Is A 'Privacy Czar' On The Way?

by Steve Smith, Nov 12, 2010, 3:45 PM

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It looks as if the recent public scrutiny of online privacy and data collection, including controversial reports on the issue from the Wall Street Journal, have rattled the Obama Administration. The Journal itself reports this morning that the White House is about to unveil new legal proposals to control the industry and suggest a new watchdog to oversee Internet privacy.

Julia Angwin reports that in the next few weeks, a U.S. Commerce Department report will outline the proposals and new position. Angwin also notes that the White House has already formed a task force that will implement the Commerce Department recommendations. Sen. John Kerry's brother Cameron Kerry, who is also general counsel at Commerce, and Assistant Attorney General Christopher Schroeder will lead the group.

If the report proves true, then this puts the debates over online privacy at a whole new level. In recent years, the Federal Trade Commission had explicitly avoided direct control over data collection practices online unless bad actors had clearly engaged in deceptive trade practices. The FTC had advised the online marketing and data industries to erect self-regulatory practices to police their own and create greater transparency with consumers. As attendees at OMMA Ad Nets heard earlier this month, those self-regulatory plans had already begun with a uniform labeling of ads and general agreement among the major marketing entities to pursue more transparent practices.

Until the actual legal or regulatory constraints are revealed, there is no way of knowing how deeply the Obama administration wants to impose government control on this issue. Even Angwin's report admits that the Commerce Department findings and recommendations are weeks away and subject to change. No doubt the parties involved are taking the temperature of lawmakers for enacting legislation.

Justin Brookman, Senior Resident Fellow at the Center for Democracy & Technology, tells me the Journal article is extremely encouraging:  "The U.S. is finally stepping up and providing leadership in the global privacy debate.  This is an important step toward flexible and practical baseline privacy protections being put into place in this country."

Likewise, Fran Maier, president and chair of TRUSTe, says that the prospects of having some government oversight of online privacy could bring the U.S. in line with trends she is seeing take shape overseas. "'Coregulation' was one of the buzz words during the recent International  Data Protection and Privacy Conference in Israel," she says. "Under this model legislation, regulation or indeed a ‘watchdog' is part of an industry self-regulatory approach, providing a ‘backstop' for enforcement.  This concept goes a long way to satisfying a number of constituents including the international privacy community, and provides a means for meaningful self-regulatory programs."

Whatever the specific recommendations, there may well be disruptive consequences from this development for marketers, since these proposals will inject a new uncertainty into the market. As Kantar's Chief Privacy Officer George Pappachen warned at Ad Nets, uncertainty depresses investment by brands and advertisers.

BlueKai's CEO Omar Tawakol says that the attention of regulators and lawmakers certainly has moved the industry to embark on serious self-policing that has progressed significantly. But he also warns that hand-cuffing an ad-supported free content eco-system online will also lead to consumers having to pay or pay more for their content. "If legislation were to be prematurely enacted in the midst of such rapid change we would end up with a mechanical horse rather than an automobile," he says.  

I would argue that the immediate problem with introducing proposed legislation regarding online privacy is that it is likely to remain just that -- proposed. With a Republican-controlled Congress focused on the economy, it seems unlikely that any legislative push on Internet privacy will go through quickly. And any laws that would require FTC enforcement would trigger conservative reticence to expand regulatory power. 

As Pappachen also argued at Ad Nets, any attempt to single out the online medium for special regulatory restrictions introduces a further disruption to the larger marketing eco-system because it just encourages bad actors to redirect their investment to the platform with least resistance. Regulation or policy regarding consumer data collection needs to be consistent across digital and analog media.

Online marketers have complained for years that they are being held to a higher standard than many direct-marketing efforts and offline consumer behavioral tracking. If these reported moves by the administration do single out digital for special regulation, then these persistent grumblings are very likely to become a much more concerted effort to create an even playing field.

Any way you cut it, a move of the kind suggested in this morning's report would seem to introduce a protracted battle over the issue that sends unclear signals to advertisers and agencies about the future value of their investments both in media spend and infrastructure. As so much of the online ad economy comes to ride on data-driven models, there is not only a need for clarity of privacy and data collection policy in the marketplace. There is also a need for speed. 

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