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FTC Proposals Hit Resistance

Jul 1, 2008

The volume of information Internet companies gather about consumers has long raised concerns over privacy. Retailers are questioning guidelines for regulating the gathering of information on consumers' online behavior.

Data is collected under the umbrella of "behavioral advertising." Equipped with information on what searches consumers have used, what websites they have visited, the content they accessed and other data, web companies can charge high prices to deliver ads to individual consumer's particular interests.

After a decade of investigating online privacy issues, the Federal Trade Commission has proposed voluntary guidelines designed to give consumers more insight into the behavioral advertising process. In proposing this industry self-regulation, the FTC summarizes four primary concerns, along with suggested remedies:

  • Greater transparency and consumer control: Websites that collect data for behavioral advertising should provide a clear, prominent statement that the information is being collected to provide ads targeted to the consumer, and allow the consumer to opt out.
  • The need to prevent criminals from accessing data collected for behavioral advertising: Companies that collect and store consumer data for behavioral advertising should provide reasonable security and retain the information only as long as is necessary to fulfill a legitimate business or law enforcement need.
  • Assurances that companies keep their promises of privacy: Companies should obtain consent from affected consumers before using data in a manner that is different from the promises they made when they collected the information.
  • Thwart the collection of sensitive data, such as medical records, for behavioral advertising: Companies should only collect sensitive data for behavioral advertising if they obtain consent from the consumer. Regarding this concern, the FTC also sought comment on what constitutes, "sensitive data," and whether its use should be prohibited, rather than subjected to consumer choice.

In spelling out its proposal in a statement, the FTC says it was "mindful of the need to maintain vigorous competition in online advertising as well as the importance of accommodating the wide variety of business models that exist in this area." The proposal acknowledges that "behavioral advertising provides benefits to consumers in the form of free content and personalized advertising."

Shop.org, the online division of the National Retail Federation, contends that the FTC's use of the term behavioral advertising is too broadly defined and urges the FTC to move slowly. Shop.org agrees that the practice provides a variety of benefits and also contends that it is "not harmful and is not as widely opposed as critics claim."

"Retailers have long understood that keeping their customers happy is the most essential part of building positive, long-term business relationships," said Scott Silverman, Shop.org's executive director. "The FTC's proposed guidelines could have the effect of undoing many online retail best practices and innovations that customers inherently value."

Silverman also contends that although the principles are intended to be self-regulatory, they "Likely will be viewed by the business community not as mere suggestions, but truly regulatory in nature, with perceived violations being considered, 'unfair and deceptive,' under the Fair Trade Commission Act."

Topic: Wholesale News

Related Articles: privacy 

Article ID: 666

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