Media Law Prof Blog

Editor: Christine A. Corcos
Louisiana State Univ.

Friday, February 13, 2009

FTC Releases Report On Online Advertising

While the Federal Trade Commission isn't moving toward regulation, it is telling Internet companies that they are not informing consumers adequately about privacy policies. An FTC press release says in part,

Over the last decade, the FTC has periodically examined the consumer privacy issues raised by online behavioral advertising – which is the practice of tracking an individual’s online activities in order to deliver advertising tailored to his or her interests. The FTC examined this practice most recently at its November 2007 “Behavioral Advertising” Town Hall. The following month, in response to public discussion about the need to address privacy concerns in this area, FTC staff issued a set of proposed principles to encourage and guide industry self-regulation for public comment. Today’s report, titled “Self-Regulatory Principles for Online Behavioral Advertising,” summarizes and responds to the main issues raised by more than 60 comments received. It also sets forth revised principles.

The report discusses the potential benefits of behavioral advertising to consumers, including the free online content that advertising generally supports and personalization that many consumers appear to value. It also discusses the privacy concerns that the practice raises, including the invisibility of the data collection to consumers and the risk that the information collected – including sensitive information regarding health, finances, or children – could fall into the wrong hands or be used for unanticipated purposes. Consistent with the FTC’s overall approach to consumer privacy, the report seeks to balance the potential benefits of behavioral advertising against the privacy concerns it raises, and to encourage privacy protections while maintaining a competitive marketplace.

The report points out that most of the public comments the FTC received concern the scope of the proposed principles. For example, commenters discussed whether it is necessary to provide privacy protections for data that is not personally identifiable. In response, the report states that privacy protections should cover any data that reasonably can be associated with a particular consumer or computer or other device.

Also, commenters questioned the need to apply the principles to (1) “first party” behavioral advertising, in which a Web site collects consumer information to deliver targeted advertising at its site, but does not share any of that information with third parties, and (2) contextual advertising, which targets advertisements based on the Web page a consumer is viewing or a search query the consumer has made, and involves little or no data storage. The report concludes that fewer privacy concerns may be associated with “first-party” and “contextual” advertising than with other behavioral advertising, and concludes that it is not necessary to include such advertising within the scope of the principles. The report notes, however, that regardless of the scope of the principles, companies must still comply with all applicable privacy laws, some of which may impose requirements that are similar to those established by the principles.

Read the report here. Here's FTC testimony on the issue.

Here's more in a New York Times story.

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