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US consumer regulator the Federal Trade Commission (FTC) has been asked by consumer groups to investigate some of the internet's biggest companies in a review of whether users' rights are violated by online advertising systems.

The complaint (pdf) claims that ad systems are increasingly based on personalised targeting, that access to users is bought and sold without their permission or even knowledge, and that information about users' offline lives is being combined with online profiling in a way that erodes their privacy.

The Center for Digital Democracy, the Federation of Public Interest Research Groups (US PIRG), and World Privacy Forum are behind the complaint, which asks the FTC to investigate advertising practices and their privacy implications.

They want the FTC to force companies involved in real-time tracking and targeting to ask web users' permission first; they want companies to say that this activity is based on personal information; that they financially compensate users for the use of their data; and that the FTC report to the US Congress on the privacy risks of these activities.

The complaint claims that 'real time bidding' (RTB) is invasive and intrusive and uses people's personal information in ways that those people do not understand. It said that the process involves the identification of individuals at specific times as targets for specific advertisers.

"We are now faced with a veritable 'Wild West' of data collection, with all sorts of practices that fail either to protect consumer privacy or to provide for reasonable understanding of the data collection process, including significant variations in how cookies are stored and the outside data sources used," said the complaint. "Ad agencies, publishers, and intermediaries are now focused on what they are calling 'the holy grail of targeting': capturing the individual consumer."

The groups say that digital exchanges offer up profiles that, though anonymous, refer to individuals whose online and offline browsing and buying habits are being analysed and matched to adverts within fractions of a second.

"The merging of outside sources of data for targeting online users is a significant new threat to consumer privacy," it said. "Few users know such a system exists."

The groups said that users are unaware that ad networks collect data on individuals from social networking sites and blogs and log not just their attributes but their online friendships and connections.

Advertisers often argue that seeing advertising and being targeted by it are the prices that consumers pay for the consumption of otherwise-free media online.

"The value of user data harnessed by these platforms and services is generating higher returns for marketers," the complaint said. "Publishers, ad agencies and marketers are all trying to capitalize on the data of each consumer – thereby causing that consumer a financial loss."

"None of the so-called consumer benefits of real-time targeting – the 'faster loading times' for an ad and whether they provide a 'better user experience' - make up for this financial loss. The availability of so-called free content is an insufficient return to a consumer for their loss of privacy, including their autonomy," it said.

The privacy groups said that though technically consumers can opt out of this processing, it is very hard and confusing. Different companies and systems use different opt-out methods and store data for different periods.

"The system of collection and use is purposefully ambiguous and not an honest reflection of data collection and use practices, further underscoring why the commission must abandon reliance on privacy policy notices as a meaningful consumer safeguard," it said.

The complaint claims that this tracking and real-time targeting are unfair and deceptive practices, as proscribed by the Federal Trade Commission Act. This identifies the offence as something that "causes or is likely to cause substantial injury to consumers which is not reasonably avoidable by consumers themselves and not outweighed by countervailing benefits to consumers or to competition".

The groups want the FTC to investigate the companies and to force them to be more open about their activities, to pay web users for the use of their data and to only process the information of people who have 'opted in' to the systems.

The complaint asks that the FTC "compel companies involved in real-time online tracking and auction bidding, including providing related data optimization, to provide an opt-in for such a process … [and] ensure that consumers receive fair financial compensation for the use of their data".

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