FTC gives behavioral ad punters one last chance
Voluntary self-regulation's final shot
The US Federal Trade Commission told online advertisers to do a better job of self-regulating how they track people's activities - or the government will step in and do it for them.
The regulatory agency issued a report Thursday with minor tweaks about how online targeted ads systems should collect, save, store, and share user information. The industry remains self-regulated despite calls from privacy groups for legislation on how companies are allowed to collect and use the data.
FTC adherence to a Bush administration policy of voluntary policing of internet advertising may be nearing the end of its rope, however. Commissioner Jon Leibowitz called the freshly modified guidance the industry's "last clear chance" to show that self-regulation will effectively protect consumer privacy.
After considering public comments from a November 2007 Town Hall meeting, the FTC offered its four revised principles for online ad punters:
1. Web sites are expected to provide clear and prominent notice regarding behavioral advertising as well as an easily accessible way for consumers to opt-out.
The agency said that because privacy policies posted on companies' websites are often too long and difficult to understand, ad-tracking disclosure mechanisms should be made separate and meaningful to users.
2. Companies should provide reasonable security for any data they collect for behavioral advertising and only retain data as long as it's needed for legitimate business or law-enforcement needs.
The Commission said the protections should be based on the sensitivity of the data and the nature of a company's business.
3. Websites are urged to obtain the express consent of users before they make material, retroactive changes to their data-collection policies.
"It is fundamental FTC law and policy that companies must deliver on promises they make to consumers about how their information is collected, used, and shared," the report states. "An important corollary is that a company cannot use data in a manner that is materially different from promises the company made when it collected the data without first obtaining the consumer's consent."
4. Companies should receive express consent for use of "sensitive data."
Although the Commission didn't offer a definition of "sensitive data," it did say that the clearest examples are items such as financial data, data about children, health information, and geographic-location information. The FTC added that it encourages industry, consumer, and privacy advocates to develop more-specific standards to address the issue.
'First party' behavioral ads need not apply
The FTC decided that their voluntary guidelines don't apply to "first party" behavioral advertising - ads using data collected by and at a single website. It claims this kind of data collection is less likely to lead to consumer harm and therefore the four principles need not cover that practice.
The Commission's principles also can be brushed off by "contextual advertising" - ads based on a user's current visit to a single webpage or a single search query that doesn't involve retention of data beyond the immediate ad result.
Although the report was approved by a vote of 4-0, statements by some commissioners indicate they think more needs to be done.
"The staff report, while commendable, focuses too narrowly," said FTC commissioner Pamela Jones Harbour. "Threats to consumer privacy abound, both online and offline, and behavioral advertising represents just one aspect of a multifaceted privacy conundrum surrounding data collection and use."
Commissioner Leibowitz said the industry needs to shape up or the days of self-policing are over.
"Industry needs to do a better job of meaningful, rigorous self-regulation, or it will certainly invite legislation by Congress and a more regulatory approach by our Commission," he said. "Put simply, this could be the last clear chance to show that self-regulation can - and will - effectively protect consumers' privacy in a dynamic online marketplace."
Many privacy advocates such as the Center for Digital Democracy say the government needs to set legal guidelines for targeted advertising now.
"We don't believe that the FTC has sufficiently analyzed the current state of interactive marketing and data collection," said Jeff Chester, executive director for the Center for Digital Democracy in a statement. "Otherwise, it would have been able to articulate a better definition of behavioral targeting that would illustrate why legislative safeguards are now required. It should not have exempted 'First Party' sites from the Principles; users need to know and approve what kinds of data collection for targeting are being done at that specific online location."
Chester said the American government shouldn't let the public remain vulnerable to the data collection and "targeting lures" of online marketing, and more meaningful action is required. ®