OTTAWA, Feb. 16, 2012 /CNW/ - Both the legal and economic impacts of
privacy regulation should be included in the national discussion about
the scope of policies, laws and regulations (PLR) on commercial
Regulations on Commercial Activity, contributes to this debate by assessing the costs and benefits of
existing privacy governance.
"The economic effects of privacy regulation on commercial activity are
similar to an iceberg—most are hidden from view," said Michael Bloom,
Vice-President, Organizational Effectiveness and Learning. "In many
ways, Canada's current regulatory approach is sensible, especially when
it engages the private sector to take responsibility for ensuring
reasonable privacy. This evolving partnership among consumers,
regulators and firms could be harmed by a movement away from the
current ombudsman approach and toward harder regulation - which would
make privacy governance more adversarial."
The current system—at both federal and provincial levels—is based
largely on complaint resolution and business policy advocacy. It
approaches the issues chiefly from a legal perspective and operates
largely without cost-benefit analysis on how regulatory regimes affect
the broader economy. The legal perspective should be complemented by
economic and business perspectives that take into account the use of
private information in a modern economy.
This report, which was funded by Google Canada Inc., contributes to an
informed national dialogue that strikes a balance between consumer
protection and economic efficiency. In this study, costs take three
Direct costs: these include human resources, administration, equipment,
and the like.
Indirect costs: the costs that are incurred by changing managerial
behaviours of firms and the buying decisions of customers.
Induced costs: the broader costs that are incurred throughout the
economy from change in the way the economy functions.
The total cost of administering privacy regulation is estimated to be
$3.8 billion annually, or approximately 0.2 per cent of Canada's $1.7
trillion economy. These costs are highly concentrated - combined, the
retail and the financial services sectors account for 45 per cent of
the total costs.
Costs also spill into effects on corporate behaviour, such as the ways
in which firms invest, innovate, and market their products and
services. Using a costing model detailed in the report, the Conference
Board calculates that privacy regulation will reduce cumulative nominal
(non price-adjusted) business investment between 2011 and 2030 by $18.8
billion. This reduction would have the effect of lowering GDP by 0.11
per cent in 2030 than it would otherwise be.
In addition to assessing costs, the study also explores economic
benefits of effective privacy protection, which include a reduced risk
of identity fraud, a reduction in data breaches and improved consumer
A reduced risk of identity fraud - The Conference Board estimates that,
in 2008, identity fraud and credit card fraud combined cost Canadians
more than $500 million in total out-of-pocket and time costs.
Fewer data breaches at firms - The potential costs to business of poor
privacy governance may include lost business opportunities, damage to
brand, and even monetary loss or lawsuits. Several U.S. studies have
attempted to quantify the impact of data breaches on firms.
An improvement in overall consumer trust - Trust has a real economic
benefit in terms of reducing search costs and lowering the cost of
information exchange. For example, the Conference Board applies the
findings of a McKinsey study in Europe to estimate the value that
Canadian consumers derive from the free use of Internet services. At
least some part of this annual $5.5 billion value would not be realized
if consumers felt their private information was at risk through use of
This is the first study to quantify the economic impact of privacy PLRs
on commercial activity in Canada. Given the data limitations, these
calculations are indicative, not definitive. However, they point to the
importance of calculating costs and benefits in advance of expanding
The report is publicly available at www.e-library.ca.
SOURCE CONFERENCE BOARD OF CANADA
For further information:
Brent Dowdall, Media Relations, Tel.: 613- 526-3090 ext. 448