House Members Edge Toward Federal Privacy Legislation

It felt like déjÀ-vu all over again this morning as two U.S. House subcommittees met to discuss online advertising, behavioral targeting, and related consumer privacy issues. As indicated during a similar hearing in April, House Members again implied their willingness to introduce federal privacy legislation which most likely would affect online advertisers, publishers, and third party ad firms.

As Congress and the Federal Trade Commission apply increasing pressure, the industry’s primary self-regulatory body announced new steps aimed at appeasing them. However, the industry’s approach may not be enough to please government or advocates of more stringent regulations.

Members of the House Energy and Commerce Subcommittee on Communications, Technology, and the Internet, along with those of the Commerce, Trade, and Consumer Protection Subcommittee met today, led by Commerce Subcommittee Chairman Bobby Rush, a Democrat from Illinois. The hearing was cut short after less than an hour as Members left to fulfill floor voting duties that carried on into the evening.

The goal of the joint hearing, said Rush, was to help determine whether “federal privacy legislation is necessary, or should companies be trusted to discipline and regulate themselves?” Noting nuances and disagreements surrounding topics and terms such as opt-in, opt-out, and first- and third-parties, Rush suggested, “All of these variables are important to consider, but they can muddle the issue of whether legislation is needed.”

In April, The House Subcommittee on Communications, Technology, and the Internet met to address concerns regarding privacy implications of ISP-based and other behavioral ad targeting technologies. During that hearing, Members wondered whether the Consumer Privacy Protection Act, introduced in 2002 but never passed, could serve as a guide for a future bill. It would have required data collectors to notify consumers about data collection and usage.

Rush in April introduced his Data Accountability and Trust Act, which would give the FTC power to require companies possessing electronic data containing personal information to establish security policies. He suggested that bill could be used as the basis of federal privacy legislation.

Indeed, for what may have been the first time, Members raised the question of which agency would be charged with regulating under any such legislation — another indicator that they could be moving closer toward drafting a more specific federal privacy bill.

Unlike other Internet ad industry players, Google supports passage of a federal privacy law, most likely because dealing with one law would be much more manageable than dealing with several conflicting state laws. The company deploys lobbyists, public policy staff, and lawyers across the country in its fights over state court lawsuits involving copyright or ad targeting issues.

According to the firm’s submitted testimony, Google is in favor of “establishing a uniform online and offline framework for privacy, creating expectations of privacy from one jurisdiction to another, and putting penalties in place to punish and deter bad actors.”

Being the industry’s main self-regulatory entity, the NAI continues to push against legislation. Yet, as the battle intensifies, it has taken incremental steps to pacify supporters of a comprehensive privacy law. This summer, the organization plans to offer a browser plugin-based supplement to its ad network members’ cookie-based solutions for opting-out from behavioral targeting. Cookie-based opt-outs are subject to deletion, rendering them ineffective when users delete cookies. The group also said this month it will launch a consumer education campaign through ads served by its member ad networks. Behavioral ad firm Tacoda launched a similar ad campaign in 2006, the goal being to inform users about how behavioral targeting works and to promote its benefits.

Other behavioral ad firms have unveiled new privacy measures designed to educate Internet users and give them better control over how their data is used. Exelate and Dotomi are among the small but growing group of data peddlers to offer enhanced opt-out at the network-, category-, or advertiser-level. Others, such as Google and Fetchback, have embraced more prominent disclosure via links within ad units. A few companies have embraced both methods.

In between bantering about the previous night’s annual Roll Call Congressional Baseball Game pitting Democrats against Republicans, some Members took time to stress concern about potentially overreaching legislation. Suggesting “self-regulation is sufficient,” Louisiana Republican Steve Scalise added that if regulations are necessary, they should be consistent across industry. “Congress should not pick winners or losers,” he said.

Zach Rodgers contributed to this story.

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