Net Companies Endorse Privacy Seals

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July 21, 1998 (3:35 PM EDT)

By John Borland,

A group of leading Internet companies released the final plank in its online privacy self-regulation plan Tuesday, betting a widely used "seal of approval" program can ward off new government legislation.

The Online Privacy Alliance -- a group of 50 Net companies that includes Microsoft, Netscape, and IBM -- has spent the last several months drafting industry privacy rules it hopes will satisfy U.S. and European policy makers.

The alliance released a set of privacy guidelines for its members late last month, but until Tuesday had no official policy for enforcing these policies.

U.S. regulators have said businesses are not doing enough to protect consumer privacy online, and have threatened to pass new privacy legislation early next year if industry doesn't show signs of improvement.

Tuesday's industry proposal would let outside organizations certify that companies are abiding by Alliance privacy policies. Businesses that follow the guidelines would be awarded an easily recognizable graphic "seal" to display online.

"The policy looks at how we can create an atmosphere of trust on the Internet," said Christine Varney, a former federal trade commissioner who helps lead the Alliance effort. Consumers will come to trust the seals, she said, forcing companies to adopt the privacy protections in order to win online business. "You will not get a privacy seal without adhering to these standards."

The alliance's proposal is split into three components, none of which involve any government action.

The foundation of the plan is the seal system. Varney cited the Better Business Bureau and the industry-sponsored TRUSTe as the organizations most likely to win marketplace acceptance for their certification programs. The alliance would not yet officially endorse any one of these seals, she said.

These outside organizations must have a clear policy for handling consumer complaints, the group's plan said. Finally, Internet companies must conduct a widespread education campaign to spread use of the seals, it added.

"Their enforcement proposal really has no form of redress for the consumer. I think it's going to be pretty discouraging for anyone pursuing a privacy claim."
-- Mark Rotenburg
Electronic Privacy Information Center

Net privacy advocates, who have often pushed for tighter legislative privacy protections, were skeptical.

"It's too little, too late," said Mark Rotenburg, director of the Washington, D.C.-based Electronic Privacy Information Center. "Their enforcement proposal really has no form of redress for the consumer. I think it's going to be pretty discouraging for anyone pursuing a privacy claim."

The alliance privacy guidelines have serious flaws, Rotenburg added. "One piece that's missing is the right to get access to your data when it's been collected by someone else," he said. That power is essential to ensure organizations such as credit reporting bureaus are keeping accurate records, he added.

Rotenburg and other critics emphasized that the seal plans have no serious penalties for violating consumers' privacy, as would legislative protections. But Varney said existing laws provide sufficient deterrents.

"Existing government bodies have the authority to prosecute bad actors," she said. "A bad actor who is engaged in fraud or deceptive trade practices is currently subject to prosecution by the FTC, or the state attorneys general, or the Justice Department."

The alliance's work has already caused a "cascade effect" in the industry, said Susan Scott, executive director of TRUSTe. "There's really been a 180 degree turn," Scott said. "Now you have a very influential slice of the Internet saying they are taking privacy very seriously."

TRUSTe itself is in the process of changing the qualification requirements for its own seal to conform to the alliance guidelines, Scott said.