CalChamber Report Critical of Privacy Agency’s Cost Assessment of New Regulations

A report released today by the California Chamber of Commerce concludes that businesses, consumers, and governments in California will suffer net economic losses, translating into reduced jobs and tax revenues, from proposed rules pending before the state privacy agency that are scheduled to be considered during its November 8 meeting.

The report, prepared by Capitol Matrix Consulting (CMC), analyzes anticipated savings detailed in the California Privacy Protection Agency’s (CPPA) Standardized Regulatory Impact Assessment (SRIA) of proposed regulations that would add and change existing rules related to the California Consumer Privacy Act (CCPA) of 2018 as amended by the California Privacy Rights Act (CPRA) of 2020. The SRIA concludes that the regulations would result in direct costs to California businesses of $3.5 billion in the first full year and average annual costs to businesses over the first 10 years of $1.08 billion and will result in employment losses peaking at 126,000 in 2030. Similarly, it estimates annual state revenue losses reaching $2.8 billion in 2028. While the SRIA claims long term benefits will exceed these costs, the report reveals that the purported benefits are based on an arithmetical error and speculative assumptions.

Specifically, the CMC report details errors in the SRIA that include:

• Underestimating external auditor and employee compensation rates paid by businesses;
• Excluding from its economic analysis out-of-state businesses that sell into California markets; and
• Ignoring the massive ongoing costs and business productivity losses resulting from behavioral changes by businesses and consumers following adoption of the regulations.

In addition, the SRIA overstates the savings from the proposed regulations by:

• Grossly overestimating baseline cybercrime losses due to an arithmetical error and other factors, including a flawed approach to estimating future cybercrime losses; and
• Overestimating savings from audits and risk assessments based on assumptions not supported by the literature, including articles listed in the SRIA.

The CMC analysis warns that there are major implications for California jobs and state budget revenues from the privacy agency’s underestimate of costs and overestimate of benefits of the proposed regulations.

A full copy of the analysis is available here.

About CalChamber
The California Chamber of Commerce (CalChamber) is the largest broad-based business advocate to government in California. Membership represents one-quarter of the private sector jobs in California and includes firms of all sizes and companies from every industry within the state. Leveraging our front-line knowledge of laws and regulations, we provide products and services to help businesses comply with both federal and state law. CalChamber, a not-for-profit organization with roots dating to 1890, promotes international trade and investment in order to stimulate California’s economy and create jobs. Please visit our website at www.calchamber.com.