FTC Jumps the Gun with Privacy Proposal
The findings of a recent Internet privacy study conducted by the Federal Trade Commission (FTC) have prompted the agency to propose that Congress give it the power to set and enforce standards for consumer privacy protection. But e-commerce groups argue that such a regulatory proposal is premature and unnecessary. The industry has its own incentive to continue working diligently toward consumer privacy protection: Loss of consumer trust means the loss of consumer dollars.
FTC to Congress: Enforce Fair Information Practices
The FTC submitted a proposal titled "Fair Information Practices in the Electronic Marketplace" to Congress this week. It is the result of the 2000 Online Privacy Survey (2000 Survey) that the agency recently conducted. The FTC based its conclusions on the extent to which sites surveyed implemented the four fair information practice principles outlined in the agency's 1998 report to Congress. These principles are defined as follows:
- Notice. Web sites would be required to provide consumers clear and conspicuous notice of their information practices, including what information they collect, how they collect it (e.g., directly or through nonobvious means, such as cookies), and how they use it.
- Choice. Web sites would be required to offer consumers choices as to how their personal information is used -- beyond the use for which the information was provided (e.g., to consummate a transaction).
- Access. Web sites would be required to offer consumers reasonable access to the information they have collected about them, including a reasonable opportunity to review information and to correct inaccuracies or delete information.
- Security. Web sites would be required to take reasonable steps to protect the security of the information they collect from consumers.
Up until now, the FTC's stance on consumer privacy protection has been to allow the Internet industry to regulate itself with respect to these four principles. However, the results of the commission's 2000 Survey have caused officials to change their tune. While 88% of 335 randomly selected Web sites posted privacy policies, the agency found that only 20% followed the choice, access, and security principles.
Citing the lackluster results, the FTC wasted no time in submitting its proposal to Congress on Monday, requesting legislation that would allow it to formally establish and firmly enforce the four fair information practice principles.
An Industry at Work
Internet industry groups argue that the FTC's request for legislation is premature, noting that the agency's fair information guidelines have only been in existence for two years. In such a short period of time, the industry has made great progress in its self-regulation. In fact, the FTC's 1998 report contained a survey indicating that only 14% of Web sites disclosed any information regarding their information practices. In the past two years, this figure made a substantial leap to 88%.
But industry groups such as the NetCoalition.com, an advocacy group made up of 10 top Internet companies, including Amazon.com, America Online, and eBay, also acknowledge that there's much room for improvement. Upon the release of the 2000 Survey, the CEOs of several NetCoalition sites sent a letter to approximately 400 Web sites, urging them to adopt and implement all four fair information practice principles. NetCoalition even went a step further than the FTC by encouraging sites to also provide contact information for consumers who have questions about privacy.
The growth and industry support of privacy programs such as TRUSTe, a nonprofit organization, and BBBOnLine, a subsidiary of the Council of Better Business Bureaus, is also a good sign of the industry's commitment to consumer privacy protection. These nonprofit initiatives award privacy seals to Web sites that meet strict privacy practice criteria. Those sites that bear the TRUSTe or BBBOnLine seals are more likely to gain the trust of the consumers who visit them.
Self-Regulation Is Likely to Stay -- for Now
Fortunately for Internet companies, the FTC's proposal to Congress met with a lukewarm reception from Democrats and downright opposition from the GOP and White House. The consensus seems to be that the industry deserves a better chance to demonstrate progress in the area of privacy. Such opposition near the end of an election-year Congressional session serves as a good indicator that the FTC will not get the regulatory power it desires -- for now.
In order for consumer trust to grow, and e-commerce along with it, every Web site needs to practice the four fair information principles. In this way, the results of the FTC's next random sample will be outstanding, and self-regulation will endure, for more than just the present moment.
For more information on privacy practices and the FTC, read the following articles:
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