FTC Argues Against Opt-In Approach To Online Privacy

The Federal Trade Commission is coming out against the idea that companies should be required to obtain consumers' explicit permission before drawing on their online activity for ad targeting.

“If consumers were opted out of online advertisements by default (with the choice of opting in), the likely result would include the loss of advertising-funded online content,” the FTC says in a staff report submitted to the National Telecommunications and Information Administration. The report, unveiled this week, comes in response to the NTIA's call for public comments about online privacy.

The report is one of the FTC's first major statements on online privacy since a slate of new Commissioners took over this year.

In its report, the agency says it supports a “balanced” approach that “weighs the risks of data misuse with the benefits of data to innovation and competition.”

The report went on to offer some specific examples of benefits to data collection, one of which was “more relevant online experiences, as retailers provide customized offers and video services recommend new shows.”

In 2016, the Obama-era FTC also rejected an opt-in approach to all forms of online behavioral advertising, but said in a staff report that companies should obtain explicit consent before collecting data it deemed sensitive -- including names, financial information and health data as well as information such as search queries, email messages, social media posts, and titles of books read or movies viewed.

It's not clear what data the FTC's current report relies on for the proposition that an opt-in system would result in a decline in ad-funded content. The report cited a 2013 study by the ad industry group Digital Advertising Alliance, but that study didn't attempt to predict how the availability of online tracking data affects free content. Instead, the report addresses consumers' views about the internet.

For that report, Zogby Analytics asked 1,000 online adults questions about their views regarding online content and advertising. Overall, 92% said free content was important to the internet.

Pollsters also asked respondents: “Which of the following would you prefer: an Internet where there are no ads, but you would pay for most content like blogs, entertainment sites, video contact and social media, or today’s Internet model in which there are ads, but most content is free?”

Around 75% of respondents said they would prefer free ad-supported content. But that question didn't differentiate between ads served based on tracking data and other types of online ads.

The new report comes as Congress is preparing to tackle online privacy. A wide variety of players -- including tech companies, the ad industry and consumer watchdogs -- are weighing in with thoughts on how to shape privacy laws.

Earlier this month, Senator Ron Wyden (D-Oregon) proposed a “do-not-track” system, which would give consumers the right to prevent information about them from being shared or sold by ad tech companies.

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