Facebook Turnaround On Privacy Could Signal Wave of Change

Facebook's U-turn late last week on publishing information about members' purchases could mark the beginning of a wave of changes to online ad techniques.

European regulators are expected to announce on Tuesday the commencement of a two-year investigation into online advertising and privacy, with a focus on behavioral targeting, or sending ads to people based on their Web-surfing activity and presumed interests.

The renewed focus in Europe could force significant changes for online ad companies because Europe has stronger consumer privacy protections than the United States, say privacy experts. In the past, some companies that have tightened privacy requirements to satisfy European authorities have applied those changes in the United States as well.

"In Europe, privacy is a political right," says Joel Reidenberg, a Fordham University law professor and privacy expert. He adds that in Europe, companies that break the rules on collecting or using information are seen as violating consumers' civil rights, regardless of whether there were economic damages.

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By contrast, the Federal Trade Commission only considers privacy issues where there has been a financial harm to consumers. What's more, while there are specific U.S. laws setting out protection in certain types of records, like medical or telephone records, there's no overarching U.S. privacy statute.

Currently, many online ad companies inform U.S. Web users about behavioral targeting and give them a chance to opt out of such programs, but there's no law requiring the companies to do so.

Most European countries, on the other hand, have laws prohibiting the use of data for any purpose beyond what it was collected for, unless consumers consent, Reidenberg says. In addition, some European countries don't allow companies to share data about consumers' health information or political opinions--even with their consent.

The investigation in Europe comes as advocates and consumers in the United States are increasingly voicing concerns about online privacy. Last week, pressure from members and advertisers forced Facebook to retreat from its controversial Beacon program by agreeing to stop publishing information about members' online shopping activity without their express consent.

That decision, made only three weeks after the program launched, came after more than 50,000 Facebook members joined a protest group launched by activist organization MoveOn.org on the site. Facebook also was confronting advertiser push-back to the Beacon program; Overstock.com suspended use of the program Nov. 21, while Travelocity never implemented it, despite being named as a launch partner.

Advocacy groups Electronic Privacy Information Center and the Center for Digital Democracy also said last week they intend to pursue FTC complaints against Facebook.

Separately, the FTC last month held hearings about online privacy and behavioral targeting. The Center for Digital Democracy and U.S. Public Interest Research Group are urging that agency to require companies to obtain consumers' explicit consent before monitoring their Web-surfing behavior and sending them ads based on sites visited. Other groups, including the Center for Democracy & Technology, argue that the government should create a do-not-track list that consumers can sign up for to exclude themselves from behavioral targeting.

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