Web Businesses Urged To Protect Privacy

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March 14, 2001 (4:49 AM EST)

By Mary Mosquera,

WASHINGTON—Privacy protections will increasingly be seen as a way to add value and build brand loyalty, business leaders said Tuesday.

Consumers want more customized services for promoting products and services they are interested in, said John Kamp, counsel for the CPExchange Network, made up of 90 businesses that are developing an open standard for data privacy. They also want information about them protected.

"As consumers demand privacy transparency, the successful company will do that," he told a conference at the Federal Trade Commission examining how companies that merge and exchange detailed consumer information observe privacy.

Privacy is still a contentious landscape. Industry says the collection of consumer data enables them to target advertising of most interest to customers and does not want policy to impede that. Compiling and reselling data reduces the cost of finding what the customer wants, a study released at the conference said.

But privacy groups want consumers to have the ability to opt out of the exchange of data, view what information is stored about them, and correct it if necessary.

Companies such as online catalog businesses and e-tailers get their data from customer forms, surveys, private and public sources, and aggregators. Consumers fill out online and offline requests for information for clothing or book purchase or for private records, like home ownership and mortgage information.

Third-party aggregators can compile the information, provide it to list brokers, or sell it back to specialty marketers, said Mary Culnan, Bentley College professor on information privacy in Waltham, Mass., and author of Internet privacy studies.

Most popular Internet sites post privacy policies that tell consumers how they will treat their information and how to opt out. Third-party companies that compile data are not apt to offer notice and choice because they don't have direct relationships with consumers, Culnan said.

"Fair information practices should apply to companies merging data and I don't think it does now. It would help close the trust gap," she said.

Industry regulates itself for now in providing privacy protections on well-traveled Internet sites, with prodding from the FTC. But pressure to legislate baseline protections is expected to result in legislation later this year.

Consumer benefits from compiling data outweigh the risks, Culnan said. But the aggregating companies need to communicate with and educate consumers about what they do with data, she said. "More disclosure makes consumers more comfortable," she said.

The lack of trust by consumers has impeded the growth of e-commerce, said Jason Catlett, privacy activist and president of Junkbusters, a company that helps consumers get rid of unwanted spam.

Consumers may not worry so much about breaches of their privacy as they do about bad surprises, such as identity theft, said Greg Miller, interim chief privacy officer and vice president of MEconomy, an Internet privacy infrastructure business.

"If we engage consumers, trust increases," Miller said. Engaging consumers means building an infrastructure to interact with customers. In his experience with opt-in mechanisms, customers generally opt in, not opt out, he said.

"Opt-in is a tool to advance transparency," Miller said. "Building brand recognition is connected with trust," he said. Opt-in mechanisms have infrastructure costs, but they are worth the opportunities in building customer relationship management services, Miller said.

Many companies belong to seal programs, such as TRUSTe, which monitors sites for privacy policies and adherence to them. TRUSTe's director of compliance, Becky Richards, said the seal service will change in July or August its disclosure requirements to be clearer about how sites share customer data with third-party compilers.

The Personalization Consortium, a group of 67 companies, goes one step further. It follows fair-information practices but its members must also submit to an independent audit of the company to insure adherence throughout the corporate structure. The results are to be posted on the organization's website.

Technology is being developed to advance privacy protections also. The Platform for Privacy Preferences Project, or P3P, developed by the World Wide Web Consortium, is emerging as an industry standard. P3P-enabled browsers read privacy policies at sites and lets a user know if it fits with stated privacy preferences.

The new language of the Internet, XML, will allow more sharing of data but it will also be able to tag data collected with privacy preferences, said Ari Schwartz, policy analyst for the Center for Democracy and Technology, a public interest group in Washington, D.C.

The Direct Marketing Association and the Privacy Leadership Initiative said in a study released Tuesday that any restrictions, such as opt-in requirements, placed on the use of data from third parties will reduce the ability of marketers to know their customers and impose higher costs.

"Consumers will pay the consequences. Restrictions of this kind would impose a $1 billion 'information tax' on catalog and Internet apparel consumers," the study said.