The balkanized approach, ad groups warn, will lead to conflicting requirements and eliminate the Internet's national reach.
"Everybody is concerned about the privacy issue killing commerce on the Internet," said Clark Rector, senior VP-state government affairs, American Advertising Federation. "You will have one standard in Minnesota, another in California, another in New York-making it impossible for a business to do commerce over the Internet."
Dan Jaffe, exec VP, Association of National Advertisers, said the new law will be "incentive for other states to set up inconsistent rules."
Minnesota's new law hits a medium that's struggling for a rebound. An industry report shows Net advertising revenue slumped 12% last year (see P. 10), and Lehman Bros. analyst Holly Becker last week projected a 13% drop in Internet advertising in 2002 and only a modest pickup of 5% in 2003.
The Minnesota legislation, which takes effect March 1, 2003, includes two sets of privacy restrictions. Following the path chosen by several other states, Minnesota required unsolicited e-mail to be identified in the subject line as an advertisement with the letters "ADV" and the e-mail to carry a valid return address or phone number.
What's new in Minnesota are added restrictions on Internet service providers disclosing any personally identifiable information without a consumer's approval, a penalty of at least $500 for disclosure and a requirement that the provider make information it collects available to the consumer if asked.
Minnesota State Rep. Tim Pawlenty, a Democrat who sponsored the legislation, called it "cutting edge."
"It prohibits release of information and provides a layer of protection to consumers," he said. "It won't eliminate concerns, but the net result is greater privacy."
He readily admitted there are problems in the state acting ahead of Congress. "It would be much better if the federal government stepped up to the plate," he said.
He also dismissed advertising groups' concerns about the legislation, saying it had been rewritten nine times to meet needs.
Emily Hackett, executive director, Internet Alliance, which represents a number of major Internet and tech companies, said she didn't believe the legislation would do much other than cause confusion.
"It will mean nothing. It will not reduce spam and it will not increase anyone's privacy. I don't think illegal spammers are going to do what is required and most marketers already send e-mails in compliance." She also said few Internet service providers collect the information the bill targets.