• by August 3, 2004

In his first sit-down interview with a media outlet, D. Reed Freeman--chief privacy officer and vice president for legislative and regulatory affairs at Claria Corp.--discussed a variety of topics, from disclosure and privacy policy improvements to the status of pending litigation against the company. Freeman joined Claria in May, after serving as a staff attorney in the Federal Trade Commission's Bureau of Consumer Protection. He was most recently a partner at Washington, DC-based law firm Collier Shannon Scott, where he specialized in online privacy and advertising law. Freeman spoke with MediaPost Executive Editor Tobi Elkin.

MP: What changes or improvements has the company made in its disclosure statements?
Freeman: Scott Eagle, our chief marketing officer, has been tireless in his efforts to explain our model and the adware model to the press and key Internet industry people. We collect only non-personal information, and have the intuitive and standard Windows uninstall process. We understand that outreach is ongoing, and we've devoted more resources to meeting with the press and industry people to discuss our model and the growing industry. One of the reasons I was hired is to be able to explain the business model to regulators whose language I speak, in a way that they understand.

I've been focused like a laser on developing industry ties and on pending legislation....Some people think if you're not collecting personal information, there is no privacy issue. We at Claria take the position that the regulators take, which is, privacy is an issue that extends beyond the collection of personal information.

I've also been meeting with key portals and hardware manufacturers to understand and address any questions they have about our business model. I was very surprised at the FTC's workshop in April that two representatives of well-known companies stood up and said that their customer service costs are increasing due to the number of customer problems arising out of the use of adware and spyware. They did not mention us directly, but we took that extremely seriously. And in our view, companies should not have to bear any expense that is attributable to us, and we are working closely with these groups to determine if we're one of the companies causing increased customer service costs....

MP: What is Claria doing to clarify its disclosure practices and the means of uninstalling its software?
Freeman: The key differentiator between adware and spyware is whether consumers are given notice of, and consent to, the download of software that tracks their online activity in some way, and whether consumers can easily locate and uninstall the software. The way we think of spyware is that it is inherently illegal. The very use of the term spyware presumes the software being described is engaged in deceit, deception, or disguise. Considered in this way, we think that spyware that happens to result in the serving of ads is still spyware, and is still illegal. We think of adware, on the other hand, as software that is 1. supported by advertising, and 2. installed on consumers' computers within the core principles of notice, consent, and control. Again, if it's installed on consumers' computers without notice and consent, or if it's difficult or impossible to remove, it's spyware, not legitimate adware--even if it is ad-supported

I've only been with the company since May, and I have only a general understanding of the history of the company before that. [But] I can tell you that there's an internal process of taking a look at what our own customers have to say about what legislators are proposing in pending legislation, what trade groups are saying, consumer groups, and the press--and we are continually using that information to try to see if we can make our practices more transparent than they are now.

MP: By more transparent, what do you mean?
Freeman: I mean that consumers understand the bargain that they're making....

MP: Where do you think the communication is breaking down? Specifically, what changes have been made to some of the disclosure screens, simplifying language, and navigation?
Freeman: ....In terms of the distribution method, I'm often asked: 'Do you think it's fair that terms are buried in a long end-user license agreement in the course of a download process?' The answer to that is--emphatically--no. The law is that material terms have to be disclosed prior to a consumer's taking action.

MP: What are material terms?
Freeman: Material terms, as defined by the FTC, are those that are likely to affect a consumer's conduct with respect to a product or service. Usually, that means a purchase decision. In this case, it means prior to the consumer obligating himself or herself to receiving ads from us by downloading software. In my view, the key terms that consumers should know--those that consumers would be unhappy if they didn't know--are that we will track your online behavior and serve you advertising. Those key material terms are disclosed in every download process in a way that a consumer has to stumble over them to get to the download, in a way that is unavoidable prior to the consumer taking action.

Consumers should also know the frequency of the ads, the type of ads that we serve, how to uninstall the software--things of that nature--and precisely what non-personally identifiable information we collect. That information is laid out as clearly as we can think of in our privacy policy, which is available at every download opportunity. We are working on making our privacy policy shorter, even easier to read. It's one of my top priorities.

MP: What about the uninstall directions? When do they come into play? It's one of the biggest things people complain about with regard to Claria.
Freeman: Keep in mind that every consumer who has difficulty uninstalling is a concern for us. That said, over 200 million people have downloaded our software, and statistics I'm aware of are that 80 percent of those people, over time, have uninstalled our software. It is not calculus, because if that were the case, I would be unable to uninstall. I am unable to do calculus [laughs].

MP: Have you ever tried to uninstall?
Freeman: Absolutely. The instructions on uninstalling are in the privacy policy at the time of download. It is in the course of screens of information provided to consumers during download. More importantly, instructions on how to uninstall are available by links from every single ad we serve. And that is the key, in my opinion. The FTC has long taken the position that consumers should be able to get out of the bargain just as easily as they got into it. In my view, you can get into our bargain by responding to an ad, and you can get out of our bargain by responding to an ad. The ads we serve on behalf [of] our clients--the pop-up ads--contain a question mark at the upper right-hand corner similar to what you see in Microsoft Windows, and a link at the bottom that says 'more info.'

Return to MediaPost's MediaDailyNews tomorrow for a continuation of the Q&A with D. Reed Freeman regarding pending spyware legislation and lawsuits filed against Claria.