Commentary

FTC Chair: Web Ad Industry Has One Last Chance To Avoid Regs

Federal Trade Commission Chairman Jon Leibowitz reiterated today that the online ad industry is running out of time to prove it can adequately protect people's privacy.

"From my perspective, the industry is pretty close to its last clear chance to demonstrate" that it can police itself, chairman Jon Leibowitz said at the Reuters Global Financial Regulation Summit, Reuters reports.

Leibowitz made similar comments in February, when the FTC issued new suggested guidelines for behavioral advertising, or tracking people as they surf the Web and then sending them ads based on sites visited. Fellow commissioner Pamela Harbour also questioned whether the online ad industry was capable of regulating itself.

Leibowitz isn't the only one in Washington talking about new regulation. At a congressional hearing last week, Rep. Rick Boucher (D-Va.) said that he plans to draft an online privacy bill this year. Of course, lawmakers frequently introduce legislation that never goes anywhere. Earlier this decade, Congress made several unsuccessful attempts to pass adware legislation, but never did so. (Even without legislation, legal actions brought by state attorneys general and the FTC, combined with market forces, felled the four major adware companies -- Claria, WhenU, Direct Revenue and Zango.)

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But the recent emergence of Internet service provider-based ad targeting through companies like NebuAd and Phorm -- which involve ISPs selling data about their customers -- could spark Congress to act. Last year, news that ISPs were working with NebuAd resulted in congressional hearings at which some lawmakers said they believed ISP-based ad targeting requires opt-in consent. (NebuAd has since retreated from its plans.)

Large ISPs AT&T, Time Warner and Verizon also took the position that all behavioral targeting companies should seek users' affirmative consent. The ISPs didn't at the time endorse new laws, but made it clear that they supported similar privacy standards for ISP-based targeting and older forms of cookie-based behavioral targeting -- in which a company like Audience Science tracks people across a limited number of sites within a network. AT&T complained specifically that older forms of behavioral targeting were largely "invisible" to consumers. (As it turns out, AT&T's public complaints are at odds with its own behavior, given that the company uses Audience Science to market AT&T services.)

Whether new laws emerge remains to be seen, but even without new legislation, the FTC could theoretically bring actions against companies that threaten consumers' privacy. Leibowitz, for one, appears prepared to do so.

Separately today, a dozen privacy groups and consumer advocates urged President Barack Obama to appoint a new FTC commissioner who is "committed to protect both consumer privacy and welfare with new media."

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