The PATRIOT Act and American Business
Excerpted from BORDC's booklet, The PATRIOT Act and American Business:
The USA PATRIOT Act (Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act) was passed in October 2001 as the Bush administration’s response to the terrorist attacks on September 11, 2001. Proponents of the act described it as necessary to provide the U.S. government with the tools to combat terrorism. The law expanded the federal government’s ability to conduct surveillance and detain suspects, increased the penalties for people convicted of terrorist charges, and enhanced strategies to prevent money laundering and other financial crimes. The act also enlisted businesses and financial institutions to gather an unprecedented volume of personal data from their customers. In early March 2006, controversial sections of the act that affected businesses were reauthorized with some changes; however, those changes did not go far enough to effectively protect businesses from unnecessary government intrusion.
Tangible Effects on Commerce
The PATRIOT Act affects business in a number of ways. For one, it makes it more difficult for businesses to operate domestically and compete in an increasingly global market. It also imposes significant reporting and recordkeeping requirements on small and large businesses. These requirements have high costs which cut into businesses’ profits, divert resources away from customer relations, and are of questionable use in fighting terrorism.
Costs to Business
The PATRIOT Act forces businesses to share with the government private information about their customers’ identities and transactions. Such requirements can discourage potential e-commerce customers, cause conflicts with foreign privacy requirements, and hurt relationships with customers.
The act imposes higher litigation costs on businesses. Companies must defend against allegations of noncompliance, pay hefty fines if they are found noncompliant, and potentially defend against privacy lawsuits from customers. Here are two examples:
Western Union and its parent company paid a settlement of $11 million to the federal government in 2003 to resolve charges that the company failed to comply with provisions of the PATRIOT Act.
Since January 2006, AT&T has been fending off a class-action lawsuit by the Electronic Frontier Foundation (EFF) on behalf of customers whose data the company provided to the government without receiving a warrant.2 Despite the July 2008 passage of the FISA Amendments Act, which granted telecommunications companies immunity for releasing private customer data without a warrant, EFF is continuing to pursue the lawsuit against AT&T, arguing that the FISA Amendments Act is unconstitutional.
Antithetical to American Business Values
While the PATRIOT Act does create new concrete costs and liabilities for businesses, a more important problem is that its provisions are antithetical to the business values that enable American businesses to thrive: the free flow of information and ideas, minimal government intrusion, and the rule of law.
To grow, compete globally, and prosper, businesses must be free to explore and exchange ideas without strict and intrusive government regulations. They depend on the rule of law to establish a fair, open, and stable business environment. Under the PATRIOT Act, the government is more involved than ever before in even the most routine business transactions. With few or no controls on its actions, the government can act arbitrarily and unfairly punish businesses. The PATRIOT Act:
- Removes judicial review: government can act arbitrarily and interfere with business matters without justification.
- Increases government intrusion into business by adding new regulations and laws.
- Decreases or removes business and consumer privacy, hindering the free flow of information.
PATRIOT Act: What Business Needs to Know
Three parts of the PATRIOT Act, in particular, hurt businesses:
- Title III imposes new reporting requirements and requires businesses to share more information with the government than was previously required.
- Section 215 allows the government to subpoena any “tangible thing,” such as business records, and imposes on recipients a permanent gag order that bars, with very few exceptions, disclosure of the subpoena to anyone.
- Section 505 allows the government to issue national security letters, a type of information request with no judicial oversight that is also accompanied by a gag order.
Business organizations, including the Association of Corporate Counsel; Business Civil Liberties, Inc.; the Financial Services Roundtable; the National Association of Manufacturers; the National Association of Realtors; and the United States Chamber of Commerce, wrote a letter to Senate Judiciary Committee Chairman Arlen Specter in October 2005 to request major changes to the above sections of the PATRIOT Act:
Confidential files—records about our customers or our employees, as well as our trade secrets and other proprietary information—can too easily be obtained and disseminated under investigative powers expanded by the Patriot Act. These new powers lack sufficient checks and balances.
Although the influence of these business groups incited some PATRIOT Act reforms, many problems remain: the federal government continues requesting that businesses spy on their customers, violate privacy obligations, and comply with voluminous red tape requirements. This surveillance is of dubious value in focusing the government on actual terrorists and may, in fact, make the U.S. less safe.
Further, the passage of the FISA Amendments Act in July 2008 granted immunity to telecommunications companies that share private customer records with the government without first receiving a warrant. This law’s constitutionality is still uncertain, leaving businesses open to litigation and their clients open to serious violations of privacy.
Download the full booklet, The PATRIOT Act and American Business, for more information.
Business groups want to limit the PATRIOT Act - Read the letter to Senator Specter signed by the US Chamber of Commerce and other prominent business associations (PDF)