FTC Privacy Report Is Drawing Praise, Criticism

By Jeffrey Burt  |  Posted 2012-03-27

FTC Privacy Report Is Drawing Praise, Criticism

The Federal Trade Commission€™s report calling for a combination of federal laws and self-policing among companies to protect online user privacy is drawing cautious praise from consumer advocacy groups, though some claimed the suggestions do not go far enough in establishing safeguards.

At the same time, some industry groups are arguing that the restrictions proposed in the FTC report, announced March 26, could harm innovation and restrict commerce on the Internet.

The reaction comes as the FTC joins other government agencies and the Obama Administration, as well as various tech industry groups, wrestling with the increasingly thorny issue of consumer online privacy. The debate has risen to new levels in recent months, with major Internet firms like Facebook and Google facing criticism from both the private and public sectors for the way they handle the issue of consumer privacy and the amount of personal data they collect, which often is used to help advertisers more easily target personalized ads for users.

More recently, Apple and Google have come under fire for enabling iPhones and Android-based smartphones to share personal data€”such as photos and contacts€”with mobile apps that are downloaded onto the devices. That has drawn the attention of U.S. Sen. Charles Schumer (D-N.Y.) who has asked the FTC to look into the issue.

The FTC, which issued a preliminary report on the issue in December 2010, in its final report called on Congress to pass general privacy laws around personal data and breach notifications, while at the same time looking to the tech industry to develop policies that strengthen user privacy and give consumers greater control over what data can be collected and how it can be used.

The Issues of Do Not Track vs. Do Not Target Are Fundamental to Online Behavioral Monitoring


The commissioners also stressed the need for strong "Do Not Track" legislation as a key part of a larger effort around consumer privacy.

Rainey Reitman, activism director for the Electronic Frontier Foundation (EFF), applauded the FTC for its efforts, saying that the €œfinal report creates strong guidelines for protecting consumer privacy choices in the online world.€ In particular, Reitman said the efforts behind Do Not Track should be supported. While acknowledging that some groups, such as the Digital Advertising Alliance, have made strides in helping consumers better understand how behavioral advertising works, Reitman said the FTC should continue supporting efforts by the World Wide Web Consortium (W3C) to create strong Do Not Track standards.

She said that Do Not Track should not be weakened to the point of becoming a "Do Not Target" standard.

€œThe issue of Do Not Track versus Do Not Target is fundamental to online behavioral tracking,€ Reitman wrote, adding that the EFF would continue monitoring how such standards are implemented.

In the lone dissenting opinion on the FTC, Commissioner J. Thomas Rosch said a concern was whether such groups as the Digital Advertising Alliance could influence the W3C enough to water down the Do Not Track standard, saying that the €œfirms professing an interest in self-regulation are really talking about a Do Not Target mechanism, which would only prevent a firm from serving targeted ads, rather than a Do Not Track mechanism, which would prevent the collection of consumer data altogether.€

Ioana Rusu, regulatory counsel for Consumers Union, an advocacy division of Consumer Reports, also lauded the FTC, particularly the commissioners€™ push to have Congress pass privacy laws to enforce what is being discussed in the industry itself.

€œThere are a lot of good initiatives in play that could help protect consumers' privacy, but ideally, we need a law to make sure everyone is playing by the same rules,€ Rusu wrote in a blog post. €œThis is a good report that reflects the growing concerns about online privacy, especially the fact that we need better tools and information to decide how our personal information is used.€

Others said the FTC€™s recommendations don€™t go far enough in ensuring that the private sector adheres to more stringent privacy guidelines. Officials with the Electronic Privacy Information Center (EPIC) said in a statement that the FTC€™s suggestions were not as rigid as those proposed by the Obama Administration in February.

€œThe framework is not as extensive as the White House Consumer Privacy Bill of Rights and depends on industry self-regulation,€ EPIC officials wrote, noting that in previous comments on a draft of the FTC report, they said that the commission "mistakenly endorses self-regulation and 'notice and choice,' and fails to explain why it has not used its current Section 5 authority to better safeguard the interests of consumers."  

Section 5 is an existing law that enables the FTC to investigate deceptive trade practices.

The Information Technology and Innovation Foundation (ITIF) criticized the FTC for not striking the right balance between the need for greater consumer privacy controls and the need for innovation and a strong online economy.

"The FTC's recommendations to protect consumer privacy by imposing new reporting requirements on businesses, restricting online advertising and stifling innovation in the mobile market are misguided,€ ITIF Senior Analyst Daniel Castro said in a statement. €œThe new report shows the FTC still does not understand the fundamental economics of the Internet. Consumers should have options to protect their privacy, but there are important trade-offs and costs in creating those protections. The FTC's recommendations would create economic burdens that could stifle the efficiency and innovation that consumers also want from the Internet."

However, the Consumer Union€™s Rusu said that unless companies that do business online can ease consumer concerns over privacy, innovation and economics will suffer.

€œWhen we talk about online privacy, we're talking about trust,€ Rusu wrote. €œA company needs customers to trust that their personal information is going to be treated with respect. If you don€™t trust that a company is going to use your information responsibly, you€™re going to be much less likely to adopt new services, and that hurts innovation.€

In this sense, the mobile market is particularly important, she said. €œThe market for mobile apps is exploding, and we clearly need to spell out the limits on the treasure trove of data that€™s being collected by these apps.  With this report, the FTC is really zeroing in on privacy concerns in this fast-growing space.€

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