Summary:

Advertising companies like Facebook and Google (NSDQ: GOOG) are usually on the front line of the digital privacy debate. But in a long-await…

Big Brother is watching you
photo: Flickr / Thomas Leuthard

Advertising companies like Facebook and Google (NSDQ: GOOG) are usually on the front line of the digital privacy debate. But in a long-awaited privacy report, the Federal Trade Commission today took the heat off these familiar names and called instead for tougher supervision of lesser known firms that collect and sell consumer data.

The report by the FTC, which in recent years has become the country’s de facto privacy czar, is a response to consumer alarm over how companies collect information about what they do online.

Despite recent calls for “Do Not Track” legislation, the FTC did not recommend new laws to forbid advertisers from gathering personal information. Instead, it praised recent efforts by the ad industry to regulate itself and advocated a “Privacy by Design” system that makes it easier for consumers to control their data.

The most significant part of the report may be the agency’s new focus on “data brokers.” These companies compile data about consumers from a variety of sources — shopping purchases, property records, court documents and so on — and sell it to third parties.

Data companies mentioned in the report, like Choicepoint or LexisNexis, are not household names like Apple (NSDQ: AAPL) and other tech firms that have been at the center of media storms over privacy. But in many cases, the data companies control a far deeper pool of information.

The FTC report asks them to step into the spotlight by forming a “centralized website where data brokers that compile and sell data for marketing could identify themselves to consumers and describe how they collect consumer data and disclose the types of companies to which they sell the information.” The agency also suggest the data brokers allow consumers to obtain information about themselves.

The shift of focus away from the online advertisers means it’s unclear how the ongoing fuss about so-called “tracking cookies” will get resolved. These are programs that record information about computer users as they move around the internet, allowing advertisers to serve specialized ads to each user.

Advertisers say this “behavioral targeting” is useful because it means, for example, that a lipstick ad isn’t shown to a sports jock. But critics say the practice is invasive and open to abuse. Experts like Stanford’s Jonathan Mayer believe that eliminating behavioral targeting would not seriously harm advertisers.

The ad industry has responded to privacy concerns with a program that is supposed to let consumers identify which companies are tracking them and that gives them instructions to stop. The industry says the program, which is symbolized by a blue triangle, is a success that has been adopted by ninety percent of advertisers. But the program may be too complicated for unsophisticated computer users and contains a number of loopholes.

The FTC flags several of these loopholes and suggests ways for the ad industry to close them: “choices offered should be persistent and should not be overridden if, for example, consumers clear their cookies or update their browsers.”

Overall, the report does not appear to poise any immediate threat to the way that companies like Facebook, which rely on providing rich online platforms in exchange for personal information, do business.

The agency also said it would host an upcoming workshop on how “mobile privacy disclosures can be short, effective, and accessible to consumers on small screens.”

One of the four FTC commissioners who took part in the report dissented from the findings on the ground that many of its proposed privacy safeguards were inefficient.

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