FTC Holds Public Workshop on Online Profiling

10 November 1999
Somebody's peeking in consumers' windows and learning about their web surfing habits, and it's made a lot of people angry. As a result, the Federal Trade Commission and the U.S. Department of Commerce held a "Public Workshop on Online Profiling" on Monday. The goals of the workshop were to educate government officials and the public about online profiling and its implications for consumer privacy, and to examine current profiling industry efforts to implement fair information practices.

The workshop is the latest round in discussions regarding e-commerce consumer protection and regulation in the United States. The U.S., home to the largest number of Internet users of any nation, is one of the few industrial nations lacking such a regulation. Last year, the European Union Directive on Privacy Protection took effect, while Canada's Principles for Consumer Protection in Electronic Commerce were enacted earlier this week.

Online businesses say they just want to provide consumers with information about products they would really be interested in. They believe self-regulation is the way to develop adequate regulation for consumer protection. But for many privacy and consumer advocates, that's like asking the fox to guard the hen house. They've asked the FTC to stop online profiling and begin a 90-day investigation into such practices.

"The reason people have the gut reaction they do to profiling is that they don't know what is being collected about them. They don't have choices. And that is not good for developing consumer confidence," said Commerce Secretary William Daley.

He added, "But consumers also will want to know what is going on inside their computers. It's not Big Brother that consumers fear. It's not even big business they fear. They fear businesses they have never heard of having information about them and using it for purposes they don't understand."

Studies have been released showing consumers want to receive advertising geared to their interests. Depending on the study, however, these same consumers tend to show different levels of concern about the information that businesses are collecting about them.

IBM just released a "Multi-National Consumer Privacy Survey" that showed consumers held little trust in how businesses would use information companies had gathered about them. The IBM survey is available at:

Privacy & American Business presented their survey results at the FTC workshop. Among their findings, over half of Internet users surveyed would be willing to give out at least some kind of personal information to receive targeted advertisements. Two caveats were the need for a way to "opt out" and disclosure of how the information was going to be used.

Its author, Alan Westin, told Reuters "The results confirm something we have seen many times in the past. People differ in how they want their privacy protected... the idea it has to be all or nothing just is not true."

Jeffrey Chester, Center for Media Education Executive Director, disagrees, calling the poll biased because survey questions didn't show that the data gathering is done through "cookies" without consumers knowledge. He said, "If the public knew that profiles were being created that included a tremendous amount of data including psychographic profiles… people would have a different response."

A group of online "profiling" companies have banded together in forming the Network Advertising Initiative (www.networkadvertising.org). Daley lauded their efforts in developing self-regulations.

Under the Initiative, consumers could "opt out" of having their information collected. Companies, however, would still be allowed to collect "non-identifiable" data from viewers, including browser type and other technological information. The ten members of NAI, including companies like Doubleclick Inc., AdKnowledge and Flycast, are responsible for more than 80 percent of online advertising.

At this point in time, the FTC is still accepting comments about the issue at:

No legislation is being considered for regulation of data collection over the Internet, according to Wendy Lader of the National Telecommunications and Information Administration.

As Daley concluded, "Privacy is a big deal for Americans. We see it as essential to our freedom. But the benefits of the Internet, and of this profiling technology, are also a big deal for companies. They can do a better job of offering the right products to the right customers. They can do it much faster. They can do it cheaper. No question, knowing your customers is important to every company in America. But so is listening to your customers. And if they are telling you they want more information about profiling and more choices, you have to meet their needs."

E-businesses should contact TrustE, (www.truste.com) Better Business Bureau Online (www.bbbonline.com), the Direct Marketing Association (www.the-dma.org) or NAI (www.networkadvertising.org) for additional information about this subject.