FTC Privacy Report proposes "Do Not Track" mechanism

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03/12/2010
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On 1 December, the Federal Trade Commission, an independent agency of the US government, issued a long-awaited preliminary staff report on "Protecting Consumers Privacy in an Era of Rapid Change".

The FTC's report is the result of two years of public hearing and consultations with stakeholders. It addresses the privacy aspects of online advertising, prompted largely by online techniques which allow advertisers to tailor advertisements to online users' preferences.

The report is critical of the industry's efforts to self-regulate, claiming that "industry efforts to address privacy through self-regulation have been too slow, and up to now have failed to provide adequate and meaningful protection". It also recommends the introduction of a 'do not track' mechanism for consumers that wish to opt-out of online behavioral advertising.

Key recommendations:
The FTC proposes to consider a broad framework which would apply broadly to online and offline commercial entities that collect, maintain, share, or otherwise use consumer data that can be reasonably linked to a specific consumer, computer or device.

Companies should adopt a "privacy by design" approach by building privacy protections into their everyday business practices.

The FTC proposes different means to provide choices to consumers for different practices "thus allowing clearer, more meaningful choice with respect to practices of greater concern":
- Consumer choice would not be necessary for a limited set of "commonly accepted" data practices - namely, product and service fulfilment, internal operations such as improving services offered, fraud prevention, legal compliance, and first-party marketing.
- For data practices that are not commonly accepted, consumers should be able to make informed and meaningful choices. These include "the sites and services that are connecting the dots between different times and places that a consumer is online and building a profile of what a consumer is doing."

To be most effective, choices should be clearly and concisely described and offered when - and in a context in which - the consumer is making a decision about his or her data. Depending upon the particular business model, this may entail a "just-in-time" approach, in which the company provides the consumer with a choice at the point the consumer enters his personal data or before he accepts a product or service.

The FTC suggests a uniform and comprehensive consumer choice mechanism, involving the placement of a persistent setting, similar to a cookie, on the consumer's browser signalling the consumer's choices about being tracked and receiving targeted ads. This should take the form of a "Do Not Track" mechanism.

Companies should improve their privacy policies so that interested parties can compare data practices and choices across companies, to create "privacy and transparency competition".

Consumers should have reasonable access to the data that companies maintain about them, particularly for companies that do not interact with consumers directly, such as data brokers.

Stakeholders should undertake a broad effort to educate consumers about commercial data practices and the choices available to them.

While the FTC has no legislative power under the Section 5 of the FTC Act to introduce a "Do Not Track" list without the support of Congress, the report is likely to stir broad debate among US companies and in Congress, where some Republican lawmakers have vowed to make privacy a top priority.

Senator John Kerry, a Massachusetts Democrat, said following the release of the report that he planned to introduce legislation that would require companies to secure data and inform consumers about what data is being collected. Separately, Ed Markey (also a Massachusetts Democract) announced today that he would introduce legislation next year that would include "a 'Do Not Track' requirement so that kids do not have their online behavior tracked or their personal information collected or profiled".

Public comments on the report can be filed here until 31 January 2011. A final version of the report will be released next year after taking into account the comments from interested parties.

ANA, WFA's US national association, plans to file a response with the FTC, and is calling on the FTC and the Congress to allow the industry's recently launched self-regulatory programme for online behavioural advertising to more fully develop before any decisions about legislative options are made.


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