Michigan charges web sites with privacy violations

The state of Michigan, which took action in February against online advertiser Doubleclick, took aim again this week at four Web sites it says offer inadequate privacy policies.

The state attorney general's office charges that the sites aren't revealing the presence of Web "bugs," or invisible 1-by-1 pixel graphics that prompt consumers' browsers to exchange cookie information with third parties.

Stockpoint.com, Procrit.com, AmericasBaby.com and iFriends.net each received "notices of intended action" Monday alleging that they had violated Michigan's Consumer Protection Act by failing to fully disclose material facts about their information-gathering practices. Michigan Assistant Attorney General Tracy Sonnenborn said the notices give the companies 10 days to begin negotiations with the state to alter their privacy statements or face a formal lawsuit.

Industry self-regulation isn't working because there are still too many problems with privacy statements, Sonnenborn added. "Many consumers are not aware that they are interacting with third parties."

Sonnenborn said the sites have each contacted the state to negotiate. Preston Bealle, president of New York-based Babygear.com Inc., which runs the AmericasBaby.com site, said he felt singled out for practices that were standard in the industry. But he said his company has agreed to make changes to its privacy statement, which he acknowledged didn't give complete information.

"We wrote it a long time ago, and as we evolved, there were things that we didn't attend to regarding the use of cookies," said Bealle. "We want to make sure that it fully discloses any kind of use of cookies that are there."

Stockpoint responded to the notice by posting a revised privacy statement that tells users how to locate and remove unwanted cookies from their browsers. The statement warns users that "companies advertising on our site have the ability to assign their own cookies. This is a process over which Stockpoint has no control."

John Mckeegan, a spokesman for Procrit, run by Ortho Biotech, a subsidiary of Raritan, N.J.-based Johnson & Johnson, said cookies and tags on banner ads let the site evaluate traffic patterns to reimburse advertisers. "Our contract with our vendors explicitly states that they cannot share information for any reason, even in aggregate form," said Mckeegan.

Although some question a state's right to control businesses incorporated outside its borders, Sonnenborn said the Michigan Consumer Protection Act gives the state jurisdiction to regulate companies that do business with state residents.

"It does seem like an interesting questions as to why they are essentially trying to remake the way the Web is used," said Bealle. "But I have no objections to the changes they are asking for, so I'm just going to do it and take care of the issue."

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