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Summary:

Two Congressmen have proposed a sweeping bill to govern online privacy that would require companies to provide clear notices of what information is being collected by either their site or service or a third-party ad network, and would allow users to opt out from such services.

If a new online privacy bill proposed today by two U.S. senators congressmen becomes law, web surfers could find themselves confronted with a growing swarm of disclosure notices, opt-in requests and user information licenses whenever they try to use websites and services that employ online advertising. The draft bill’s chief proponent — Rick Boucher, chairman of the House Subcommittee on Communications, Technology and the Internet — said it’s designed to strike a middle ground between privacy protection and the need for online companies to benefit from interactive and targeted advertising. But if the reaction by consumer groups is any indication, the two sides are still light-years apart.

Among other things, the new proposed legislation (PDF) would require companies to get a user’s explicit approval (that is, it would require users to “opt in”) before they “knowingly collect” information about a person’s medical history, financial records, Social Security number, sexual orientation or precise geographic location. Other information, such as that collected by web cookies or session logs on corporate servers, would not require explicit consent, provided the company involved displays a “clearly-written, understandable privacy policy that explains how information about individuals is collected, used and disclosed” and provided users can decline or “opt out.” For the most part, the bill appears to codify what is accepted practice by reputable online companies.

Digital privacy has become an ongoing brush fire that flares up almost weekly. Google has been slammed by privacy authorities from countries around the world for its practices, and Facebook has come under scrutiny from privacy groups and a coalition of four senators who sent a letter to the company asking it to refrain from “opting in” users to new information-sharing features, and to provide easier ways to control what information is shared. One of the senators involved, Charles Schumer, has also written to the Federal Trade Commission asking it to take action against the company.

Facebook has even been criticized by its own former privacy chief, Chris Kelly, who is now running for California Attorney General. Rep. Boucher, meanwhile, has been discussing a digital privacy bill for at least a year, and says he’s been meeting with both industry groups such as the Interactive Advertising Bureau and privacy advocates trying to come up with a solution that satisfies both sides. But it doesn’t appear that such a goal is even possible.

Industry supporters say the bill would bring U.S. laws around digital privacy closer to the more strict European legislation in that area, and have complained that any restriction on privacy rules for advertisers would threaten the $23 billion online advertising market that’s still struggling to recover from the recession. Most of the privacy groups that responded to the proposed legislation on a conference call following its release, however, say that Boucher’s bill is a sop to the industry and perpetuates a “bankrupt notice and opt-out system that just doesn’t work.” One privacy advocate — Evan Hendrix, editor of Privacy Times magazine — said that the bill was actually worse than having no legislation at all. A coalition of these groups sent a letter to Congress on Monday complaining about a lack of appropriate legislation and calling on the FTC to get tough on web services.

Ginger McCall of the Electronic Privacy Information Center said on the conference call that the consumer advocacy group was disappointed by the proposed bill, and that it would do little to nothing to stop companies like Facebook from collecting and using information. She said that the group, which has already filed one complaint with the FTC about Facebook, was planning to file another complaint today. Peter Eckersley of the Electronic Frontier Foundation said that the bill should provide “better default rules of the road” for online companies “so that you don’t need to worry about reading all the fine print or opting out of everything.” He said the exemption for what the bill called “operational data” collected through cookies and web logs was also “troubling.”

In a Washington Post interview last year, Boucher said the bill would take a “measured approach” to privacy. “Targeted advertising has great value and encourages more Web traffic,” he said. “The goal is for people to use the Internet more and trust it more by giving a clear sense that the Internet is secure…If not for the ability to target advertising for Internet users, there would not be as much free content.” Members of the Interactive Advertising Bureau’s Public Policy Council are meeting next week in Washington to get an update on the bill. Council members represent entertainment and content companies such as Disney and ESPN, as well as data collection and analysis firms like Bluekai and major web players such as Google and Amazon.

Related content from GigaOM Pro (sub req’d): Social Advertising Models Go Back to the Future

Post and thumbnail photos courtesy of Flickr user Kevin Dooley

  1. Wonder if these rules are a little too late. The real test will be in its enforcement.

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  2. What is going to be an application?

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  3. [...] earlier today, goes too far, according to some in the online ad industry, and not far enough, according to some privacy [...]

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  4. [...] earlier today, goes too far, according to some in the online ad industry, and not far enough, according to some privacy [...]

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  5. This may reduce some Internet privacy issues… but not completely for sure.

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  6. Very interesting development. In Europe we have very tough laws on privacy. German companies need a double-optin to be able to email a newsletter. Poland has a very powerful agency that checks companies and reviews their security guidelines (GIODO).

    Finding a set of rules we can all share in common would not only serve the internet users and help build their trust. This common set could also make the internet more competitive, because many European companies have a huge disadvantage when competing with US-competitors. (Please do not misread this as whining ;).

    Apart from the challenges of competing from Europe the industy here has more than survived. Companies have learnt how to deal with the (sometimes harsh) rules and still make their money.

    As European service we have to adhere to many rulings, especially when we localise our service to another language and expand into a new country. Of course this slows us down a bit, but it also shows how much we respect the market and the users.

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  7. Bottom line is, American companies do not respect consumers’ privacy and don’t care to be regulated. So marketers, unscrupulous companies, identity thieves and hackers all benefit from their lobbying, their violation of our privacy and their unfettered sharing of personal information. That must change, even if it needs to be forced upon companies doing business on the Internet. Just do it.

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  8. [...] is the first in a long line of hearings regarding this issue while groups continue to work with Congress to turn tough technological language into visionary [...]

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  9. It will definitely be interesting to see how it is enforced. It will also be interesting to see if the opt out will eventually replace the opt in.
    http://lunchpail.knotice.com/2010/05/10/self-regulation-winning-ongoing-bt-battle/

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  10. Truth is I think Facebook and others presume people just don’t care how their info is being used. So the default is that they do what they will, but you can always “opt out”.

    If you would like share how you think your info should or shouldn’t be shared, please tell Comradity: http://www.comradity.com/comradity/how-do-you-feel-about-sharing-your-information.html

    We plan to share the results with Rep. Boucher.

    Katherine Warman Kern
    @comradity

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