Source: http://muhaz.org/united-states-district-court.html
Timestamp: 2019-04-23 04:03:38+00:00

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We are frequently asked how, during our recent tenure at the Federal Trade Commission, we came to create the National Do Not Call Registry, one of the most popular government actions ever undertaken. The answer lies in our search for an approach to regulate the exchange of consumer information in commercial transactions. Information exchange is the currency of the modern economy. The growth of the internet, and the resulting new possibilities for collecting, storing, and exchanging information, have sparked a renewed interest in privacy and the ability of consumers to control the use of information about them.
We argue that information exchange is valuable and that regulators should be cautious about restricting it. The traditional approach to privacy regulation, based on the so-called fair information practices (FIPs), is inadequate. Instead, we argue, government should base commercial privacy regulations and policies on the potential consequences for consumers of information use and misuse. This approach focuses attention on the relevant questions of benefits and costs, and offers a superior foundation for regulation. It was this approach that suggested there would be large consumer benefits from Do Not Call. Finally, we apply this approach to privacy to the growing problem of breaches of information security. Companies with sensitive information about consumers that, in the wrong hands, could harm consumers should be expected to protect that information in ways that are reasonable and appropriate given the sensitivity of the information.
The heart of building a database is a matching algorithm. [FN4] Systems must distinguish consumers with very similar identifying information, and recognize an individual whose identifying information changes significantly, such as those who have moved or changed their names after marriage or divorce. The systems must accommodate records that may be missing parts of the identifying information, and they must recognize that any individual piece of incoming information may be a mistake. [FN5] Consequently, no one piece of identifying information is used to perform the match. Rather, matching is done based on multiple data points using an algorithm that tests the extent to which the various elements contain data that are consistent for that individual.
Matching systems confront an inherent tradeoff between inclusion (associating probable matches) and exclusion (keeping records separate when an exact match does not exist). Insisting on a more exact match reduces the chances that an incoming record will be associated mistakenly with the wrong individual. But it increases the chances that the information about an individual will be incomplete because some valid information cannot be matched to the individual with absolute certainty. [FN6] Either potential error can create costs for both users of the data and the consumers who are the subject of the information. Absent a unique, error-free, and universally available identifier, however, the tradeoff is unavoidable. An important element of competition among information providers is their systems' ability to provide the most complete, precise, and accurate data possible to their customers.
Once compiled, information is used for many purposes. [FN8] Information intermediaries help locate individuals, providing information about their last known address, prior addresses, places of employment, and the like. For background checks, the intermediaries also facilitate searches of public records, revealing liens, bankruptcies, personal assets, and even criminal records.
Of course, the accumulated information about consumers is used for marketing, perhaps the most controversial use of commercial data. Like the other uses of commercial data, marketing has real social value, enabling companies to offer consumers choices that better satisfy their preferences. Unlike the other uses, however, it directly involves the consumer, who must process a torrent of junk mail, both electronic and physical, and deal with unwanted calls from telemarketers.
It is not obvious, however, that better information about consumer behavior increases the amount of marketing. It clearly leads to more targeted marketing—there is a higher probability that the consumer will find the message relevant if information about past behavior helps to predict preferences. If targeting were perfect, consumers would receive only offers that were actually of interest. Imperfect, but better, targeting would increase the fraction of offers that the consumer finds interesting. By eliminating offers of no interest, it would tend to reduce the amount of marketing received. [FN10] Indeed, much of the annoyance of spam stems from that fact that, because it is so cheap to send, there is very little targeting. [FN11] Regardless of past behavior, virtually every consumer with an email account has likely received offers to enlarge or contract various body parts, as well as offers to assist in smuggling large sums of money out of a foreign country.
[FN1]. A wide variety of information products exist, offering substantial benefits. These products include tools to reduce the risk of fraud, facilitate credit-granting decisions, and locate individuals. Information tools also offer easier access to public records, thus helping to monitor official conduct, protect our most vulnerable citizens from criminals and sexual predators, monitor land use and development, and determine whether licensed professionals are who they claim to be.
