The digital economy relies heavily on collecting personal data. This requires new tools to regulate the practice and new methods to compensate states when companies collect their residents’ data. Companies popularly known as “data brokers” operate invisibly, collecting and buying consumer data and then aggregating and selling it to advertisers and merchants. A New Jersey bill recently signed into law, A5328, creates new regulations on companies that collect and sell consumer data, including a registration fee that increases with the amount of data collected.
Under the new law, these companies will pay a registration fee on a sliding scale, with small operators of fewer than 100,000 consumers paying $5,000, rising as high as $1.5 million for larger operations with more than 4.5 million consumers. Along with the fee, the new law requires data brokers to report basic information about their business and practices, as well as restrictions on the collection or sale of sensitive data such as religious beliefs or credit card numbers.
Estimating the revenue generated by this law is difficult because of limited information on data brokers and high rates of noncompliance in states with data broker registration. Other states with data broker registration regimes have a fixed registration fee of a few hundred dollars, but New Jersey’s law appears to be the first in the nation to charge an escalating registration fee that reflects how much the data broker collects and sells. Because this law is new, many questions about how it will work remain unanswered, including how and when it will be enforced. Without knowing how many consumers have their data collected and sold, and how many data brokers will comply with the new law, the Office of Legislative Services left the fiscal estimate “indeterminate.”
New Jersey’s registration requirement follows those of other states, such as California and Texas, which have recognized the data privacy concerns raised by these companies. As NJPP has previously identified, data in the largely unregulated data broker industry can be used or misused by law enforcement or private entities to reveal sensitive information or discriminate against people or groups.
Appropriately taxing and collecting fees from the digital economy, especially the less visible players such as data brokers and advertisers, will be critical to ensure stable revenue collection and fair payment for the costs imposed on residents and state governments.
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