Senate Signals FTC Enforcement on Privacy May Be Needed

If today’s Senate Committee on Commerce, Science and Transportation hearing titled “Privacy Implications of Online Advertising” was any indication, actual federal legislation may come only after the government grants the Federal Trade Commission greater enforcement capabilities.

“The FTC might need to go further and ensure enforcement of any guidelines,” said Democratic Senator Byron Dorgan, referring to the commission’s proposed guidelines for behavioral ad industry self-regulation.

Industry representatives from Google, Microsoft, Facebook and ISP ad targeting firm NebuAd gathered with speakers from a consumer privacy organization, a free market advocacy group, and the FTC to discuss the approach the U.S. government should take to online advertising in light of growing concerns about the role consumer data plays in serving such ads. Behavioral ad targeting, including recent relationships between Internet service providers and behavior tracking vendors such as NebuAd, were high on the agenda.

“I had invited Internet Service Providers today, and they had declined the invitation,” said Dorgan. The North Dakota Senator said he plans to hold a subsequent hearing for ISPs alone.

Directing his comments to NebuAd Chairman and CEO Robert Dykes, Dorgan expressed what is at the heart of the contention between consumer privacy concerns and the promise of online ad targeting relevance. “If my ISP said to me, ‘We have a proposition: Is it OK if we give everything you do to another company?’ I’d say, ‘Of course it’s not OK… The answer is no, capital N-O.’ ”

Dykes stressed NebuAd tracks only non-personally identifiable data, provides prior notice about its tracking activity, and allows users to opt-out before or after tracking begins.

Committee members questioned witnesses about online data tracking, storage, identification, anonymity, and security as it relates to online ad targeting. Overall, the two-hour exchange revealed the challenges in not only determining appropriate regulatory or legislative steps, but in understanding the deeply technical subject matter.

Although he implied a need for sharper FTC enforcement fangs, Dorgan noted Congress might also need to draw up new laws. The FTC’s guidelines have not been finalized; Lydia Parnes, its director, Bureau of Consumer Protection told Committee Members comments on the guidelines are under evaluation.

“Although there clearly is more work to be done, the commission is cautiously optimistic that the privacy issues raised by online behavioral advertising can be effectively addressed through self-regulation,” said Parnes. Once finalized, the FTC guidelines would govern self-regulation.

Microsoft and Google, often at odds on Capitol Hill, each support industry self-regulation and a federal privacy law. “Overall, legislation does play an appropriate part of the mix along with self-regulation,” said Mike Hintze, Microsoft’s associate general counsel, legal and corporate affairs.

Google Senior Privacy Counsel Jane Horvath said the search firm supports passage of a comprehensive federal privacy law to penalize bad actors, and added, “We hope that revised [FTC] principles will be adopted widely by the online ad industry.”

Hintze did, however, voice what could be construed as veiled concerns about Google’s dominance in the industry, especially in light of its recent search ad deal with Yahoo. “We definitely see a nexus between competition and privacy in that if there does become a dominant player in the online advertising space… It could become the case where a single company has a nearly complete picture of people’s online behavior.”

Representing the consumer privacy advocacy wing of the witness stand, Center for Democracy and Technology President and CEO Leslie Harris dismissed current industry self-regulatory efforts, mainly the Network Advertising Initiative, as failed.

“Only now, when the FTC has turned its attention to the issues, has the Initiative proposed modest improvements,” she said, alluding to the NAI’s proposed updated guidelines for behavioral targeting. The CDT is a longtime proponent of federal privacy legislation, in addition to FTC enforcement capabilities.

Harris also suggested recent data tracking and ad targeting trials by ISPs create “new legal complexity… In our view the law doesn’t permit it.”

Though the hearing culminated with little indication as to the future of government intervention regarding online privacy, Democratic Senator Bill Nelson of Florida connected the issues raised to the broader theme of government surveillance and civil liberties. Noting the Foreign Intelligence Surveillance Act is up for a Senate vote today, Nelson questioned, “How do we rein this in so that as this Internet continues to explode into something… that will be totally ubiquitous, how do we support our constitution and protect our civil rights?”

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