Michigan to File Suit Against DoubleClick

The State of Michigan is preparing to file suit against online advertising leader DoubleClick, which is also the subject of informal inquiries by the New York State Attorney General‘s office and the Federal Trade Commission.

The Michigan Attorney General’s office has given DoubleClick a “notice of intended action,” basically, a warning that the company has ten days to cease and desist the activities the State finds unlawful, or else the Michigan Attorney General’s office will file suit.

The notice of intended action alleges that the company is violating Michigan’s Consumer Protection Act by collecting information on consumer behavior without the consumer’s knowledge. A violation of the Act is punishable by a $25,000 fine.

The notice alleges that DoubleClick secretly places cookies on the computers of people browsing the Web sites in its network, knowing that consumers are not aware that this is being done. “In reality,” the notice reads, “most consumers have not been given notice, have not knowingly consented to or authorized the placement of surveillance cookies, and are unaware of DoubleClick’s opt-out policy.”

The notice also targets DoubleClick for allegedly changing its own privacy policy, which Michigan claims the company did without adequately informing consumers.

DoubleClick’s opt-out policy also comes under fire. The notice calls it, “an inadequate and unacceptable substitute for a consumer’s knowing consent to allow DoubleClick to collect, compile, analyze, and use confidential, personal information. DoubleClick’s opt-out alternative violates the Michigan Consumer Protection Act.”

A DoubleClick spokesperson, reached by telephone this morning, said the company was unaware of any action by the State of Michigan. A call placed this afternoon has not yet been returned by the company.

DoubleClick has lately been in hot water over its privacy practices, which has drawn complaints from consumer advocacy groups and sparked inquiries by the Federal Trade Commission and the State of New York Attorney General’s office.

The concerns are especially strong about the company’s intention to match data collected online with offline consumer information it acquired when it bought Abacus Direct last year. That matching up will happen when people register at a participating site and okay the use of their personal information. Privacy advocates, though, don’t think the public is being sufficiently informed.

Trading in DoubleClick’s (DCLK) stock was halted yesterday to give the company a chance to disseminate he news. The company’s stock has dropped 12 3/16 today since trading began.

“We are confident that our business policies are consistent with our privacy statement and beneficial to consumers and advertisers. The FTC has begun a series of inquiries into some of the most well-known web companies, including DoubleClick, and we support their efforts to keep the Internet safe for consumers,” said Kevin Ryan, president of DoubleClick.

“DoubleClick has never and will never use sensitive online data in our profiles, and it is DoubleClick’s policy to only merge personally identifiable information with non-personally identifiable information for profiling, after providing clear notice and choice.”

The Federal Trade Commission is also looking into Amazon.com’s (AMZN) privacy practices, and EToys (ETYS) is being investigated for the way it markets to children.

The New York State Attorney General’s office probe, and that of the Federal Trade Commission, are both still informal and apparently consist mostly of the collection of information.

“We are just in the information gathering stage. DoubleClick voluntarily is providing us with information,” said Juanita Scarlett, a spokesperson for New York Attorney General Eliot Spitzer.

“We have no formal investigation. In New York, we have an entire department dedicated to looking at Internet issues, privacy, consumer issues, everything involving e-commerce. As consumers approach us with their concerns we certainly and proactively take a look at e-commerce.”

The New York Attorney General’s office has, for a couple of months, taken a big interest in e-commerce and online privacy issues. Attorney General Spitzer has called for legislation, “to establish baseline statutory personal privacy protections.”

“We used to fear the collection and retention of information by the government, and so we passed laws limiting the ability of government to gather information about us,” said Spitzer, speaking to the New York State Bar Association on January 28.

“In fact, today the source of the most troublesome privacy invasions is not government, but certain commercial interests that exchange confidential information as a commodity. In this regard, the problem is not Big Brother, but Big Browser.”

Spitzer appears to be most concerned about companies that share consumers’ personal information with third parties, and those that don’t allow consumers to opt-out.

Earlier this week, DoubleClick started a public information campaign to inform people about privacy, and to show them how to opt-out of DoubleClick’s database, setting up a Web site called PrivacyChoices.

The advertising company is also facing six lawsuits that allege it unlawfully collects personal information about Internet users.