Government Says Self-Regulation of Online Privacy Is Coming Up Short

Inside the Plan to Remedy the Problem

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NEW YORK (AdAge.com) -- Government officials took a sharp stance on the issue of online privacy last week when the Federal Trade Commission and the Department of Commerce voiced concerns over the current state of digital privacy and said self-regulation hasn't been sufficient to this point. At stake is nothing less than a $24 billion online advertising industry that relies on tracking technology used in serving ads that fuel much of the free web.

While the FTC and Commerce Department have worked closely with the advertising industry for the past few years over how it can best develop a mechanism that would allow people more control over how their information is collected and used, both government agencies declared the industry hasn't been doing enough and instead proposed an alternative Do Not Track program.

"We're sending a clear message that self-regulation of privacy has not worked accurately," FTC Chairman Jon Leibowitz said in a call with reporters Wednesday. "The industry as a whole needs to do a far better job."

Some in the advertising industry saw that position as a sharp about-face in stark contrast to what they feel has been clear progress in the industry's self-regulatory program. And they intend to keep working on the programs, in hopes of staving off legislation.

"We would disagree with the FTC that self-regulation isn't working," said Linda Woolley, exec VP-government affairs at the Direct Marketing Association, citing the fact that the industry initiative, called AboutAds.Info, became fully operational a few weeks ago.

The industry program is backed by a coalition of advertising trade groups calling itself the Digital Advertising Alliance, comprised of the 4A's, the American Advertising Federation, the Association of National Advertisers, the DMA and the Interactive Advertising Bureau, altogether representing more than 5,000 corporations.

A significant component of the industry's program includes an icon that will appear on ads and will lead consumers to an opt-out page. Stuart P. Ingis, partner at Washington law firm Venable and lead counsel for the DAA, said that the online-ad industry has delivered the kind of choice the Commission has asked for, and that the business community is in the best position to execute these plans.

Part of the recent confusion stems from the fact that while the FTC had long been the primary government stakeholder in the online privacy debate, the Department of Commerce recently announced its intentions to publish privacy guidelines before the end of the year, causing some in the ad industry to wonder whether they would have to scrap their plans and deal with another set of rules altogether.

As if to answer that very concern, last week representatives from both government agencies sat side-by-side in front of a House subcommittee to offer testimony on the possibility of Do Not Track legislation. While the FTC posted its guidelines on privacy just a day before the hearing, Commerce plans to release its report "in the coming weeks," according to Daniel Weitzner, the associate administrator for the Office of Policy Analysis and Development at the Department of Commerce. According to people familiar with the matter, both Commerce and FTC have been working closely on their separate proposals, and their respective positions would be "complementary."

David Vladeck, director of the FTC's Bureau of Consumer Protection, who sat next to Mr. Weitzner in front of the House Committee, said that self-regulation can work "if it is improved." But short of improvement, the FTC proposed a Do Not Track.

A sticking point, however, is how exactly a Do Not Track feature would work. The Commission's report spells out a specific example whereby a web browser, such as Firefox, would install a piece of software onto the user's browser that would signal to online marketers whether that consumer has chosen to make available his browsing habits in return for targeted advertising. But such a mechanism would only be specific to that browser on that computer and not to the specific person, as the Do Not Call legislation offers.

Chairman Leibowitz said such a design isn't necessarily the only acceptable method for consumer choice, and Mr. Vladeck left the door open to self-regulation in his testimony, saying that, "Such a universal mechanism could be accomplished through legislation or potentially through robust, enforceable self-regulation."

The statement also underscored the fact that the FTC cannot enact legislation on its own, and in many ways is working closely with Commerce as a legislative linchpin.

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