Should Consumers be Worried?

By January 23, 2007

In November, the Center for Digital Democracy and the U.S. Public Interest Research Group filed a complaint with the Federal Trade Commission (FTC) based on their concern that online advertising networks, behavioral targeting, and rich “virtual reality” media, among other data collection practices, were threatening the privacy of the American public. “A vast infrastructure of data collection has been put in place without the public’s awareness,” said Jeff Chester, executive director of the Center for Digital Democracy. “It’s designed for only one thing -- to get you to buy and buy and buy.” The two public-interest advocacy groups are also worried about other harmful effects in the long term.

“The emergence of this on-line tracking and profiling system has snuck up on both consumers and policymakers and is much more than a privacy issue,” said U.S. PIRG Consumer Program Director Ed Mierzwinski in a statement released at the time of the filing. “Its effect has been to put enormous amounts of consumer information into the hands of sellers, leaving buyer-consumers at risk of unfair pricing schemes and with fewer choices than the Internet is touted to provide.”

In early November, the FTC hosted hearings on “Protecting Consumers in the Next Tech-ade”. The hearings were attended by experts from the business, government, and technology sectors, consumer advocates, academicians, and law enforcement.

Dave Morgan, chairman of behavorial targeting advertising network TACODA, was among the attendees. “The FTC has been aggressive when there has been fraud. For example, they shut down the spyware industry. What we do is legal and my hope is that the government is not going to get involved.”

Morgan has a couple arguments to bolster his claim that these techniques are here to stay. “The number one complain from consumers about Web advertising is that it is irrelevant. As behavorial targeting gets better, consumers will notice that the ads they see are more relevant to them,” he believes. “Internet users like to get content for free. It is things like behavorial targeting that pay for free newspapers online. For a media site, 99% of the revenues come from advertising.”

Online marketers are eager to point that they do not collect addresses or other identifying information. That is not what they are interested in. This may be of minimal comfort to consumers when they realize that their surfing and buying habits are on file. One of the Center for Digital Democracy and U.S. PIRG’s main beef is that “current privacy disclosure policies are totally inadequate, failing to effectively inform users what data are being collected and how that information is subsequently used.”

The two organizations have called for “an immediate investigation into the online marketplace in light of this new environment, exposing practices that compromise user privacy, issuing the necessary injunctions to halt current practices that abuse consumers and crafting policies—and recommending federal legislation—to prevent such abuses.” The ball is in the FTC’s court.

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