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FTC Proposes "Do Not Track" for Online Privacy

27 Jan, 2011 By: William I. Rothbard

William I. RothbardOn Dec. 1, 2010, the Federal Trade Commission (FTC) issued its much-awaited preliminary staff report on Internet privacy titled, “Protecting Consumer Privacy in an Era of Rapid Change.” While a final report will follow in 2011 after a public comment period, this initial report makes plain the FTC’s feeling that big changes are necessary to protect consumer privacy online, and its determination to implement them through new legislation and regulation if industry self-policing efforts fall short.

Chief proposals include:
• A “Do-Not-Track” mechanism, similar in concept to “Do Not Call,” to enable consumers to prevent advertisers from monitoring their online behavior and delivering targeting ads. As envisioned by the FTC, the mechanism would be a browser setting similar to a persistent cookie that, when activated, would signal sites that the consumer does not want to be tracked. Several unanswered questions exist about the necessity, technology and enforceability of a Do-Not-Track option for consumers, but the FTC stance is now crystal clear: It supports Do Not Track and will push the online advertising industry and Congress for its enactment.

• Privacy policies are too dense; important privacy choices, including third-party data sharing, should be clearly presented on the Web site itself, in “just in time” fashion (i.e., when the consumer is entering personal data or making a purchase decision), and express consumer consent should be obtained at that point before data are shared.

• “Intangible” (non-physical or non-economic) harm, such as “reputational” harm, “fear of being monitored” or “injury to consumer dignity” (in the words of the FTC’s top consumer protection official), perhaps should be considered as a basis for law enforcement actions against privacy violations. This would be a radical departure from long-standing FTC policy that only physical or economic injury can justify FTC action.

• Subsequent material changes to a privacy policy must be clearly disclosed and express consumer consent obtained before they are implemented.

• Adoption of “privacy by design,” i.e., integrating privacy protections into everyday business operations and improving transparency of all data practices, including those of companies, such as list brokers, that don’t face consumers.

The FTC report signals a sea change in the debate over Internet privacy. Tighter federal regulation of online privacy practices is no longer a matter of if, but when. The stakes are high for marketers, consumers and even the continuing vibrancy of the behavioral advertising model that has been so integral to the growth of E-commerce.

William I. Rothbard is a former FTC attorney and practices in Los Angeles, specializing in advertising and marketing law. He can be reached at (310) 453-8713, [email protected], and

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