FTC, Industry Clash Over Online Privacy

The 1,000-member Software & Information Industry Association (SIIA) said Tuesday that new legislation to govern online privacy issues would “represent a giant step backwards.”

The Washington, D.C.-based organization said that industry self-regulation remains the clear-cut alternative to government legislation and called on the U.S. Federal Trade Commission (FTC) to utilize existing laws that allow prosecution of Web site operators who misrepresent their privacy practices.

The SIIA’s statement is a response to the FTC’s request on Monday that Congress enact new laws regarding online privacy. The Commission voted 3-2 last Friday to release a report that concludes legislation is necessary.

Consumer Confidence at Risk

According to the report, “The number of Web sites meeting basic standards of privacy protection is far too low, endangering consumer confidence in this fast growing, pro-consumer marketplace.”

The FTC said it conducted a survey based on two target groups: a random sample of all Web sites with at least 39,000 unique visitors per month; and the 100 most popular U.S. commercial Web sites.

The commission found that only 20 percent of the randomly surveyed sites had implemented widely accepted standards of online privacy. Among the 100 most popular sites, 42 percent complied with those standards. Only 8 percent of the randomly surveyed sites included a privacy seal, while 45 percent of the most popular sites did so, the FTC said.

The SIIA claims that a full 90 percent of Web sites post privacy policies, compared to only 14 percent two years ago. That is proof positive that self-regulation is working, the SIIA contends.

“E-commerce vendors understand that it is in their best interest to be predictable and transparent in their use of consumer information as consumers become more educated about privacy policies and their rights,” said SIIA President Ken Wasch.

Political Football

The upcoming presidential election between Texas Governor George W. Bush and Vice President Al Gore could lead to a high level of public debate over the privacy issue. Because legislative action by Congress is unlikely prior to the election, both candidates are expected to carve out positions for inclusion in their platforms.

Gore, who has positioned himself as the more Internet-oriented of the two candidates, is said to support a strong privacy initiative, but is dependent on the software industry for financial support in key states like California, Massachusetts and Texas.

Bush, on the other hand, favors self-regulation and is likely to take Gore to task for any indication that he supports government intervention in privacy issues between business and consumers.

The FTC’s recommendation is a departure from its earlier position in support of self-regulation. President Clinton is also an outspoken advocate of self-regulation.