Draft of Online Privacy Bill Stirs Fears Among Ad Industry

Proposed House Legislation Would Require Opt-Out and Disclosure When Collecting Personal Information

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NEW YORK (AdAge.com) -- A draft of a long-awaited bill that was released today seeks to rein in exactly how web publishers and advertising networks can collect and make use of an individual's information, whether that information is explicit, such as a person's name and address, or implicit, such as their click-stream.

The proposed bill is wide-ranging, reflecting Washington's renewed focus on digital privacy as well as the $24 billion online ad industry. While the draft legislation upholds some practices by the ad industry such as opt-out, it signals a shift by Washington from self-regulation to government regulation, a move that privacy groups have long sought.

The bill, crafted by Rep. Rick Boucher, D-Va., would require web publishers to alert users about how their information is being collected, what it is being used for, who else it is being sent to and how long it is kept, as well as offer a clear way for a user to opt-out of that transaction. Mr. Boucher consulted with both privacy advocates and the advertising industry in developing the draft legislation (Rep. Cliff Stearns, R-Fla., signed on at a later date), but both sides of the debate still have major concerns with the draft bill. Privacy groups spot loopholes that would allow advertising networks to skirt rules on alerting the public about how their information is collected, while the advertising industry sees bigger implications in what the bill defines as private, or "covered" information.

"This is a fundamental shift in the privacy laws of the United States," said Mike Zaneis, VP of public policy for the Interactive Advertising Bureau. "Some of the definitions around what is considered personally identifiable information are overly broad." Mr. Zaneis pointed to a provision of the bill that changes current understanding of what is traditionally considered private information. Name, address, Social Security number, bank accounts and the like have long-been considered information subject to stricter security. Such information is typically not collected online beyond business transactions, and advertising networks have begun to capitalize on this gray area of tracking known as "behavioral targeting" by building anonymous profiles of a user's click-stream in order to push ads that are relevant to his or her online viewing habits. One paragraph of the bill appears specifically written to address this practice by deeming someone's internet-protocol number, or even his or her computer, as private information.

"This is one part of the argument showing that the ad industry has lost," said Pam Dixon, executive director of the World Privacy Forum, a public-policy-research group. "There's a broad acknowledgment at this point that computer-based and numeric identifiers are just as good as your name."

Offline marketing
Mr. Boucher wrote in a statement on his website, "Online advertising supports much of the commercial content, applications and services that are available on the internet today without charge, and this legislation will not disrupt this well-established and successful business model. It simply extends to consumers important baseline privacy protections."

One aspect that has been overlooked is the legislation's implications for the offline marketing world. Linda Woolley, exec-VP of government affairs for the Direct Marketing Association, points out that the bill defines a postal address as private information subject to prior approval. "If I'm a marketer sending you a postcard about a trip to Italy, I'd have to get your permission to do that," she explained. "But how do I do that if I'm mailing you in the first place? This is troubling."

Underscoring the fact that the proposed legislation has been released to elicit feedback from the public as well as industry lobbyists, many on both sides of the issue were quick and careful to praise the congressman for his efforts in bringing the issue to the national forefront. Mr. Boucher's office will be considering comments on the draft, before releasing a full bill in two months.

Stuart P. Ingis, partner at Washington law firm Venable and counsel for a broad coalition of advertisers, including Microsoft, Google and Yahoo, conceded the industry would be more comfortable with self-regulation, but that there appears to be enough encouraging elements in the legislation to move forward. "It's a thoughtful draft, and clearly a lot of work went into it," he said. "But I think it's going to take a long time to parse this through the legislative process."

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