Why Google shouldn’t have to admit its privacy sins

The gadfly activist group Consumer Watchdog grabbed more headlines this week after a federal judge let it weigh in on Google’s (s goog) $22.5 million privacy settlement with the Federal Trade Commission.

Consumer Watchdog is jumping up and down because the settlement, which punishes Google for hacking shenanigans, doesn’t require the company to admit wrongdoing.

“Google executives want to buy their way out of trouble with what for them is pocket change, and then deny doing anything wrong,” said Consumer Watchdog’s John M. Simpson, adding the deal “undercuts the regulatory process.”

Baloney. Simpson and friends appear to be seizing on recent comments by FTC commissioner J. Thomas Rosch to stir the pot. Rosch earlier this month dissented in a Facebook (s fb) privacy case, saying he preferred that companies use the phrase “neither admits nor denies.”

Well, wait a minute — shouldn’t these companies have to fess up and own their wrongdoing? In a perfect world, yes. But, in reality, the current system works because it shames the companies and forces them to pay sizable fines. Companies choose to play this game because it provides them with a partial shield from civil lawsuits.

A source from a big tech company, speaking on the condition of anonymity, told me that firms would fight bitterly if they had to admit liability in the FTC settlements. This would result in many more court cases and higher risk and cost for the government. The current “name, shame and pay” tactic used by the FTC and other agencies isn’t pretty but it’s largely effective.

Which brings us back to Consumer Watchdog. Critics say the company is a playground for trial lawyers.  And, unlike the Electronic Frontier Foundation and other groups that post reports, Consumer Watchdog’s funding and operations are a black hole.

Consumer Watchdog’s latest hysterics smell all the more in light of its recent anti-Google crusade (remember that ad in Times Square?) and the presence of the indefatigable Gary Reback, a former Microsoft lawyer who is currently representing a shopping site that is suing Google.

All of this doesn’t mean Google deserves less scrutiny. The company has many, many sins to atone for and there are few signs it plans to get privacy religion anytime soon. Courts and activist groups also deserve blame for creating privacy settlements that pay lawyers but do little to involve the consumers whose rights have been violated.

The privacy scene is a mess but Consumer Watchdog’s decision to demagogue the regulatory process won’t help.

(Image courtesy of Shutterstock 3445128471)