[FN2]. According to LexisNexis, the risk management sector includes identity authentication, fraud prevention, and credit and security risk products. Reed Elsevier, Reed Elsevier Announces the Acquisition of Seisint, Inc. for $775 Million (July 14, 2004), online at http://www.reed-elsevier.com/index.cfm? Articleid=965 (visited Jan 12, 2008).
[FN3]. KPMG Corporate Finance, Background Screening *1 (Fall 2003), online at http://web.archive.org/web/20060706171129/http:// www.kpmgcorporatefinance.com/us/pdf/bkgd_screen.pdf (visited Jan 12, 2008).
[FN4]. The data-matching process used in credit reporting is discussed in detail in FTC, Report to Congress under Sections 318 and 319 of the Fair and Accurate Credit Transactions Act of 2003 36-46 (2004), online at http:// www.ftc.gov/reports/facta/041209factarpt.pdf (visited Jan 12, 2008).
[FN5]. Studies of unemployment insurance records, for example, suggest that the error rates in entering social security numbers range from 0.5 to 4 percent. Id at 39. Unlike credit card numbers, social security numbers do not include a “checksum” digit, which can be derived mathematically from the other digits in the number. Thus, a computer can check to ensure the credit card number is internally consistent, which substantially reduces the chances of undetected typographical errors.
[FN6]. The consequences of either incompleteness or inaccuracy depend on the particular item of information involved. Either type of error about a recent bankruptcy filing, for example, is more serious than if the information is about a recent account that was paid on time.
[FN7]. Identity Theft: Recent Developments Involving the Security of Sensitive Consumer Information, hearing before the Senate Committee on Banking, Housing, and Urban Affairs, 4 (Mar 10, 2005) (statement of the FTC), online at http://ftc.gov/os/testimony/050310idtheft.pdf (visited Jan 12, 2008).
[FN8]. Many uses of information are restricted under various federal statutes. Under § 604 of the Fair Credit Reporting Act (FCRA), Pub L No 91-508, 84 Stat 1128, codified in relevant part at 15 USCA § 1681b (2007), for example, information that constitutes a “consumer report” can be used only for a narrowly drawn list of permissible purposes.
[FN9]. A major national credit card issuer with approximately forty-five million accounts, growing by about ten thousand accounts a day, realized a 13 percent decrease in application fraud losses and annual savings of $18 million by implementing a basic identity authentication tool. Similarly, a national wireless telecommunications provider reduced its fraud losses per handset by 55 percent and decreased the time it took to confirm fraud records by 66 percent. FTC, Panel on the Costs and Benefits of the Collection and Use of Consumer Information for Credit Transactions 11-12 (June 18, 2003) (testimony of Laura DeSoto, Senior Vice President, Credit Services, Experian).
[FN10]. Better targeting would reduce the marginal cost of acquiring a new customer, which would mean that sellers would seek to acquire more customers. This expansion in the amount of marketing would tend to increase the number of solicitations received. On the other hand, the increased productivity of marketing means that it takes fewer solicitations to generate a customer, which would reduce the number of solicitations received. Which factor would predominate is not obvious a priori.
[FN11]. See FTC, Email Address Harvesting: How Spammers Reap What You Sow 1 (Nov 2002), online at http://library.findlaw.com/2003/Aug/8/132973.pdf (visited Jan 12, 2008).
In this admiralty case we primarily consider whether the United States Court of Appeals for the Ninth Circuit correctly refused to enforce a forum-selection clause contained in tickets issued by petitioner Carnival Cruise Lines, Inc., to respondents Eulala and Russel Shute.
“SUBJECT TO CONDITIONS OF CONTRACT ON LAST PAGES IMPORTANT! PLEASE READ CONTRACT-ON LAST PAGES 1, 2, 3” App. 15.
“3. (a) The acceptance of this ticket by the person or persons named hereon as passengers shall be deemed to be an acceptance and agreement by each of them of all of the terms and conditions of this Passage Contract Ticket.
