR Strategy Forum

Each month, we pose a question about business, management, technology, or public policy to our panel of academic experts. Here you can see what they think and why.
Learn more about this series

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