Consumer Advocacy Groups Call on FTC to Probe Mobile Marketing

A new year brings a new focus for digital privacy advocates. Two consumer advocacy groups planned to petition the Federal Trade Commission today to step up its efforts in inspecting the mobile marketing industry.

Mobile ad and marketing firms including ChaCha, Velti, Cellfire, Bango, and AdMob are cited in a complaint from the Center for Digital Democracy and the U.S. Public Interest Research Group concerning privacy and security of data collected through and used by mobile marketers.

“If left unregulated, marketers will ultimately strive for nothing short of a totally mobile based data collection and targeting environment,” wrote the groups in a complaint they intended to send to FTC commissioners today. The missive amends earlier complaints from CDD and USPIRG regarding online advertising and behavioral targeting, adding copious references to mobile marketing and advertising practices the organization deems “unfair and deceptive.”

In the complaint, the organizations specifically ask the agency to “undertake an immediate, formal investigation of mobile online advertising practices, focusing on the following five areas of concern: Behavioral Targeting, Location-based Targeting, User Tracking/Mobile Analytics, Audience Segmentation, Data Mining.”

The organizations contend that a 2008 FTC town hall meeting failed to address threats to consumer safety and data privacy resulting from mobile marketing practices. According to the complaint, the FTC has proved ineffectual because it did not establish regulations to guard against deceptive online advertising practices when the industry was in its nascency in the 1990s. The groups suggest the FTC “avoid repeating the mistake” by intervening to regulate mobile marketing in its early stages.

The industry sector’s attempts to self-regulate are “inadequate,” particularly in terms of disclosure of data collection and usage, says the complaint. The CDD and USPIRG, both of which have been critics of digital marketing in recent years, call for an “immediate investigation into the impact of interactive, targeted advertising on the mobile marketplace.”

In a laundry list of recommendations, the groups call for inspection of mobile marketing opt-in and data disclosure practices with special attention to the impact of mobile marketing on children. They also want the FTC to establish a mobile marketing task force along with the Federal Communications Commission and state governments. Florida’s Attorney General’s Office has already settled with a number of firms facilitating allegedly misleading mobile marketing practices, including AT&T Mobility.

In response to the filing, mobile search provider ChaCha — named in the complaint, said maintaining trust and protecting user privacy is of “utmost importance” to the firm.

“As with any other search service, we are providing our users with the information they request and relevant advertising as it relates to their search query,” the company said in a statement.

The FTC has expressed an interest in behavioral targeting and, more recently, mobile marketing. In May the commission held its “Beyond Voice: Mapping the Mobile Marketplace,” event during which CDD Executive Director Jeff Chester was a speaker.

At the event, FTC Commissioner Jon Leibowitz said the agency will “police” the mobile industry. “In an era of broadband and information services, the FTC will be watching and is watching closely. We strongly believe, as many of you know, in self-regulation, but we are also going to police the wireless space.” Leibowitz also noted “The emerging mobile marketplace raises a host of opportunities as well as a host of consumer protection challenges.”

Though the FTC has taken a relatively hands-off approach to the digital marketing industry, FTC Deputy Director of the Bureau of Consumer Protection Eileen Harrington signaled at an Interactive Advertising Bureau event in September that could change. “We sounded the clear call for self-regulators,” she said, alluding to a set of self-regulatory guidelines for behavioral advertising put forth by the FTC in 2007.

She implied the FTC or other government entities could take action if the industry doesn’t start enforcing guidelines for behavioral targeting, including providing clear, concise and prominent statements about online data collection for advertising. “This is a very juicy policy issue in Washington,” she added in September.

The CDD and USPIRG call their complaint “an initial test for the Obama FTC.” Along with the FTC, Congress took a closer look at the online advertising industry and its privacy implications in 2008. President-Elect Barack Obama’s upcoming administration and the Democratic-controlled Congress may be more open to industry regulation; however, it remains to be seen whether legislators will find the time to devote to such matters with more pressing economic issues at hand.