“8. It is agreed by and between the passenger and the Carrier that all disputes and matters whatsoever arising under, in connection with or incident to this Contract shall be litigated, if at all, in and before a Court located in the State of Florida, U.S.A., to the exclusion of the Courts of any other state or country.” Id., at 16.
The last quoted paragraph is the forum-selection clause at issue.
Respondents boarded the Tropicale in Los Angeles, Cal. The ship sailed to Puerto Vallarta, Mexico, and then returned to Los Angeles. While the ship was in international waters off the Mexican coast, respondent Eulala Shute was injured when she slipped on a deck mat during a guided tour of the ship's galley. Respondents filed suit against petitioner in the United States District Court for the Western District of Washington, claiming that Mrs. Shute's injuries had been caused by the negligence of Carnival Cruise Lines and its employees. Id., at 4.
Petitioner moved for summary judgment, contending that the forum clause in respondents' tickets required the Shutes to bring their suit against petitioner in a court in the State of Florida. Petitioner contended, alternatively, that the District Court lacked personal jurisdiction over petitioner because petitioner's contacts with the State of Washington were insubstantial. The District Court granted the motion, holding that petitioner's contacts with Washington were constitutionally insufficient to support the exercise of personal jurisdiction. See App. to Pet. for Cert. 60a.
The Court of Appeals reversed. Reasoning that “but for” petitioner's solicitation of business in Washington, respondents would not have taken the cruise and Mrs. Shute would not have been injured, the court concluded that petitioner had sufficient contacts with Washington to justify the District Court's exercise of personal jurisdiction. 897 F.2d 377, 385-386 (CA9 1990).
Turning to the forum-selection clause, the Court of Appeals acknowledged that a court concerned with the enforceability of such a clause must begin its analysis with The Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972), where this Court held that forum-selection clauses, although not “historically ... favored,” are “prima facie valid.” Id., at 9-10, 92 S.Ct., at 1913. See 897 F.2d, at 388. The appellate court concluded that the forum clause should not be enforced because it “was not freely bargained for.” Id., at 389. As an “independent justification” for refusing to enforce the clause, the Court of Appeals noted that there was evidence in the record to indicate that “the Shutes are physically and financially incapable of pursuing this litigation in Florida” and that the enforcement of the clause would operate to deprive them of their day in court and thereby contravene this Court's holding in The Bremen. 897 F.2d, at 389.
We granted certiorari to address the question whether the Court of Appeals was correct in holding that the District Court should hear respondents' tort claim against petitioner. 498 U.S. 807-808, 111 S.Ct. 39, 112 L.Ed.2d 16 (1990). Because we find the forum-selection clause to be dispositive of this question, we need not consider petitioner's constitutional argument as to personal jurisdiction. See Ashwander v. TVA, 297 U.S. 288, 347, 56 S.Ct. 466, 483, 80 L.Ed. 688 (1936) (Brandeis, J., concurring) (“ ‘It is not the habit of the Court to decide questions of a constitutional nature unless absolutely necessary to a decision of the case,’ ” quoting Burton v. United States, 196 U.S. 283, 295, 25 S.Ct. 243, 245, 49 L.Ed. 482 (1905)).
We begin by noting the boundaries of our inquiry.
First, this is a case in admiralty, and federal law governs the enforceability of the forum-selection clause we scrutinize. See Archawski v. Hanioti, 350 U.S. 532, 533, 76 S.Ct. 617, 619, 100 L.Ed. 676 (1956); The Moses Taylor, 4 Wall. 411, 427, 18 L.Ed. 397 (1867); Tr. of Oral Arg. 36-37, 12, 47-48. Cf. Stewart Organization, Inc. v. Ricoh Corp., 487 U.S. 22, 28-29, 108 S.Ct. 2239, 2243-2244, 101 L.Ed.2d 22 (1988).
