Industry Reacts to FTC Online Profiling Report

An online ad industry group is rejoicing while privacy advocates seethe, in
the wake of a Federal Trade Commission
report recommending the self-regulation proposal offered by the Network Advertising Initiative,
a group of third-party ad serving companies.

In its report to Congress, which comes after a year of negotiations between
these ad serving firms and the federal government, the FTC praised the NAI
proposal, and recommended that legislation along the same lines be adopted.

“This report reflects the Commission’s view that industry self-regulation
must play a central part in protecting consumer online privacy,” said Jodie
Bernstein, director of the FTC’s Bureau of Consumer Protection.

“NAI constitutes over 90 percent of the network advertising industry.
Legislative action is necessary to ensure the remaining 10 percent will
comply with the protections outlined in NAI’s Principles and to guarantee
full compliance by all Web sites.”

The NAI — whose members include 24/7
, AdForce, AdKnowledge, Avenue A, Burst! Media, DoubleClick, Engage, L90, and MatchLogic — was pleased with the

“We’re delighted that we could come to such a terrific agreement with the
strong support of the FTC and the Clinton Administration,” said Jeff
Connaughton of Quinn Gillespie & Associates and NAI spokesperson.

“These principles represent an enforceable self-regulatory approach that
addresses consumer concerns about information collection while balancing the
many technologies and benefits of e-commerce.”

Privacy advocates blasted the FTC decision, saying it was inadequate to
protect consumer privacy, especially criticizing the fact that the proposal
backs an opt-out, rather than opt-in approach to online profile building.

“What part of the word ‘consent’ don’t online profilers understand?” asked
Jason Catlett, president of the Junkbusters advocacy group.

“Notice is not enough. The presumption that people should be tracked online
unless they consistently object is offensive and goes against what the
overwhelming majority of people want. What is needed is a law requiring
consent before these long electronic dossiers are built about anyone or sold
to third parties.”

The FTC backing of this plan, with its opt-out provisions, is major
development, showing that the government is inclined to bless what has been
the status quo in the industry, rather than spurring a significant overhaul
with the adoption of an opt-in methodology. However, the practice of
marrying non-personally-identifiable previously-collected data (possibly
collected offline) with personally identifiable information is not to take
place without the consumer opting-in. What opt-in means in this case,
though, remains to be seen.

The NAI principles basically say that host Web sites must post information
about the data collection activities of third-party ad servers. If
personally identifiable information is collected, “robust” notice should
appear at the time and place where the information is collected. When
clickstream data is collected, that must be clearly noted in the Web site’s
privacy policies.

In addition, any linkage of previously collected non-personally identifiable
data to personally identifiable data (a practice that DoubleClick got in hot
water for beginning), must be done on an opt-in basis. Any other use of
information is collected on an opt-out basis.

Under the proposal, consumers should be given ac

cess to the information
gathered about them, and network advertisers must make reasonable efforts to
protect that data.

Within the FTC, commissioner Orson Swindle objected to the call for
legislation, saying there was no demonstrated need and that self-regulation
would likely be adequate. Commissioner Thomas Leary and Commissioner Mozelle
Thompson both expressed concerns about the education of consumers and the
notice given to them as information is collected.

“I believe that the legislation should focus on adequate ‘notice’ and not
mandate across-the-board standards for other elements of the so-called ‘fair
information practices,'” said Leary.

The FTC’s report will go to Congress, which will consider passing
legislation based on the agency’s recommendations.

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