FTC pushes for Internet privacy role

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A divided Federal Trade Commission May 22 told Congress that Web marketers' attempt at self-regulation hasn't fully worked and asked for new authority to require consumer marketers to put four-part privacy policies on their Web sites. FTC Chairman Robert Pitofsky, in comments released with the report, reiterated his questions about whether to impose the requirements on Web marketers and not also on direct marketers. Mr. Pitofsky sought no authority over the direct marketers, and he told Advertising Age May 22, doesn't intend to. "What I do want to signal is the more you get into it, the more you wonder if there is a bright line between them, but I'm not ready to go that far. If Congress wants to examine that, it ought to ask us or someone else to do that."

Commissioner Thomas Leary, however, dissented from the report in part because it didn't also target offline marketers. "Any legislation should apply to offline commerce as well," he said.

The FTC report, the third in three years tracking Web marketers' privacy initiatives, reported the results of surveys of a selection of the most popular Web sites and a second random survey of other consumer Web sites.

The survey showed 100% of most popular sites and 88% of the random sample had at least one privacy disclosure. However, it said a closer examination of sites collecting personally identifying information found 42% of the most popular sites and 20% of the random sample met all four elements of the FTC's privacy principles: notice, choice, access and security.

Marketers had expected the low showing would be attributable to unresolved industry issues on what access and security should be. The FTC, however, reported that the figure was also due to a large number of sites not fulfilling the basic requirements to provide both notice and choice. The report said "only 41%" of sites in the random sample and 60% of sites in the most popular group met all the notice and choice standards.

The report also said that support for one of the enforcement mechanisms for self-regulation, industry privacy seals, hasn't been strong, reporting that just 8% of the random sites and 45% of the most popular displayed a privacy seal.

"Because self-regulatory initiatives to date fall short of broad-based implementation of effective self-regulatory programs, the commission concluded that such efforts alone cannot ensure that the online marketplace will emulate the standards adopted by industry leaders," the report said.

The FTC asked that Congress give it authority to set forth a basic level of privacy that would include all four elements, and consider the issue of giving consumers choices both in how information was used by the site itself and whether it could be disclosed to other entities. It did not outline specific language for either Congress or for the rules it would adopt.

Mr. Pitofsky in the past has opposed legislation. "It is not a switch from self-regulation," he told Ad Age. "It is a switch that self-regulation will give it all by itself. This is meant to complement self-regulation."

Mr. Pitofsky also said growth of the seal programs may be critical.

"My experience is self-regulation works best when you have a board that can refer to the government issues that are not settled at the industry self-regulation level," he said.

Commission member Orson Swindle in a vocal dissent called the report "embarrassingly flawed" with a conclusion that was "unwarranted." He warned that the commission report "requires all consumer-oriented commercial Web sites to comply with breathtakingly broad laws whose details will be filled in later."

Commissioner Thomas Leary, while saying he believed any privacy restrictions should apply to offline as well, also said he believed the FTC's request for legislation was too broad, calling instead for legislation mandating better disclosures.

In Congress today, there were divided reactions to the report with a prospect that passing legislation this year would be difficult. U.S. Rep. Billy Tauzin (R., La.), chairman of a House Commerce Committee subcommittee that would have to review legislation, voiced skepticism. "I am surprised that less than a year ago with a lot less progress, Pitofsky said there was no need for legislation, and today with more progress, he now is accepting the advice of bureaucrats," Rep. Tauzin told Ad Age.

Ad groups also raised questions about increased FTC authority. The Association of National Advertisers said it remains convinced no legislation is needed. "Our mantra is that self-regulation works," said Dan Jaffe, ANA exec VP. "We are already very active and will increase our efforts."

Copyright May 2000, Crain Communications Inc.

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