Second, we do not address the question whether respondents had sufficient notice of the forum clause before entering the contract for passage. Respondents essentially have conceded that they had notice of the forum-selection provision. Brief for Respondents 26 (“The respondents do not contest the incorporation of the provisions nor [sic ] that the forum selection clause was reasonably communicated to the respondents, as much as three pages of fine print can be communicated” ). Additionally, the Court of Appeals evaluated the enforceability of the forum clause under the assumption, although “doubtful,” that respondents could be deemed to have had knowledge of the clause. See 897 F.2d, at 389, and n. 11.
Within this context, respondents urge that the forum clause should not be enforced because, contrary to this Court's teachings in The Bremen, the clause was not the product of negotiation, and enforcement effectively would deprive respondents of their day in court. Additionally, respondents contend that the clause violates the Limitation of Vessel Owner's Liability Act, 46 U.S.C.App. § 183c. We consider these arguments in turn.
Both petitioner and respondents argue vigorously that the Court's opinion in The Bremen governs this case, and each side purports to find ample support for its position in that opinion's broad-ranging language. This seeming paradox derives in large part from key factual differences between this case and The Bremen, differences that preclude an automatic and simple application of The Bremen's general principles to the facts here.
In The Bremen, this Court addressed the enforceability of a forum-selection clause in a contract between two business corporations. An American corporation, Zapata, made a contract with Unterweser, a German corporation, for the towage of Zapata's oceangoing drilling rig from Louisiana to a point in the Adriatic Sea off the coast of Italy. The agreement provided that any dispute arising under the contract was to be resolved in the London Court of Justice. After a storm in the Gulf of Mexico seriously damaged the rig, Zapata ordered Unterweser's ship to tow the rig to Tampa, Fla., the nearest point of refuge. Thereafter, Zapata sued Unterweser in admiralty in federal court at Tampa. Citing the forum clause, Unterweser moved to dismiss. The District Court denied Unterweser's motion, and the Court of Appeals for the Fifth Circuit, sitting en banc on rehearing, and by a sharply divided vote, affirmed. In re Complaint of Unterweser Reederei GmbH, 446 F.2d 907 (1971).
This Court vacated and remanded, stating that, in general, “a freely negotiated private international agreement, unaffected by fraud, undue influence, or overweening bargaining power, such as that involved here, should be given full effect.” 407 U.S., at 12-13, 92 S.Ct. at 1914-1915 (footnote omitted). The Court further generalized that “in the light of present-day commercial realities and expanding international trade we conclude that the forum clause should control absent a strong showing that it should be set aside.” Id., at 15, 92 S.Ct., at 1916. The Court did not define precisely the circumstances that would make it unreasonable for a court to enforce a forum clause. Instead, the Court discussed a number of factors that made it reasonable to enforce the clause at issue in The Bremen and that, presumably, would be pertinent in any determination whether to enforce a similar clause.
In this respect, the Court noted that there was “strong evidence that the forum clause was a vital part of the agreement, and [that] it would be unrealistic to think that the parties did not conduct their negotiations, including fixing the monetary terms, with the consequences of the forum clause figuring prominently in their calculations.” Id., at 14, 92 S.Ct., 1915 (footnote omitted). Further, the Court observed that it was not “dealing with an agreement between two Americans to resolve their essentially local disputes in a remote alien forum,” and that in such a case, “the serious inconvenience of the contractual forum to one or both of the parties might carry greater weight in determining the reasonableness of the forum clause.” Id., at 17, 92 S.Ct., at 1917. The Court stated that even where the forum clause establishes a remote forum for resolution of conflicts, “the party claiming [unfairness] should bear a heavy burden of proof.” Ibid.
In applying The Bremen, the Court of Appeals in the present litigation took note of the foregoing “reasonableness” factors and rather automatically decided that the forum-selection clause was unenforceable because, unlike the parties in The Bremen, respondents are not business persons and did not negotiate the terms of the clause with petitioner. Alternatively, the Court of Appeals ruled that the clause should not be enforced because enforcement effectively would deprive respondents of an opportunity to litigate their claim against petitioner.
