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 Media, AdForce, AdKnowledge, Avenue A, Burst! Media, DoubleClick, Engage, L90, and MatchLogic — was pleased with the decision.

“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 access 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.