Industry Group Argues Against Web Bug Legislation

An industry association says the U.S. government should hold off on passing privacy-related laws on the use of Web technologies that can track users online.

Earlier this month, the Washington, D.C.-based Online Privacy Alliance testified before the bicameral Congressional Privacy Caucus that that Congress should focus on the way technology is used, rather than trying to pass laws governing those specific technologies — especially the tracking technology known as “Web bugs.”

“Web bugs” — also called “Web beacons” or “clear GIFs,” are often-invisible online graphics embedded in Web pages. They can be used to report information about a site visitor to the site’s publisher or to a third party, such as an ad network.

The CPC, which includes more than thirty members of Congress, is co-chaired by Sens. Richard Shelby (R-AL) and Chris Dodd (D-CT), and Reps. Joe Barton (R-TX) and Edward Markey (D-MA).

The chairs said earlier this year that they intend to make Web bugs and other Internet tracking technologies a major focus of their agendas during the current Congressional session.

But OPA advisor Christine Varney, an attorney with D.C.-based Hogan and Hartson and a former Federal Trade Commissioner, said that the Internet industry opposes Congressional legislation of Web bugs — advising CPC members during its meeting last week to keep their hands off of rules surrounding the technology.

“Web beacons are neither good nor bad, the issue is how they are being used,” she said. “It’s the behavior of businesses and not the technologies they use that determine whether consumer privacy is respected. There are practices that enhance privacy and practices that invade privacy, but technology itself is neutral.”

“I am extremely concerned that the Caucus not be misled in thinking that the technology itself is either dangerous or nefarious,” Varney added. “As with any technology, bad actors will use technology for bad purposes. It is this kind of behavior that we must target, not the technology itself.”

Varney said that Web bugs help to make the Internet more efficient and allow consumers to continue accessing free, ad-sponsored content.

“When technology is used to provide purely analytical and statistical services or non-personally identifiable data transfers, we do not believe there is any threat to the privacy of American consumers,” she testified.

OPA policy is that affiliated Web sites disclose what information is being collected, and why — letting visitors then decide whether to use the site.

“Like all other matters related to privacy online, it is essential that Web sites tell visitors that Web beacons are being used and give them the option of saying ‘no,'” Varney said. “Notice and choice are fundamental to building trust between Web sites and consumers.”

OPA member companies include ad networks DoubleClick, 24/7 Media and Engage, as well as ISPs EarthLink, software giant Microsoft and network technology firm Novell. It also includes portal companies Yahoo and Excite@Home and Web advertisers Ford, Unilever and Procter & Gamble.

The OPA is also associated with the American Advertising Federation, the Association of National Advertisers and the American Association of Advertising Agencies, among others.

Similarly, privacy advocates like The Privacy Foundation’s Richard Smith — who also testified at the CPC’s meeting — criticize the undisclosed usage of Web bugs. However, Smith is less charitable in his view of Web publishers or advertising firms’ use of the technology.

“Even where Web Bugs are simply used for commercial purposes, officials at most Internet marketing companies and Web sites don’t want to talk about what’s going on. Very few privacy policies mention Web bugs or how they may be used,” Smith wrote in an email newsletter to members. “It makes me wonder what companies may be trying to hide.”

“These new ad tracking schemes were invented after click-through rates on banner ads plummeted,” Smith added. “Inundated with advertising, the click-through rate is now around 0.3 percent and dropping. So, as Internet advertising seemingly becomes less effective, the reaction by businesses is to do more tracking. Not exactly an encouraging trend for Internet privacy.”

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