The Bremen concerned a “far from routine transaction between companies of two different nations contemplating the tow of an extremely costly piece of equipment from Louisiana across the Gulf of Mexico and the Atlantic Ocean, through the Mediterranean Sea to its final destination in the Adriatic Sea.” Id., at 13, 92 S.Ct., at 1915. These facts suggest that, even apart from the evidence of negotiation regarding the forum clause, it was entirely reasonable for the Court in The Bremen to have expected Unterweser and Zapata to have negotiated with care in selecting a forum for the resolution of disputes arising from their special towing contract.
In contrast, respondents' passage contract was purely routine and doubtless nearly identical to every commercial passage contract issued by petitioner and most other cruise lines. In this context, it would be entirely unreasonable for us to assume that respondents-or any other cruise passenger-would negotiate with petitioner the terms of a forum-selection clause in an ordinary commercial cruise ticket. Common sense dictates that a ticket of this kind will be a form contract the terms of which are not subject to negotiation, and that an individual purchasing the ticket will not have bargaining parity with the cruise line. But by ignoring the crucial differences in the business contexts in which the respective contracts were executed, the Court of Appeals' analysis seems to us to have distorted somewhat this Court's holding in The Bremen.
In evaluating the reasonableness of the forum clause at issue in this case, we must refine the analysis of The Bremen to account for the realities of form passage contracts. As an initial matter, we do not adopt the Court of Appeals' determination that a non-negotiated forum-selection clause in a form ticket contract is never enforceable simply because it is not the subject of bargaining. Including a reasonable forum clause in a form contract of this kind well may be permissible for several reasons: First, a cruise line has a special interest in limiting the fora in which it potentially could be subject to suit. Because a cruise ship typically carries passengers from many locales, it is not unlikely that a mishap on a cruise could subject the cruise line to litigation in several different fora. See The Bremen, 407 U.S., at 13, and n. 15, 92 S.Ct., at 1915, and n. 15; Hodes, 858 F.2d, at 913. Additionally, a clause establishing ex ante the forum for dispute resolution has the salutary effect of dispelling any confusion about where suits arising from the contract must be brought and defended, sparing litigants the time and expense of pretrial motions to determine the correct forum and conserving judicial resources that otherwise would be devoted to deciding those motions. Finally, it stands to reason that passengers who purchase tickets containing a forum clause like that at issue in this case benefit in the form of reduced fares reflecting the savings that the cruise line enjoys by limiting the fora in which it may be sued.
We also do not accept the Court of Appeals' “independent justification” for its conclusion that The Bremen dictates that the clause should not be enforced because “[t]here is evidence in the record to indicate that the Shutes are physically and financially incapable of pursuing this litigation in Florida.” 897 F.2d, at 389. We do not defer to the Court of Appeals' findings of fact. In dismissing the case for lack of personal jurisdiction over petitioner, the District Court made no finding regarding the physical and financial impediments to the Shutes' pursuing their case in Florida. The Court of Appeals' conclusory reference to the record provides no basis for this Court to validate the finding of inconvenience. Furthermore, the Court of Appeals did not place in proper context this Court's statement in The Bremen that “the serious inconvenience of the contractual forum to one or both of the parties might carry greater weight in determining the reasonableness of the forum clause.” 407 U.S., at 17, 92 S.Ct., at 1917. The Court made this statement in evaluating a hypothetical “agreement between two Americans to resolve their essentially local disputes in a remote alien forum.” Ibid. In the present case, Florida is not a “remote alien forum,” nor-given the fact that Mrs. Shute's accident occurred off the coast of Mexico-is this dispute an essentially local one inherently more suited to resolution in the State of Washington than in Florida. In light of these distinctions, and because respondents do not claim lack of notice of the forum clause, we conclude that they have not satisfied the “heavy burden of proof,” ibid., required to set aside the clause on grounds of inconvenience.
