Internet Self-Regulation Dead on Arrival

If the wave of legal activity and negative publicity that has swamped online advertising agency DoubleClick is any indication, then attempts to self-regulate the Internet have been an abysmal failure.

In fact, a new report from Forrester Research suggests that government regulation of e-commerce privacy issues are now a foregone conclusion.

The research firm goes so far as to identify the recent uproar over DoubleClick’s plans to combine consumer surfing-pattern data with offline purchase patterns from its Abacus subsidiary as the ultimate lightning rod.

“With President Clinton calling for stronger privacy protection for computer users, DoubleClick asked the government to clarify online data rules,” the Forrester report notes. As a result, problems inherent in privacy self-regulation have been exposed for all to see.

Gaping Holes in Self-Regulation

“Privacy advocate Richard Smith showed that financial data and video titles — both regulated offline — are often inadvertently sent to third-party servers,” the report points out.

Additionally, Forrester contends that even though companies such as DoubleClick have allowed consumers to opt out from being tracked online, they have not made the option readily available or easy to choose.

Finally, the report asserts that the ease of combining online data from such diverse sources as motor vehicle records, catalog purchases and warranty card surveys makes privacy violations too tempting a proposition for many e-merchants to resist.

Statutes Lag Behind Technology

Still, e-tailers are not totally at fault, Forrester says. In many cases, current laws are ambiguous and do not reflect advances in technology.

“It is legal to hire a private eye to follow someone at a shopping mall, but it is illegal to tap a phone,” the report explains. “Only legislation can define whether a Web user deserves privacy because she is in her living room or should expect to be tracked because the Web is a public network.”

Therefore, Forrester suggests that such laws as the 1971 Fair Credit Reporting Act, which protects an individual’s financial information from offline marketers, should be quickly updated to close loopholes that allow online merchants to cull such information with impunity.

Forrester also calls for more new legislation, such as the Children’s Online Privacy Protection Act, which was enacted in 1998 to restrict online marketing targeted toward children.

The Avoidance Factor

I agree with Forrester’s conclusions, but the report misses an important factor that contributes heavily to the current crisis in e-commerce privacy.

I think the reluctance of both the Federal Trade Commission (FTC) and the U.S. Congress to meet this problem head on has given the wrong signal to those unscrupulous e-tailers who care little about individual privacy, and has also opened the door to an untold number of class action lawsuits.

This negligence by both parties feeds consumer fears and almost guarantees that self-serving politicians will soon be proposing draconian measures.

Still, while the government is bound to step into the privacy fray, I am not at all sure that it will happen any time soon. In the meantime, inaction will create a huge open space that only a litigator could love, and the courtrooms will be meting out piecemeal solutions that will never fill the void.