Privacy Pros: FTC Proposal Doesn't Make Grade

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July 28, 2000 (11:51 AM EDT)

Privacy Pros: FTC Proposal Doesn't Make Grade

By Barbara Darrow and Mary Mosquera,

The Federal Trade Commission's report on online advertising does too little to protect personal privacy, advocates said.

The report lauds a proposal submitted by the Network Advertising Initiative (NAI) that pushes a self-regulatory game plan. NAI members, who make up the bulk of online advertisers, would offer web surfers notice of their profiling activities and let them "opt out" of having their travels monitored.

Network advertisers supply banner ads for websites and also gather data about visitors.

Under the proposal, advertisers would work with a third-party enforcement program and "make reasonable efforts to protect the data they collect for profiling purposes from loss, misuse, alteration, destruction, or improper access," according to a posting on the FTC web site.

Yet many consumers are leery of such claims, especially in light of recent news that Toysmart tried to sell its customer data -- collected from consumers who were assured their data would stay private -- to pay off debt.

The Electronic Privacy Information Center (EPIC), Washington, D.C., which advises legislators on privacy issues, does not think the recommendation goes far enough and puts the burden on consumers, rather than advertisers, to keep data private.

"NAI principles fail to provide adequate safeguards for Internet users," said Marc Rotenberg, executive director of EPIC.

Jason Catlett, president of Junkbusters.com, a for-profit site dedicated to alleviating spam and privacy invasion, agreed.

"Privacy advocates are unhappy with the acceptance of this proposal," Catlett said. "NAI won't protect consumers from unwanted surveillance."

The NAI, which claims to represent 90 percent of network advertisers, will start adhering to the principles even before Congress considers the FTC recommendations.

Online profiling raised a cry among privacy advocates, especially after online ad power Doubleclick (stock: DCLK), New York, planned to merge the catalog database garnered by direct-mail player Abacus Alliance with its own data about Internet users.

Privacy advocates accused Doubleclick of trying to strip anonymity from users it had been tracking by matching them Abacus's personal registry of names, addresses, and phone numbers.

Richard Smith, newly named chief technology officer of the Privacy Foundation, Denver, said the FTC report is a mixed bag.

"Clearly, the advertising folks think it's great, and now the FTC has sort of blessed it, but mostly it institutionalizes bad behavior," he said.

Smith said the classic debate remains whether or not users must actively opt out of having their information harvested.

"In this country we seem to opt out, but in Europe users are able to opt in," he said.

The latter method puts the onus on advertisers to make opting in attractive by showing the users what they get in return for their data.

On the other hand, sites are getting better about posting notice on their policies, he noted.

Smith thinks the most important aspect of the debate surrounds the use of third-party cookies.

"The cookie patch Microsoft (stock: MSFT) announced a few weeks back gives consumers pretty good choice and notice about how third-party cookies can be used," he said. "Consumers will be able to vote on what they want to do."

How does it work? The first time a surfer comes across any banner ad, he or she will see a security alert. Users can click on "yes" or "no" to accept or reject the cookie every time this occurs, or check off a box to remember the response.

"It's democracy in action," Smith said.

It is unclear whether AOL (stock: AOL) will offer similar features with the Netscape browser, he noted.

This is one case of Microsoft being on the side of angels, observers said, although Smith noted that the company was asked by several State Attorneys General to improve the cookie support in its browser.