It bears emphasis that forum-selection clauses contained in form passage contracts are subject to judicial scrutiny for fundamental fairness. In this case, there is no indication that petitioner set Florida as the forum in which disputes were to be resolved as a means of discouraging cruise passengers from pursuing legitimate claims. Any suggestion of such a bad-faith motive is belied by two facts: Petitioner has its principal place of business in Florida, and many of its cruises depart from and return to Florida ports. Similarly, there is no evidence that petitioner obtained respondents' accession to the forum clause by fraud or overreaching. Finally, respondents have conceded that they were given notice of the forum provision and, therefore, presumably retained the option of rejecting the contract with impunity. In the case before us, therefore, we conclude that the Court of Appeals erred in refusing to enforce the forum-selection clause.
The Court prefaces its legal analysis with a factual statement that implies that a purchaser of a Carnival Cruise Lines passenger ticket is fully and fairly notified about the existence of the choice of forum clause in the fine print on the back of the ticket. Even if this implication were accurate, I would disagree with the Court's analysis. But, given the Court's preface, I begin my dissent by noting that only the most meticulous passenger is likely to become aware of the forum-selection provision. I have therefore appended to this opinion a facsimile of the relevant text, using the type size that actually appears in the ticket itself. A careful reader will find the forum-selection clause in the 8th of the 25 numbered paragraphs.
Of course, many passengers, like the respondents in this case will not have an opportunity to read paragraph 8 until they have actually purchased their tickets. By this point, the passengers will already have accepted the condition set forth in paragraph 16(a), which provides that “[t]he Carrier shall not be liable to make any refund to passengers in respect of ... tickets wholly or partly not used by a passenger.” Not knowing whether or not that provision is legally enforceable, I assume that the average passenger would accept the risk of having to file suit in Florida in the event of an injury, rather than canceling-without a refund-a planned vacation at the last minute. The fact that the cruise line can reduce its litigation costs, and therefore its liability insurance premiums, by forcing this choice on its passengers does not, in my opinion, suffice to render the provision reasonable. Cf. Steven v. Fidelity & Casualty Co. of New York, 58 Cal.2d 862, 883, 27 Cal.Rptr. 172, 186, 377 P.2d 284, 298 (1962) (refusing to enforce limitation on liability in insurance policy because insured “must purchase the policy before he even knows its provisions”).
See also Steven, 58 Cal.2d, at 879-883, 27 Cal.Rptr. at 183-185, 377 P.2d, at 295-297; Henningsen v. Bloomfield Motors, Inc., 32 N.J. 358, 161 A.2d 69 (1960).
The second doctrinal principle implicated by forum-selection clauses is the traditional rule that “contractual provisions, which seek to limit the place or court in which an action may ... be brought, are invalid as contrary to public policy.” See Dougherty, Validity of Contractual Provision Limiting Place or Court in Which Action May Be Brought, 31 A.L.R.4th 404, 409, § 3 (1984). See also Home Insurance Co. v. Morse, 20 Wall. 445, 451, 22 L.Ed. 365 (1874). Although adherence to this general rule has declined in recent years, particularly following our decision in The Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972), the prevailing rule is still that forum-selection clauses are not enforceable if they were not freely bargained for, create additional expense for one party, or deny one party a remedy. See 31 A.L.R.4th, at 409-438 (citing cases). A forum-selection clause in a standardized passenger ticket would clearly have been unenforceable under the common law before our decision in The Bremen, see 407 U.S., at 9, and n. 10, 92 S.Ct., at 1912-13, and n. 10, and, in my opinion, remains unenforceable under the prevailing rule today.
The Bremen, which the Court effectively treats as controlling this case, had nothing to say about stipulations printed on the back of passenger tickets. That case involved the enforceability of a forum-selection clause in a freely negotiated international agreement between two large corporations providing for the towage of a vessel from the Gulf of Mexico to the Adriatic Sea. The Court recognized that such towage agreements had generally been held unenforceable in American courts, but held that the doctrine of those cases did not extend to commercial arrangements between parties with equal bargaining power.
