FTC, Online Ad Firms Haggle Over Privacy

WASHINGTON (06/13/2000) - In the wake of last month's Federal Trade Commission recommendation that Congress pass basic online privacy laws, a group of Internet ad-server companies is continuing to hold secret talks with the FTC and the Commerce Department about a set of self-imposed privacy standards for the online-advertising industry in lieu of new privacy legislation.

Jodie Bernstein, the director of the FTC's Bureau of Consumer Protection, will appear Tuesday before the Senate Commerce, Science and Transportation Committee to testify about "online profiling," the practice whereby ad-server companies track Web surfers' mouse clicks for the purpose of targeting specific banner advertisements at them. Bernstein's appearance will be followed by industry representatives and privacy advocates.

Privacy advocates view online profiling as a particularly insidious invasion because it is usually done without the knowledge or consent of Web surfers.

Besides the ubiquitous software "cookies" that ad servers lob into Web surfers' computers, nearly invisible "Web bugs" litter the Internet, transmitting information back to ad servers.

Industry representatives point to targeted Net advertising as a big reason that so much Web content is offered free of charge, implying that new laws would lead more companies to charge for content. But privacy advocates argue that detailed online profiles, even those lacking personally identifying information, are too Orwellian and vulnerable to abuse to go unregulated.

Bernstein will hand over a new FTC study that describes online profiling and consumers' privacy concerns. But the report, approved unanimously by the commission, stops short of making specific recommendations to Congress. That's because the FTC wants to give its ongoing negotiations with the online-advertising industry a chance to work out before it decides whether to tell Congress it should pass more new laws. Both sides had hoped to reach an agreement by Monday, but talks were bogged down over issues such as the industry's enforcement of its proposed standards.

"There are real challenges to creating an effective self-regulatory regime for this complex and dynamic industry, and this process is not yet complete," says Bernstein in her prepared testimony. Bernstein plans to tell the committee that the FTC will make specific recommendations to Congress after it has finished considering the industry's self-regulatory proposals.

The Internet advertising industry is perhaps the one sector that has engaged government regulators head-on, rather than burying its head in the sand and hoping that the desire for new online privacy laws will blow over.

Last November, leading Internet advertisers seized the floor at a government-sponsored online-profiling workshop to roll out the Network Advertising Initiative, an industry consortium that promised to educate Web surfers about online profiling and give them the chance to opt-out of having their personal information used. The NAI members, including leading ad-server companies such as DoubleClick and Engage, pledged that anyone doing business with them would be required to participate in the new program, which was supposed to require links to privacy policies, as well as the launch of a public education Web site.

Since November, the NAI has gone into stealth mode as it haggles with government regulators over self-regulatory guidelines and pushes its agenda on Capitol Hill. Besides heading off new laws, the NAI wants to get the government's approval of its self-regulation program so that upstart ad-server competitors would feel compelled to abide by it.

DoubleClick ran into a storm of public criticism earlier this year - and an FTC investigation - regarding its plans to combine anonymous online data with names and addresses culled from the files of an offline-marketing firm that it had acquired last year. DoubleClick backed away from that strategy but said it would resume the practice once an official set of online-profiling privacy guidelines were in place.

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