“The fact is, online advertising is subject to a higher standard that offline direct marketing tactics,” Apprendi said.

The FTC report, “Self-Regulatory Principles for Online Behavioral Advertising,” continues to advocate voluntary industry self-regulation, in keeping with its principles governing online behavioral advertising issued at the end of 2007, despite the urgings of consumer advocacy groups that it impose rules regulating online advertising.

The commission’s new guidelines are based on four principles:

• Transparency and consumer control. The commission advises that Web sites that collect data for behavioral advertising provide “a clear, concise, consumer-friendly and prominent statement” that the data are being collected to provide ads tailored to the user’s interests and that the user has an easy and obvious way to choose whether to allow this.

• Security for data retention. Companies that collect data for behavioral advertising should provide “reasonable” protection of that information and retain it for a limited time.

• Obtaining consent for changing use of data. If a company wishes to use online behavioral data in ways other than it indicated when the information was collected, it must acquire an actual opt-in from the Internet user. This might apply, for example, in a corporate merger situation where, going forward, there are significant changes in the way data are collected and used.

• Obtaining consent for using sensitive data. If a company wishes to collect and use online information about medical conditions, children or other sensitive topics in order to present relevant advertising to an Internet user, it must get opt-in consent from that user.

The FTC’s first principle—providing for easy, clear ways to opt out of data collection—appears to be rarely addressed by most Web sites. The FTC seemed to gloss over a part of this failure by saying its principles don’t have to apply to “first party” or “intra-site” uses, such as when a publisher tailors editorial content, ads and other Web site features on its own Web site to its own customers.

“The [FTC] staff noted ... the trusted relationship between consumers and the Web sites they regularly view, and the fact that consumers could deal directly with the Web site operator if they have any concerns,” noted David Straus, Washington, D.C.-based counsel for American Business Media, an association of business publishers and magazines, which lobbied hard for self-regulation.

Nevertheless, the commission indicated that even these trusted Web sites should refer to the FTC privacy principles if they share or sell this customer data to others to be used in presenting behavioral advertising.

OFFICIAL RESERVATIONS
While the commission worked closely with ABM and other industry organizations to confirm self-regulation of online behavioral ads, some commissioners expressed concern.

Commissioner Pamela Jones Harbour, in a concurring statement to the FTC report, nevertheless warned that unless the advertising industry does “a better job of meaningful, rigorous self-regulation,” the FTC or Congress may intervene with legal regulations.

In addition, Commissioner Jon Leibowitz said, “This could be the last clear chance to show that self-regulation can—and will—effectively protect consumers’ privacy in a dynamic online marketplace.”

He said that online advertisers “invite legislation if they don’t do a good job at self-regulation.”

The FTC said it will continue hearing from advocacy groups about their concerns over online privacy and will conduct investigations to determine if instances of behavioral target advertising violate the Unfair Trade Practices Act.

The online industry is showing sensitivity to the issue of privacy. Both Google and Yahoo have announced new tools that will allow Internet users to opt out of receiving targeted online advertisements.

Also, four leading marketing and advertising industry associations affirmed their commitment to developing their own privacy principles. In conjunction with the FTC’s new report, the American Association of Advertising Agencies, the Association of National Advertisers, the Direct Marketing Association and the Interactive Advertising Bureau issued a joint statement committing themselves to developing educational programs and member mandates supporting the FTC principles.

However, in its report, the FTC criticized another organization, the Network Advertising Initiative (NAI), a cooperative of online marketing companies, asserting that “NAI could do more to ensure the transparency of online behavioral advertising to consumers.”

“Ultimately both the FTC and the privacy groups will get comfortable with self-regulation,” Collective Media’s Apprendi said. “Ninety-nine percent of the Internet companies and publishers are already compliant with the principles. A couple of bad apples can cause problems for a lot of people but, if these are cracked down on, the industry will be OK.”