• by Wendy Davis  @wendyndavis, December 21, 2007

The Federal Trade Commission Thursday issued proposed new privacy principles that could lead to significant changes in how Web companies notify consumers about online ad techniques.

In the seven-page document, "Online Behavioral Advertising: Moving the Discussion Forward to Possible Self-Regulatory Principles," the FTC focuses on what it calls "behavioral advertising," or tracking people's online searches and Web-surfing history and then serving them ads based on that behavior.

"Regardless of whether one views behavioral advertising as beneficial, benign or harmful, there are reasonable concerns about the possibility of consumer data collected for this purpose falling into the wrong hands or being used for unanticipated purposes," the FTC wrote.

One of the principles outlined Thursday calls for Web sites that collect data about consumers to provide "a clear, concise, consumer-friendly, and prominent statement" explaining their practices and giving consumers the ability to opt out.

While the document doesn't define "clear" and "prominent," some industry observers say that if those terms are interpreted similarly to "clear and conspicuous," many companies will have to revamp their Web sites.

"Clear and conspicuous is in your face--almost to the point of unavoidable," says Alan Chapell, a consultant who advises online companies about privacy issues.

George Pappachen, director of privacy of WPP research company Safecount, agrees that many Web sites will need to at least make some revisions to their privacy policies.

The FTC also suggested that companies limit the time they store data about consumers, proposing that "companies should retain data only as long as is necessary to fulfill a legitimate business need."

In addition, the commission suggests that companies not target ads based on sensitive data, including information about medical problems or sexual orientation, without users' express permission.

The principles grew out of a two-day town hall meeting last month exploring privacy and online advertising. The FTC is now accepting comment on the principles.