Behavioral Marketing

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A new advertising icon was released last week by a privacy advocacy group in conjunction with a group of advertisers and agencies as part of an effort to educate consumers about behavioral advertising and head off federal regulation.
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When Flash cookies (also known as a “Local Shared Objects”) were first flagged as a privacy issue back in 2005, a few savvy companies added a disclosure about Flash cookies into their web site privacy policies. Since then, we have not heard the issue raised again. Now this sleeper issue seems to have been awakened by a recent report by researchers at the University of California, Berkeley, entitled Flash Cookies and Privacy. 

Flash cookies, which utilize a little-known capability of Adobe’s Flash plug-in, are a method to store information about a user’s preferences. (Estimates suggest that Adobe’s Flash software is installed on some 98 percent of personal computers.) Flash cookies may be used to provide better functionality to the user by, for example, storing the user’s preferences about sound volume or caching a music file for smoother play-back over an unreliable network connection. Flash cookies may also be used as unique identifiers that enable advertisers to track user preferences and circumvent deletion of HTTP cookies. Because Flash cookies are stored in a different location than HTTP cookies on one’s personal computer, simply erasing HTTP cookies, clearing browser history, or deleting the cache does not remove Flash cookies.

Over the course of the last decade, many companies have become accustomed to notifying consumers of their data collection practices in their online privacy policy.  However, in a recent proposed settlement, the FTC indicated that, at least under the facts before them, disclosures that were “buried” in a privacy policy were not sufficient.

On June 4, the FTC reported a proposed settlement with Sears Holding Management Corporation of a complaint that Sears had failed to meaningfully disclose to customers the extent of the information it was collecting through its online market research software.  The FTC claimed that this failure to disclose constituted an “unfair or deceptive act” under the Federal Trade Commission Act. 
 

On February 12, 2009, the FTC issued its long-anticipated Staff Report on Self-Regulatory Principles for Online Behavioral Advertising. The revised Self-Regulatory Principles are the result of a year of study of the more than 60 comments provided by industry, advocacy organizations, academics, and individual consumers in response to the FTC’s proposed self-regulatory principles issued in late 2007.
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In a year when behavioral advertising was already expected to be at the top of the hot button privacy issues list, on January 13, 2008, the Center for Digital Democracy (“CDT”) and U.S. Public Interest Research Group (“US PIRG”) filed a document with the Federal Trade Commission (“FTC”) urging the FTC to investigate online mobile marketing practices, to take new actions to stop mobile marketing activities that “abuse consumer rights,” and to recommend new federal legislation and enhanced enforcement power for the FTC in this area. The document expands on the groups’ concerns about online behavioral advertising generally – the delivery of ads tailored to consumers’ interests based on browsing habits and/or consumer demographics – to the mobile space. In doing so the groups cite the potential for even greater consumer harm because of the additional possibility of location-based targeting linked to a cell phone or other mobile device that is typically tied to a single consumer who uses it for multiple applications, including voice, video and data.

Behavioral tracking of consumers online in order to deliver relevant advertising is a privacy issue that is receiving a lot of attention, and one that has been the focus of Federal Trade Commission and consumer group scrutiny. On September 25th, the United States Senate Commerce Committee held a hearing on online privacy and received commitments from the three industry representatives (from AT&T, Verizon and Time Warner Cable) that if they do deploy technologies that are able to track consumer online behavior in order to tailor advertising, that consumers will have clear notice and a full opportunity to provide affirmative consent. None of the companies currently use such technologies in their roles as Internet Service Providers. The broadband providers challenged the rest of the online industry, including web site operators and application providers such as Google, to provide the same protections to consumers. Essentially, the witnesses called for an end to “opt out” when it comes to online advertising.
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