Politicos OK limits for U.S. firms in Net-censoring countries

Update 12:53 p.m. PDT: Congress has moved a step closer to enacting a new law regulating key aspects of how U.S. tech companies operate in countries whose governments censor or otherwise manipulate the Internet.

As expected, the House of Representatives Committee on Foreign Affairs backed a slightly amended version of the Global Online Freedom Act by a voice vote on Tuesday morning. The bill's preliminary nod is a prelude to the same House committee's plans to grill Yahoo executives early next month about a widely publicized case involving the imprisonment of a Chinese journalist.

The law is necessary because "the Internet should be a tool for good and one that helps to promote American values," said Rep. Tom Lantos (D-Calif.), the panel's chairman and a vocal critic of U.S. tech companies' China dealings.

"Activists play a cat-and-mouse game with police, opening new Web sites to provide more information as soon as old ones are blocked or shut down," he went on. "In this cat-and-mouse game, American companies should--just like the American government--stand with those promoting freedom, rather than with the police who seek to shut down the dissidents and their message of democracy."

Whether the bill will actually go anywhere from here is debatable. A Republican-controlled subcommittee passed a nearly identical proposal more than a year ago, but it never got any further attention.

Sponsored by Rep. Chris Smith (R-N.J.), it's a broad effort to hold American firms accountable for their practices in countries deemed by the U.S. government to be "Internet-restricting"--that is, locales where it's determined that the government is "directly or indirectly responsible for a systematic pattern of substantial restrictions on Internet freedom."

"Dictatorships need two pillars to survive--propaganda and secret police," Smith said in a statement. "The Internet--if misused--gives them both in spades."

U.S. firms would face a host of new restrictions and obligations under the bill. For instance, they wouldn't be allowed to store any e-mails or other electronic communications containing "personally identifiable information" about their users on servers in any of the designated countries. And they'd be obligated to give the State Department a detailed breakdown of how their products' search results have been filtered and all URLs that have been removed or blocked at the request of foreign governments known to be restrictive.

If approached by local authorities with requests for users' personal information, American companies wouldn't be allowed to turn it over except for "legitimate law enforcement purposes," as determined by the U.S. Department of Justice. That provision, which enjoys support from human rights groups like Reporters Without Borders, appears to be a response to allegations that Yahoo divulged information to Chinese authorities about pro-democratic online writings by a couple of its citizens, leading to their convictions and imprisonment.

Failure to comply with any of those rules could result in fines of up to $2 million.

Mixed reactions
Not everyone at Tuesday's vote was so keen on the approach, though. Rep. Adam Smith (D-Wash.) raised concerns about voting on a bill with a potentially significant financial impact on U.S. businesses without first holding hearings.

"As for specifics on the bill itself, Smith does not believe that restricting U.S. Internet companies from working inside countries like China would cause the Chinese government to be less repressive because other companies would be waiting to take their place," spokesman Derrick Crowe told CNET News.com.

Microsoft, for its part, told CNET News.com that no new laws are necessary in this area. Instead, the company would prefer to go a nonlegislative route and is working with Google, Yahoo, other companies, academics, investors and human rights groups to come up with a set of guiding business principles. A Google representative said his company was still evaluating the bill.

Yahoo spokeswoman Tracy Schmaler sent us the following statement about the bill's passage: "This highlights the complexity of the issues confronting U.S. companies doing business in China and similar countries, and we think it's an important dialogue to have about the role the U.S. government should play in facing these challenges. We look forward to working constructively with Congress to find practical solutions."

The Computer & Communications Industry Association, which counts Microsoft, Google and Yahoo among its members, said the proposed rules won't do anything to blunt what it called shared concerns over "Internet censorship and repression of democratic speech online." It's "unrealistic" to expect a single company to stand up to an oppressive regime, and penalizing U.S. companies for failing to do so is likely to backfire, the group argued.

"By placing these businesses in this untenable position of choosing between complying with either U.S. or Chinese law, but not both, GOFA [the Global Online Freedom Act] guarantees an exodus of U.S. businesses from the Chinese market," CCIA President Ed Black wrote in a two-page letter to the House panel provided to CNET News.com. "By ensuring our unilateral withdrawal from the battle for the hearts and minds of the Chinese people, GOFA will forfeit this critical frontier for spreading democracy to state-run and state-influenced Chinese enterprises with no interest in promoting American values."