Commentary

FTC's Ohlhausen: Privacy Regs Could Harm Startups

Federal Trade Commission member Maureen Ohlhausen reiterated her view that restricting companies from collecting data about consumers could harm online ad startups.

Speaking at a conference of the trade group Digital Advertising Alliance, Ohlhausen said that “reducing the flow of information in the marketplace” could impose barriers to entry by precluding new companies from “obtaining valuable information that incumbents already possess.”

Ohlhausen made similar comments last month, at a conference of the self-regulatory group Network Advertising Initiative, when she said that new privacy restrictions “may have an effect on competition by favoring entrenched entities that already have information, over new entities.”

The remarks are significant, given that many ad networks have raised similar concerns. They argue that policies preventing third parties -- like themselves -- from collecting information will disadvantage them against companies that gather information in their capacity as first-party publishers, such as Amazon.

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Generally, companies that operate sites visited by consumers, are considered first parties, while ad networks that collect data at those sites are considered third parties. But some first parties, including Amazon, are now operating their own ad networks, raising questions about what standards should apply when they collect information in order to send people targeted ads.

That wasn't the only talking point that Ohlhausen reiterated today. She also reminded the audience that she disagrees with the agency's 2012 recommendation that Congress consider enacting a baseline privacy law.

The Republican commissioner additionally indicated that she believes companies' data practices must really raise eyebrows before the FTC condemns them as “unfair.” (The situation is different if a company violates its privacy policy. In that case, the FTC can allege that the company has deceived users -- which involves different questions than whether the company acted unfairly.)

Ohlhausen specifically mentioned DesignerWare as an example of a company with unfair privacy practices -- but that company's actions were extreme by anyone's standards: DesignerWare allegedly installed spyware on rental computers, without telling consumers.

When Ohlhausen was asked specifically whether she believes that “creepiness” can itself be a form of unfairness, she answered in the negative.

Not everyone agrees with that view. Privacy scholar Ryan Calo has argued that creepiness in advertising can be problematic in itself. How so? He says that making people feel “creeped out” online creates harm. If nothing else, he argues, people who suspect they're being manipulated by online advertisers might stop using the Web -- or at least ecommerce sites.

And former FTC consumer protection head David Vladeck famously said the agency should consider whether online companies that track consumers violate their privacy, even if the companies don't cause any financial harm. “There’s a huge dignity interest wrapped up in having somebody looking at your financial records when they have no business doing that,” he told The New York Times in 2009.

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