FTC sticks with online advertising self-regulation

A new report by the U.S. Federal Trade Commission has expanded the agency's guidelines for online marketers engaged in behavioral advertising, but critics suggested the report doesn't do enough to protect consumer privacy.

The revised behavioral advertising principles, released Thursday, expand on a December 2007 set of guidelines, but two members of the FTC questioned whether the self-regulatory approach laid out in the new report will be effective.

"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," Commissioner Jon Leibowitz wrote in a statement released with the report. "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 people want to see self-regulation succeed, Leibowitz added. "But the jury is still out about whether it alone will effectively balance companies’ marketing and data collection practices with consumers’ privacy interests," he added. "A day of reckoning may be fast approaching."

Four online marketing and advertising groups said they are committed to working together to develop a set of privacy principles for online advertising. The American Association of Advertising Agencies, the Association of National Advertisers, the Direct Marketing Association and the Interactive Advertising Bureau have created a task force to support the FTC's goal of a self-regulatory program, the groups said.

The new report, written by FTC staff, makes some changes to four privacy principles laid out in December 2007: transparency and consumer control; reasonable security and limited data retention; consumer consent for major changes to existing privacy policies; and affirmative consumer consent for using sensitive data for behavioral advertising.

The new report clarifies guidelines on retroactive changes to privacy policies. "As the FTC has made clear ... a company must keep any promises that it makes with respect to how it will handle or protect consumer data, even if it decides to change its policies at a later date," the new report says. "Therefore, before a company can use previously collected data in a manner materially different from promises the company made when it collected the data, it should obtain affirmative express consent from affected consumers."

Under the guidelines, the FTC continues to expect that Web sites will provide clear notice about behavioral advertising, as well as a way for consumers to choose whether to have their information collected.

As with the 2007 report, these guidelines urge companies to provide reasonable security for any data they collect for behavioral advertising and to retain data only as long as it is needed to fulfill a legitimate business or law enforcement need.

The report also continues to urge companies to obtain affirmative express consent before collecting sensitive data for behavioral advertising.

FTC Commissioner Pamela Jones Harbour suggested the new report is too narrowly focused. “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," she said in a statement. "I would prefer that the Commission take a more comprehensive approach to privacy, and evaluate behavioral advertising within that broader context.”

Privacy advocate Jeffrey Chester, executive director of the Center for Digital Democracy, also suggested that federal regulators need to look deeper into behavioral advertising.

"Advertisers and marketers have developed an array of sophisticated and ever-evolving data collection and profiling applications, honed from the latest developments in such fields as semantics, artificial intelligence, auction theory, social network analysis, data mining, and statistical modeling," he said. "Unknown to most members of the public, a vast commercial surveillance system is at the core of most search engines, online video channels, video games, mobile services and social networks."

While marketers argue this data collection is good for consumers, there are costs, Chester added. "They often dismiss concerns about privacy, arguing that too much fuss is being made about a system that simply knows a person would rather see an online ad for dog food rather than for a new automobile," he said. "But the goals of online advertising are more than just helping us feed Rover or choose a model of car. The digital marketing system is ultimately designed, largely through stealth means, to shape our conscious and unconscious attitudes about how we live our lives."

Copyright © 2009 IDG Communications, Inc.

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