Posted on March 27, 2008 by Timothy P. Tobin

Consumer Advocates Target Online Behavioral Advertising: Broad Regulation Threatens to Impede Delivery of Relevant Advertising and Business Models for Free Online Content

In the wake of the December 2007 FTC statement proposing self-regulatory principles for businesses that are engaged in online behavioral targeting (click here for earlier blog post), that activity has continued to provoke consumer groups who advocate for government regulation. The legislature in New York has taken notice and is considering a first of its kind bill, the Third Party Internet Advertising Consumer's Bill of Rights Act of 2008, to regulate third parties Internet advertisers’ tracking activities. The New York legislature’s activity coincides with significant opposition in the European Union to online behavioral advertising practices.   

Online behavioral targeting is the process of tracking online users’ behavior and serving ads tailored to that behavior. While the methods vary, the primary methods used online are cookie-based, conveying to advertisers web pages a user visits. Companies may also use search data. This information is sometimes combined with demographic data such as geographic location, to help further personalize advertisements. Glossed over by consumer groups is the fact that tracking usually is conducted anonymously with data collected linked only to a computer’s Internet Protocol (IP) address, not name or other personally identifiable information. In addition, responsible Internet companies are expected to provide clear notice and opportunities for consumers not to participate in such programs. Still, consumer groups have seized on reports of Internet Service Providers contracting with companies such as Nebu-Ad, Phorm and Adzilla who use so-called “deep packet inspection” to collect data on every page a user visits rather than just those that are part of an online advertising network. 

The ongoing debate over online behavioral targeting is significant not only because such targeting enables consumers to receive ads that are more relevant and useful to them, but as the FTC has recognized, restrictions that inhibit companies’ ability to obtain advertising revenue may fundamentally affect the ability of the Internet to continue to offer valuable content for free.

The New York Bill

The New York bill, with versions in the Assembly and Senate (A. 9275 and S. 6441) is based on the Network Advertising Initiative (NAI) self-regulatory principles. The NAI is a group of online advertising firms and it adopted its principles in 2002. The bill would create an extensive regime of consumer notice and choice for third party tracking of different types of consumer online activity. Absent obtaining a consumer’s prior affirmative consent or opt-in, third parties would be prohibited from collecting personally identifiable information online in some situations (when merged with certain other previously collected data). Consumers would have the right to opt-out of any online tracking involving non-personally identifiable information. The bill would require clear notice by third party advertising companies on their own sites of their profiling activities, the types of data they collect, how they use the data, the opt-out process, and the length of time the data is retained. And, it would require third party advertising companies to contractually require the sites to whom they provide services to include notice and opt-out options.  

Notably, the bill would prohibit a third party from tracking information from websites when it does not have a contractual relationship with the website owner. This provision could have major implications for the companies described above that contract with Internet Service Providers to monitor surfing activity across all websites a consumer visits. The bill is also significant because it would effectively create a national law – companies with a national online presence would necessarily be doing business in New York as well.                    

The European Union 

The press has recently reported about controversy in the U.K. concerning reports that the country’s three largest ISPs, BT, Talk Talk, and Virgin Media, had contracted with Phorm for behavioral targeting services. A U.K. think tank, the Foundation for Information Policy Research (FIPR) submitted an open letter to the U.K Information Commissioner charging that Phorm’s activities violate British privacy law and the European Union’s Data Protection Directive by not affording consumers opt-in choice for the tracking. Phorm is claiming that it uses a cookie with a random number assigned to track information so that it does not collect personally identifiable information. 

The issue of online monitoring continues to draw the attention of European Union regulators with more activity expected in the near future. Although the E.U. approved the Google-Doubleclick merger, the E.U. Article 29 Working Party comprised of data privacy regulators from each of the E.U.’s member states has stated that even search engines based outside of the E.U. may fall under the E.U. Data Protection Directive. In addition, the Chairman of the Article 29 Working Party has asserted that IP addresses standing alone constitutes personally identifiable information. This stands in contrast to how IP addresses are viewed in the U.S. The Article 29 Working Party is expected to issue a report in April concerning the privacy implications of Internet search engines, which should further address these issues.     

Industry and Interest Group Guidelines        

In addition to the activity discussed above, industry and consumer interest groups continue to propose new guidelines. The NAI announced late last year it is planning to revise its guidelines while just last month the Interactive Advertising Bureau – an organization comprised of many leading Internet companies – issued self-regulatory guidelines similar to the FTC’s but designed to give companies more flexibility in their approach to notice and choice. Earlier this month, the Center for Democracy and Technology issued its Privacy Principles for the Development of User Controls for Behavioral Targeting, which focuses on allowing consumers to express their preferences for behavioral targeting, having those preferences remain in place until altered by the consumer, and encouraging companies to have readily available and easily understandable policies.
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Posted on December 20, 2007 by Timothy P. Tobin

FTC Staff Issues Proposed Self Regulatory Principles for Behavioral Advertising and Seeks Comment

FTC staff issued a statement today proposing four “self-regulatory” principles to guide businesses engaged in online behavioral advertising. FTC staff also seeks public comments on these principles as well as additional information on what other uses businesses are making of online tracking data. Interested parties can submit comments by February 22, 2008. 

The statement, titled “Online Behavioral Advertising: Moving the Discussion Forward to Possible Self-Regulatory Principles” follows from the FTC’s town hall meeting held in early November 2007. There, FTC considered privacy issues raised by behavioral advertising and heard from consumer interest groups and businesses’ alike.  The agenda and links to material related to the town hall meeting can be found here.    

The self-regulatory approach taken by FTC staff recognizes the benefits behavioral advertising provides. Specifically, FTC staff recognizes that ad-supported content makes newspapers and other valuable information from around the world more readily available to consumers online and that many consumers value personalized ads. FTC staff is, however, concerned that behavioral advertising and the related data collection “is largely invisible and unknown to consumers.” The four principles FTC staff has proposed to address concerns over transparency and consumer choice state that: 

(1) every website that collects data for behavioral advertising should include “a clear, concise, consumer-friendly and prominent statement” that (a) consumer data is being collected online for behavioral advertising, and (b) consumers can exercise choice on collection of their data for such purposes, with a “clear, easy-to-use, and accessible method” provided for doing so;  

(2) a company engaged in behavioral targeting should reasonably secure the data collected and only retain it “as long as necessary to fulfill a legitimate business purpose or a law enforcement need”;

(3) a company should obtain consumers' "affirmative express consent" if it is going to use personal data for a materially different purpose than was disclosed when the data was collected; and 

(4) a company should obtain "affirmative express consent" before collecting "sensitive" consumer data (such as health data, sexual orientation, and children's data). FTC staff is seeking further comment on the types of data that constitute "sensitive" information and whether instead of consumer choice, a prohibition on collection of such data would be a better approach; 

FTC staff seeks comments on the four proposed principles generally, including their feasibility and the costs and benefits of offering choices for behavioral advertising. FTC also staff seeks additional information on the secondary uses of tracking data that extend beyond behavioral marketing. Specifically, FTC staff seeks information on what secondary uses of tracking data is occurring, which of those uses raises privacy concerns, whether those concerns extend to non-personally identifiable information in addition to personally identifiable information, and whether some heightened form of protection relating to secondary uses is warranted. 

The FTC vote to approve release of the principles was 5-0. The related FTC press release is available here.
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