Site accused of omitting privacy policy

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Pushing the envelope of advertising regulation, Michigan's attorney general is arguing that it's not just what a marketer says about privacy on its Web site that can violate consumer protection laws. It's what's not said.

In a little-noted action that some advertising lawyers fear could signal a new battleground for the industry, Attorney General Jennifer Granholm last month accused an Iowa-based Web site of violating Michigan's consumer protection laws solely because it didn't include a privacy policy on its Web site.

Ms. Granholm called the failure of Stockpoint Inc.--whose offers stock market information--to post a privacy policy a "material omission" because the company collects some personal data and uses ad servers that add cookies to consumers' computers.

Advertising lawyers said it is marketers' claims that traditionally trigger enforcement action by federal agencies or states claiming statements are "unfair" or "deceptive" because they fail to disclose all terms.

The Michigan action, contained in a "notice of intended action" to Stockpoint, goes further because Ms. Granholm for the first time is claiming marketers that say nothing at all can be charged with being deceptive. Her notice to Stockpoint alleges the company violated Michigan law because it failed to tell consumers how it would use the data it collected and also failed to mention it was passing information to third-party ad servers. Stockpoint did not return phone calls.


"Silence alone has not ever been considered as cause for deceptive advertising charges," said Dan Jaffe, exec VP of the Association of National Advertisers. "This case certainly raises serious questions. It is totally at variance with the [Federal Trade Commission's] view and would be a major break with federal and state procedures in the past."

Ms. Granholm said she disclosed plans to accuse Stockpoint as part of her announcement of plans for three other companies as well. In the other cases, she accused Web retailer of violating consumer laws for failing to disclose its use of third-party ad servers; Ortho Biotek of letting its send information on visitors to AIDS- and cancer-related Web sites to DoubleClick without disclosure; and of not disclosing its site also sends information to DoubleClick.

The state actions come as the pressure on Congress to act mounts. Late last month the House Government Reform Committee sent legislation to create a privacy study commission to the House floor.

In the Senate, Sen. John McCain (R., Ariz.) is expected to propose privacy legislation and Sen. John Kerry (D., Mass.) will offer legislation when Congress returns requiring privacy disclosure statements on all Web sites and creating a commission to report back in a year on other privacy issues both on- and offline.

In addition, the Senate Judiciary Committee and the House Government Reform Committee are also expected to consider related legislation.

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