California Lawmakers Warn of Economic Risks from AB 566

News Summary

California Assembly Bill 566 (AB 566) could potentially devastate the state’s economy, impacting consumers and small businesses due to a mandated opt-out preference for data sharing. A report by Capitol Matrix Consulting reveals the bill may lead to a $3.6 billion drop in advertising revenue, risking over 73,000 jobs and resulting in a significant reduction in tax revenues. While aimed at enhancing consumer privacy, the bill’s unintended consequences raise concerns for the digital landscape and small businesses reliant on targeted advertising.

California lawmakers are facing significant concerns as a recent report reveals that Assembly Bill 566 (AB 566) could have devastating effects on the state’s economy, particularly impacting consumers, small businesses, and the digital landscape. The report, conducted by Capitol Matrix Consulting and commissioned by the California Chamber of Commerce, details the potential fallout from the proposed legislation that mandates a “global opt-out preference setting” for internet users in California.

AB 566, introduced by Assemblymember Lowenthal (D-Long Beach), aims to give consumers the option to prevent their personal data from being sold or shared by websites. However, the report warns that this change could inadvertently lead to severe consequences, disrupting job markets and the state’s economy, along with affecting the overall consumer experience.

According to projections, if 25% of California’s internet users opt-out of data sharing, it could result in a staggering $3.6 billion loss in advertising revenue within the state. The report outlines further negative repercussions, including:

• A potential loss of over 73,000 jobs.
• A decrease of approximately $6.4 billion in labor income.
• A reduction of $550 million in state tax revenue.
• A loss of $270 million in local tax revenue.

This could reshape the digital ecosystem in California, leading to fewer ad-supported websites and consequently, a decrease in the variety and accessibility of online content. Research suggests a significant majority of consumers—71%—prefer personalized online experiences, underscoring the essential role of targeted advertising for both users and businesses.

For small and medium-sized businesses (SMBs), which constitute 87% of California’s businesses and employ 47% of the workforce, targeted advertising is a critical marketing tool. With limited budgets, these businesses rely on effective advertisements to reach specific audiences, making the anticipated revenue loss particularly alarming. Additionally, industries including online publishing, news organizations, shopping centers, and non-profits, which depend heavily on digital advertising, could suffer disproportionately due to AB 566.

The California Chamber of Commerce and various business allies have voiced strong opposition to the bill, pointing to the expected job losses, decreased revenues, consumer confusion, and potential disruption of internet services as key concerns. They highlight that consumers in California already have rights to opt-out under the California Consumer Privacy Act (CCPA) and have access to various tools to manage their data. Instead of enacting AB 566, the report suggests that the California Privacy Protection Agency should prioritize educating consumers about their existing options for data management.

As discussions regarding AB 566 continue, the bill awaits action from the Senate after their summer recess. The potential ramifications have raised alarms across various sectors, leading to calls for reevaluation of the legislation’s objectives and its broader impacts on California’s economy and digital environment.

In conclusion, while the aim of AB 566 is to enhance consumer privacy, the unintended consequences outlined in the report suggest a significant risk to California’s economic stability and the digital content landscape, warranting careful consideration and potential modifications before any final decisions are made.

Deeper Dive: News & Info About This Topic

• California Chamber of Commerce: Report Concludes AB 566 Threatens California’s Economy, Consumers, and Small Businesses
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• California Chamber of Commerce: CalChamber Report Critical of Privacy Agency’s Cost Assessment of New Regulations
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