Advocates Tangle Over Online Ad Regulation in Comments to FTC

Several commenters talked about consumer confusion over companies’ legal responsibilities regarding privacy of customer information and cited a recent study by the University of California Berkeley and the University of Pennsylvania, which concluded that most Americans oppose targeted advertising (WID Oct 1 p9). In a joint comment, the Center for Digital Democracy, Consumer Watchdog, Electronic Frontier Foundation and others highlighted the example of EchoMetrix. The company sells parental control software, they said, but unknown to most parents it also gathers children’s instant-messaging data to sell to advertisers to tailor messages to kids. “Parents most likely had no knowledge that software they had bought to protect their kids would gather personal IM conversations and use it as a marketing tool,” they said. Like the Center for Democracy & Technology (WID Nov 10 p6), this group supported applying fair information practices to the new business practices of the Internet.

Chris Hoofnagle, the director of Information Privacy Programs at the Berkeley Center for Law & Technology, said businesses adopt much more stringent privacy and data controls when they're dealing with each other than with individuals. In business-to-business contracts, he said, sellers can often audit buyers, make the buyer liable for acts of service providers or require notice of a security breach. “While many privacy policies contain slippery language concerning sale of personal information to third parties, B2B contracts prohibit it with certainty,” he said. Hoofnagle said that people often have no way of knowing how their names ended up on an advertiser’s list, or what lists they're on, because some commercial data brokers ban the disclosures. He recommended that the commission look into the practice of enhancement -- linking information obtained from consumers to an existing database. “The standard (uninformed) self-help argument in this field is: if you don’t want your information sold, don’t give it out. But enhancement obviates many attempts to protect privacy through selective revelation.”

The greatest privacy danger to people isn’t from companies, however, but from the government, said Berin Szoka of the Progress & Freedom Foundation. The foundation recommends a “layered” approach to online privacy that focuses more on government access, he said. First, the Fourth Amendment should be applied to the digital age, he said, and Americans’ digital information protected. Users should be educated about privacy risks and data management and empowered to choose to set their privacy preferences. Industry self-regulation should be improved and current laws enforced, Szoka said. A layered approach “that relies on user empowerment and education need not be perfect to be ‘good enough,’ because ‘privacy’ is not an absolute good that trumps all other consumer interests, nor can ‘community standards’ accommodate a diverse citizenry,” he said.

Szoka also argued in favor of behavioral advertising, saying it gives consumers more-relevant ads and results in lower prices and more innovation. Despite what people may tell pollsters, the actual increase in click-through rates and conversion rates shows that people actually prefer tailored ads, he said. “Instead of guessing what consumers might choose, the FTC and other law enforcement agencies should focus on holding companies to the ‘expectations’ they set in their official privacy policies and other statements about their any (sic) use and collection practices,” Szoka said.

The Technology Policy Institute, submitting a paper that Thomas Lenard and Paul Rubin wrote in May, also argued in favor of targeted advertising. There’s no such thing as a free lunch, the institute said, and reducing online information use would actually hurt consumers. They would be less likely to benefit from such free products as search and e-mail, they said. Further, “a Do Not Track List would have an effect opposite that of the popular Do Not Call List,” they said. “A Do Not Track List would increase the volume of unwanted marketing messages.” Lenard and Rubin said that following the European model of only allowing information to be used for the stated purpose for which it was collected could lead to reduced security for consumers by banning productive re-uses of the data. They said there’s a “public good” aspect to data, in that it can be re-used, increasing productivity. “The public good nature of information means that the externalities associated with the commercial use of information are more likely to be positive than negative,” they said.

The first roundtable will be Dec. 7 in Washington.