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Business Costs & Regulation

Online Privacy Wars Heating Up

More measures to protect consumer data are in the works in Washington.

Odds favor stronger federal consumer online privacy protections on two fronts.

In one battle, companies such as Google, AOL and eBay are making a strong case for beefing up the Electronic Communications Privacy Act to safeguard private digital information from government access. The goal? Require the government to obtain a search warrant before it can obtain access to personal online communications and documents, or before it can track the locations of specific cell phones and the people being communicated with.

In the other, online privacy advocates are pushing Congress to reinforce Federal Trade Commission guidelines -- put out just over a year ago -- with more teeth to police so-called behavioral advertising, targeted to particular computer users based on their online surfing patterns.

“Given changes in technology and the ability to collect, manipulate, and transfer huge amounts of data -- often behind the scenes -- we may need to think about new approaches to privacy models,” says Peder Magee, a senior staff attorney in the FTC’s Division of Privacy and Identity Protection.

FTC guidelines require the industry to police its own marketing strategies. They include provisions calling on marketers to be more transparent by giving consumers more information and a measure of control over how data are being used. But the current default privacy setting on most Web sites allows businesses to retain user data unless consumers opt out, and privacy advocates want consumers to have to opt in to allow marketers to keep such data.

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But while stricter controls on a business' ability to access sensitive data, such as financial and medical information are a good bet -- either through legislation likely to be introduced this summer or through a new FTC regulation -- Washington is likely to turn thumbs-down on an opt-in provision.

Online marketers worry that few consumers would choose to receive targeted pitches, ruining an effective way for them to make money. “If we changed the online ad model, you would have to pay to use Web sites. Consumers would change their mind about sharing some of their data if that were the case,” says Chris Merida, director of congressional and public affairs at the U.S. Chamber of Commerce.

Merida says that the chamber supports industry self-policing, noting that online businesses have proved themselves up to the task. Among businesses that have altered their online behavior: Netflix, which, in response to a legal challenge, canceled a $1-million contest to come up with an algorithm that could best predict a consumer’s taste in movies based on previous selections. Google, which made revisions to its privacy options after the launch of its social networking tool, Buzz, caused an uproar among normally receptive Gmail users. And Facebook, which often blogs about the frequent changes it makes to its privacy policy to keep users up to date.

However, Rep. Rick Boucher (D-VA), a vocal proponent of legislatively curbing the use of behavioral advertising, says he has little intention of shaking the foundation of the industry to its core. Note his comments before a congressional hearing on behavioral advertising:

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“I am a supporter and beneficiary of targeted advertising. I would much prefer to receive Internet advertisements that are relevant to my interests. ...

“…Online advertising supports much of the commercial content, applications and services that are available to Internet users without charge, and I have no intention of disrupting this business model.

“At the same time, I believe consumers are entitled to some baseline protections in the online space.”

The protections referenced by Boucher would include making opting out of online business pitches simpler for consumers by making the opt-out option more visible and accessible. He also favors having easy-to-find information available on Web sites, telling consumers how their data are being used, how long the information is being retained and whether it is sold to third parties.

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One possible compromise between online marketers and privacy watchdogs: A limit on how long consumer data captured via the Web can be retained, says Pam Dixon, executive director of the World Privacy Forum, a nonprofit group focused on consumer education and research. Dixon notes that consumer data are typically most useful for companies within the first 24 hours of contact -- when ads can be directed most effectively based on fairly recent online surfing by the consumer -- yet they’re often retained forever.

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