Tuesday, October 18, 2011

“Do-Not-Track” Approach to Consumer Privacy Questioned by FTC Commissioner Rosch

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

Federal Trade Commissioner J. Thomas Rosch reiterated his doubts about the viability of a “do-not-track” mechanism to protect consumer privacy in the United States, in a speech delivered at the Loyola Chicago Antitrust Institute Forum last Friday. Commissioner Rosch has called the FTC staff’s recent endorsement of such a mechanism “premature.”

A do-not-track mechanism would purportedly enable consumers to choose whether to block the tracking of their online searching and browsing activities in order to limit targeted advertising. In an FTC staff report issued in December 2010, entitled “Protecting Consumer Privacy in an Era of Rapid Change: A Proposed Framework for Businesses and Policymakers,” the staff recommended the implementation of a do-not-track mechanism.

“Serious Reservations”

Commissioner Rosch concurred in the decision to issue the staff report for comment, but expressed “serious reservations” about the do-not-track proposal advanced in it. At the time the report was released, Commissioner William E. Kovacic also questioned the wisdom of do not track. However, Commissioner Kovacic left the agency earlier this month, leaving Rosch the only member of the Commission skeptical of the staff’s recommendation.

In his remarks in Chicago, Commissioner Rosch explained how the do-not-track approach to privacy protection has “generated attention not only from the Commission and the media, but also from Congress, the online industry, and a host of consumer advocacy groups.”

While there are bills in Congress that address broader privacy concerns without providing for a specific do-not-track mechanism, two pieces of legislation have been proposed this term that instruct the FTC to develop a specific do-not-track mechanism, according to Rosch.

Proposed Federal Legislation

The proposed “Do Not Track Me Online Act” (H.R. 654) would require the FTC to issue rules: (1) establishing standards for “an online opt-out mechanism; (2) requiring mandatory disclosures regarding the collection, use, and sharing of information; and (3) allowing consumers to otherwise prohibit the collection or use of a broad array of information transmitted online.

The proposed “Do-Not-Track Online Act of 2011” (S. 913) would require the FTC to issues rules: (1) establishing a mechanism whereby consumer can simply and easily opt out of having their personal information collected online—including on mobile devices; and (2) prohibiting the collection of personal information from consumers who have opted out.

Online Industry’s Efforts

The Commissioner criticized the online industry’s efforts to implement do not track. He questioned claims that these efforts provide consumers with the choice to eliminate behavioral advertising, tracking, or targeted advertising. Specially, he mentioned the browser-related mechanisms associated with Microsoft’s Internet Explorer 9, Mozilla’s Firefox, and Google’s Chrome and the self-regulatory regime of the Digital Advertising Alliance, which uses cookies to effectuate the choice mechanism.

According to Rosch, there are four overarching shortcomings with the industry’s efforts:

(1) Some of the mechanisms only allow consumers to opt out of behavioral advertising, but not all “tracking,” and there is a failure to alert consumers to this fact.

(2) Consumers may not be fully informed about the benefits or consequences of subscribing to a do-not-track mechanism. Commissioner Rosch expressed concern that “across-the-board_ opting out by consumers might reduce the overall financing that supports free content across the Internet, and accordingly, result in a decrease in innovation.

(3) There was not much evidence that the mechanisms were really working to alert consumers about the existence of tracking and online behavioral advertising. The rates of adoption are very low.

(4) The current proposals involve well-entrenched firms that might favor barriers to consumer tracking in order to create or raise entry barriers to rivals. The firms’ intentions might not be solely to protect consumers against behavioral tracking.
“[W]e cannot be blinded so much by our zeal to protect consumers from behavioral tracking that we lose sight of our competition mission,” Commissioner Rosch said. “There is probably nothing worse than to have firms with an anticompetitive agenda designing consumer protection initiatives.”

The text of Commissioner Rosch’s October 14 remarks, entitled “Do Not Track: Privacy in an Internet Age,” appears here.

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