Since their origination in 1973, [FN12] the FIPs have been highly influential in privacy debates. The heart of FIPs is to require notice and choice. That is, consumers should receive notice of the information that is collected about them, and they should have a choice about how that information is used, particularly with respect to secondary uses. [FN13] In the context in which they were originally developed—assessing the privacy implications of government agencies matching data about a consumer derived from various sources—these principles are potentially quite useful. If consumers knew that data given to one agency would be matched to data from another agency and they had a choice about whether to provide the data or allow the match, then it is very difficult to see how a privacy problem could exist.
The converse, however, does not follow. That is, the absence of a privacy problem when consumers understand and have a choice about the information collection or use does not imply that a privacy problem exists whenever consumers are ignorant of the information use or lack a choice about it. No reasonable person would think that a privacy problem exists when information is shared with numerous parties to clear a check in settlement of a transaction or to conclude a transaction at an ATM. Yet, most consumers are unaware that such information sharing even exists, let alone have knowledge of which specific parties might receive the information, and consumers have given no consent beyond the fact that they initiated the transaction. [FN14] Indeed, attempting to apply FIPs to real-world privacy issues creates significant quandaries, as we discuss next.
The reality that decisions about information sharing are not worth thinking about for the vast majority of consumers contradicts the fundamental premise of the notice approach to privacy. To be an effective approach, some significant number of consumers must not only read privacy notices for the businesses with whom they currently deal, they must also consider the privacy practices of alternative service providers and choose the provider whose practices best match their privacy preferences. There is no reason to think this is currently happening, or will ever happen.
The FIPs principle of choice fares no better. For consumers, the costs of exercising choice regarding information sharing involve more than the small investment of time to read the notice and implement the choice. To exercise choice, a consumer first must decide to do so. Because consumers literally have (at least) hundreds of ways that they can use their time, to care about choices regarding their information they must overcome both the costs of decisionmaking and the opportunity cost of not using their time elsewhere. [FN17] The costs involved in deciding to choose may pose a more fundamental barrier to FIPs than the mere time costs involved.
In our economy, there are vital uses of information sharing that depend on the fact that consumers cannot choose whether to participate. One such example is credit reporting. Unlike many other countries, credit reporting in the US is “full file” or “comprehensive” reporting, including both positive and negative information about consumers. [FN21] The expansion of credit reporting, along with improvements in credit scoring, has facilitated substantial expansion in the availability of credit to American consumers, [FN22] as well as the democratization of credit. [FN23] Credit grantors can make more expeditious decisions, often without a personal visit to a loan officer, enabling the phenomenon of “instant credit” and offering significant benefits to consumers as a group.
Property recordation is another example in which giving consumers choice regarding use of their information in the system would seriously undermine an important institution. Although the recording acts governing property recordation vary from state to state, they share two separate, but interdependent, purposes. The first is to protect purchasers who acquire interests in real property. The second purpose, critical to achievement of the first, is enabling prospective purchasers—and lenders—to determine the existence of prior claims that might affect their interests. Thus, claims against property are a matter of public record, accessible to all. [FN27] If consumers could exclude liens against their property, or if they could limit access to the records, these important purposes would be thwarted.
We could, of course, narrow the range of places in which consumers are allowed choice to avoid the difficulties discussed above. But, if we accept FIPs as the basis for privacy regulation, there is no principled basis for limiting choice consistent with FIPs. A privacy regime that gives consumers a choice—except when it doesn't—is not a basis for a sound legal approach at all.
Of course, under the Coase theorem, allocation of a property right to information would not matter in a world of zero transaction costs. As our discussion of notice makes clear, however, the transaction costs of even considering uses of personal information appear to loom large relative to the benefits, let alone the costs of negotiating to rearrange rights. Because transaction costs will essentially preclude transactions, we need to know the efficient use of the information before we can assign property rights. Yet, the attraction of the FIPs approach to privacy is that, at first blush, it seems to avoid precisely that question. Unfortunately, it does not.

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