A Deep Dive into Privacy, AI, and Competition for Small Businesses in 2024

The year 2023 marked a number of fundamental milestones for small businesses, as many actively engaged in critical policy discussions ranging from data privacy to artificial intelligence (AI), demonstrating their influential impact on legislation that could impede their ability to grow and build their businesses. As we enter 2024, it's essential to reflect on the strides made by small business owners last year. Across the nation, small business leaders actively participated in pivotal policy dialogues, addressing critical issues in both Washington, DC, and state capitals. Looking ahead, we'll delve into a comprehensive analysis of key issues affecting small businesses, provide updates on key policy matters, and explore how small business leaders can stay involved and continue to influence positive change.

National Data Privacy Laws for Small Businesses: National Standards or Patchwork of Confusion:

In the digital age, data privacy is a paramount concern for small businesses, however the absence of a national data privacy law has created a complex patchwork, with 14 states implementing their own versions. This inconsistency burdens small businesses operating across state lines, necessitating costly and time-consuming compliance with numerous regulations. Nevertheless, the call for a comprehensive national data privacy law presents both benefits and concerns. On the positive side, a standardized system can streamline compliance processes, reducing costs associated with adapting to different state regulations. It can also level the playing field for businesses operating across state lines. According to 3C Small Businesses Network (the Connected Commerce Council), 80% of advertisers agree that online ads help them compete with larger companies, and 71% of online publishers say they would not have been able to launch and sustain their business without digital advertising revenue. With that being said, finding the right balance between protecting consumer privacy and enabling targeted advertising, critical for many small businesses, remains a concern.

Protecting Online Advertising for Small Businesses:

Privacy laws must consider the importance of data-driven digital advertising for small businesses. Digital ads allow them to compete effectively with larger companies by reaching targeted audiences affordably. AI-powered chatbots and virtual assistants offer round-the-clock customer support and personalized experiences, while AI-driven analytics provide data-driven insights for predicting customer behavior and making informed business decisions. A recent study conducted by the Data Catalyst Institute highlights the significant role of digital advertising for small businesses. According to the findings, 82% of small business advertisers perceive digital ads as a superior method for reaching new customers compared to traditional ads, while 78% attribute higher sales and revenue generation to digital advertising over traditional methods.

In 2023, Florida passed privacy laws targeting large data-driven digital advertising platforms that could hinder affordable online promotional communications for small enterprises by imposing restrictions on data collection. Small business owners quickly brought into action emails, op-eds, meetings with legislators, and sharing personal stories, successfully advocating for and prompting amendments to the bill. More than 100 small businesses emailed their legislators to share concerns about the bill. Diego Sampaio of Orlando, owner of Globalfy, an international business development service, told lawmakers that more than half of his business is directly tied to digital ads. Morgan Overholt of Miami, owner of Morgan Media, met with legislators in Tallahassee to explain how she uses digital advertising to build her blog’s readership and sells ads to businesses that want to reach the traveling audience. LaKita Anderson penned an op-ed in Florida Daily about how online advertising allowed her to start and grow her cooking blog and gave her more financial freedom than ever before.  Big Tech can take the hit. Small businesses can’t.

Similar challenges for 2024 looming in New York and Michigan emphasize the need for continued vigilance, indicating that small businesses must actively participate in these discussions and continue to influence relevant legislation to ensure favorable outcomes. Currently, small enterprises have the opportunity to collaborate with lawmakers and other stakeholders to craft regulations that consider their advertising needs and limitations, setting the stage for policies in 2024 and beyond.

Artificial Intelligence (AI) Regulation and Small Businesses:

The rise of AI presents many opportunities as well as various challenges. AI has gained national attention, providing small businesses with tools to innovate, grow, and compete globally. AI offers several benefits for small businesses, from customer service automation to data analysis and market prediction, however, ethical considerations regarding safety, security, privacy, and equity deserve attention. In early 2023, the Biden Administration initiated discussions on AI safety, security, and privacy, laying the groundwork for further exploration in 2024. Policymakers are expected to delve into AI regulations, and it's crucial for small businesses to be included in these discussions to ensure regulations foster growth and innovation.

