Can E-Commerce Police Itself?

The issue of Internet privacy seemed to dominate much of the e-commerce terrain last week as President Bill Clinton and the U.S. Senate Commerce Committee waded knee-deep into the fray.

According to published reports, Clinton gave high-tech industry leaders a stern warning last Friday, telling them that they must quickly adopt minimum privacy standards or have the government do it for them.

“This is a big deal to people,” Clinton reportedly told a group of high-tech executives at a meeting in San Jose, California.

“They are afraid they will have no place to hide,” Clinton added. “And so I would argue again that the continuing success of the phenomenal enterprise, which has no parallel in history, requires us to seriously take into account that core of what makes America a unique place, that freedom requires a certain space of privacy.”

Earlier in the week, the subject of consumer privacy over the Internet was also brought up when AOL CEO Steve Case was asked at a U.S. Senate hearing if he saw a need for legislation to make sure that companies comply with privacy rights.

Case replied that although he is not opposed to such an effort, “it would be better if companies could do it on their own.”

Privacy Alliance Pushes Self-Regulation

This call for self-policing is a familiar industry refrain. The Online Privacy Alliance, a coalition of about 90 global companies and associations, is still trying to convince the Federal Trade Commission (FTC) that there is no need for government regulations to protect users’ online privacy rights.

Instead, the alliance contends that the best way to protect consumers is to allow the industry to regulate itself.

Put Stiff Penalties in Place

While self-regulation sounds good in theory, I believe that there have already been too many violations of users’ privacy rights that have simply gone unpunished. Therefore, to become convinced that the industry is really serious about policing itself — especially in light of the revelations about the actions of controversial Internet advertising firm DoubleClick — I would have to see some stiff penalties put in place by the industry for such “mistakes.” Only then would I begin to believe industry policing still had a chance to work.

Currently, since there is no punishment being meted out, a lame “we’re sorry” is all consumers can expect from companies that deliberately spy on them.

Again, if the industry is really serious about self-regulation, then let’s see it slap a six-figure (US$) fine on offending companies and divide the money among the users whose privacy has been breached.

Self-Policing Can Work

One only has to look at the National Association of Security Dealers (NASD) to see how an industry can successfully regulate itself.

However, based on the e-commerce industry’s youth, disunity and big egos, I doubt that effective self-regulation will happen any time soon. Sad to say, the government will probably be forced to step in and do the job.