America’s first federal law governing Internet privacy has gone into effect. Known as COPPA, the Children’s Online Privacy Protection Act is an attempt to protect children in cyberspace. Notwithstanding good intentions, the rules will fail to protect children while endangering the privacy of others and making life more difficult for on-line entrepreneurs.

The new law requires that web sites obtain “verifiable parental consent” before collecting personal information from children under 13 years old. That means that before 12-year-old Susie can fill out a registration form and enter a children’s web site, she needs to get her mother or father to send a fax, credit card number, digital signature or snail-mail to the site. But what’s to stop Susie from lying and telling the web site she is 13? As it turns out, not much.

The Federal Trade Commission, which will be responsible for enforcing the new rules, is operating under the rather naive assumption that kids under 13 don’t lie as much as kids over 13. With that assumption in mind, the FTC will be devoting substantial resources and dozens of employees to surf the web looking for violators. But it remains unclear how the FTC will actually know if a web site has collected information from a child under 13.

By scanning web sites for a statement of how parents can grant their permission, the FTC will ensure that companies are complying with the basic bureaucratic requirements of the law. But that does not mean the law will accomplish its goals. More likely, when kids catch on that they have to be 13 years old to enter a site, web sites will see an unprecedented surge in the number of 13-year-olds on the web.

The COPPA rules also create negative unintended consequences. For instance, since the law requires parents to submit their own personal information, the law compromises parental privacy. It is truly ironic that in attempting to protect the information of children, the rules dictate the extraction of information from their parents (i.e., credit card numbers, phone numbers, etc.).

COPPA will also have the rather unfortunate result of forcing a decline in the number of sites and services available to kids. As Wired News recently reported, many companies are deciding it is too much trouble to comply with the law, and are instead ditching their preteen clientele.

NBCi, which offers free e-mail accounts at snap.com and email.com, decided in February to close all accounts registered to kids under 13. “At this time, Snap does not have any way for your parents to give us their permission, so we have decided that closing your account is the surest way for us to obey the law,” they said. If a big company like NBC thinks it isn’t worth the time and energy to comply with the law, imagine how small businesses will respond.

According to some estimates, it could cost between $50,000 and $60,000 a year to maintain a toll free number in order to verify parental consent. That’s a bundle of money, and probably the difference between the creation or destruction of new children’s sites. And a decline in children’s sites will mean kids will have no choice but to flock to sites meant for adults. This means the new privacy law is both ineffective and harmful, but there are other solutions.

First, regulators must understand that no law can replace parental involvement. Children should be taught that just as they shouldn’t take candy from strangers, they should not give away their addresses to anyone who asks on the web. Parents, teachers and others in the community should not relinquish this important responsibility to the FTC.

Further, markets have already provided tools for parents to protect their child’s on-line identity. Software products such as “ChatGard,” “NetNanny,” and “X-stop” prevent kids from giving out personal information on-line. These types of solutions are more successful at protecting kids on-line, and they don’t jeopardize parental privacy or exact large compliance costs from the small businesses that are driving a booming economy.

Sonia Arrison is director of the Center for Freedom and Technology at the California-based Pacific Research Institute. She can be reached via email at sarrison@pacificresearch.org.