State and Federal Digital Economy Legislation:

As seen nationally in 2023, significant shifts unfolded in the legal, regulatory, and policy realms concerning artificial intelligence (AI).
In a year where half of the global population is expected to participate in elections, and as artificial intelligence (AI) gains increasing but still uncertain geopolitical significance, governments will persist in experimenting with various regulatory approaches to govern foundational models and other AI deployments. Their aim is to attain political, societal, and geopolitical objectives. These initiatives will coincide with the emergence and evolution of societal norms surrounding AI usage and acceptance, along with broader recognition of potential risks. Such developments will span legal jurisdictions. For instance, competition authorities worldwide have already indicated heightened scrutiny of leading AI companies’ market impacts. The European Union (EU) pushed forward with its AI Act, aiming to establish the first comprehensive AI law with worldwide implications. The AI Act mandates that nearly all companies using AI in their products, services, and supply chains within the EU market evaluate their risk exposure and potential liabilities under the new framework. Similarly comprehensive AI laws and governance mechanisms are being proposed and discussed in other parts of the world.

The European Union's AI Act faced significant challenges due to the emergence of foundation models, also known as "general purpose AI." Despite this hurdle, it is now progressing steadily towards implementation, poised to be the inaugural comprehensive AI law. Scheduled for 2024, this legislation will directly govern AI systems according to their inherent risk, with broad-reaching implications extending beyond the EU's borders.

In the United States, the Federal Trade Commission (FTC), California's Privacy Protection Agency (CPPA), and other federal and state regulators are positioned to maintain their efforts to establish themselves as pivotal agencies in this rapidly evolving domain. Anticipated are new state legislations related to AI and regulatory enforcement focused on data governance and utilization in high-risk sectors like employment, insurance, and healthcare. Additionally, the intellectual property legal landscape is expected to be reimagined, influenced by guidance from the U.S. Copyright Office and court rulings in prominent federal lawsuits currently pending. In contrast to the EU, the United States maintained a sectoral, self-regulatory stance toward AI, evident through a variety of federal initiatives, regulatory directives, and legislative endeavors.

Artificial intelligence has swiftly become a focal point of national attention in recent years- its transformative potential empowers small businesses to expand their reach, optimize operations, and enhance competitiveness in today's dynamic global market. Last year, the Biden Administration expanded its efforts to mitigate AI-related risks by securing voluntary commitments from 8 major technology giants/ leading AI companies such as Amazon, Anthropic, Google, Meta, Microsoft, and OpenAI, centering on the principles of safety, security, and trust in AI. These commitments, building upon previous agreements with seven top AI companies secured in July of 2023, signify immediate strides toward government action. Later that year, an impactful Executive Order mandated federal agencies to assess and establish standards for AI safety, security, privacy, and equity, alongside civil rights guidelines and consumer protections. This comprehensive approach aligns with the administration's commitment to fostering responsible AI development and safeguarding against potential risks in the digital landscape. 

With ongoing technological advancements, we anticipate a surge in policymaker engagement to shape new AI regulations in 2024. The Administration's call for comprehensive AI legislation, coupled with Senate Majority Leader Schumer's initiation of AI Insights Forums, underscores the growing emphasis on informed policymaking. In the absence of federal legislation, states like California and New York are exploring their own AI regulations, with others like Colorado, Oregon, Washington, and Massachusetts poised to join the conversation.. Additionally, various states engaged in exploring legislation impacting prominent technology platforms throughout 2023. Although none of these state bills were enacted, lawmakers remain actively involved in evaluating the digital economy, likely to revisit similar legislative efforts this year, with a focus on promoting fairness in the digital marketplace. As we move further into 2024, governments globally will continue to explore different regulatory approaches to AI governance, alongside the evolution of societal norms.

In Summary:

The achievements of smaller enterprises in 2023 placed great emphasis on the power of small businesses in advocating for policies that drive growth and innovation. Consumers should have transparent information and control over their data use for advertising, balancing privacy with targeted advertising through responsible data practices and robust consumer protections. As we embark on the legislative journey of 2024, it's crucial for small business leaders to continue making their voices heard. 

To ensure responsible AI development, businesses should stay informed about AI advancements and regulations, advocate for ethical AI policies promoting clarity, fairness, and the absence of ambiguity, and participate in pilot programs to contribute to responsible AI deployment. In the dynamic landscape of the digital economy, small businesses encounter a myriad of opportunities alongside challenges, akin to a double-edged sword. While digital platforms provide unparalleled access to a vast audience, concerns about the dominance and potentially unfair practices of large tech companies loom large, casting shadows over the potential benefits. To shape this digital landscape into one that fosters fairness and innovation, small businesses must actively engage in advocacy efforts and participate in crucial discussions surrounding platform governance. By advocating for policies that prevent the stifling of competition by tech giants and safeguard the interests of smaller enterprises, businesses can work towards creating a more equitable environment where all players have the chance to thrive.

Participation in platform governance discussions is equally vital. Sharing firsthand experiences and perspectives enables small businesses to contribute valuable insights into how online platforms can be structured to promote fairness, competition, and inclusivity. By actively engaging in these conversations, businesses can help shape the rules and regulations governing the digital realm, ensuring that they reflect the diverse needs and interests of all stakeholders. Moreover, staying informed about state-level legislation pertaining to the digital economy is paramount. Monitoring developments in this arena empowers small businesses to anticipate regulatory changes and advocate for policies that support their growth and inclusion. By keeping abreast of emerging laws and regulations, businesses can proactively position themselves to navigate potential challenges and seize opportunities as they arise.

While AI presents an array of opportunities for small businesses, ethical concerns regarding safety, security, privacy, and equity must be addressed. The Biden’s Administration’s proactive stance on AI regulation sets the stage for robust discussions in 2024, emphasizing the importance of small businesses' involvement in shaping regulations conducive to growth and innovation. Key developments to monitor in 2024 encompass the progression of the EU's AI Act, the issuance of the White House AI Executive Order, ongoing FTC enforcement efforts, IP-related legal disputes, and legislative activities revolving around AI and employment law.

In 2023, the landscape of privacy and cybersecurity in the U.S. saw a significant increase in regulatory efforts and law enforcement activities, both at the federal and state levels, alongside private lawsuits. This surge was primarily fueled by the rapid advancement of data-centric technologies such as AI and IoT, persistent cyber threats from malicious entities, and the resultant legal actions. Anticipating a continuation of these patterns into 2024, with established technologies gaining traction and new ones emerging, especially given the unlikelihood of comprehensive federal legislation during an election year, we foresee continued leadership from federal and state agencies in driving regulatory initiatives and pursuing enforcement measures against entities and individuals. We remain committed to monitoring and analyzing these developments in the upcoming year. Digital advertising serves as a cornerstone for small businesses, enabling them to compete on par with industry giants. Unfortunately, legislative hurdles, as witnessed in Florida in 2023, highlight the critical need for small business advocacy. Ultimately, the voice of small businesses holds consequential sway in shaping the digital landscape. By making their voices heard through advocacy, participation, and staying informed, small businesses can play a pivotal role in driving positive change and creating a digital economy that works for everyone. In unity, small businesses can navigate the challenges of 2024 and contribute to a thriving and supportive business environment.

Credits: Gibson Dunn Artitificial Intelligence Review; Gibson Dunn U.S. Cybersecurity and Data Privacy Review; floridapolitics.com; whitehouse.gov