FTC Sides with Private Sector on Internet Privacy Issues

The Federal Trade Commission Tuesday uttered the one word Internet companies have been dying to hear from the U.S. government: self-regulation.

FTC Chairman Robert Pitofsky and three commissioners, testifying before the House Commerce Committee’s Telecommunications Subcommittee, presented a report essentially agreeing with the private sector that Internet privacy should remain the responsibility of the companies involved.

“The Commission believes that legislation to address online privacy is not appropriate at this time,” the report states. However, the commission will be watching to see how well Internet companies address what the FTC calls “substantial challenges” to educate online merchants on the importance of privacy and give them incentives to implement appropriate safeguards as widely as possible.

Not Quite Hands-off

While the FTC does not advocate legislating a privacy initiative, the commission is also not going to sit back idly and watch. In the report, “Self-Regulation and Privacy Online,” the commission sets a schedule of public workshops, task forces and an online survey it will use to monitor the private sector’s efforts toward implementing privacy measures.

“This is not the occasion to declare victory. There is more to protecting consumer privacy than simply publishing notices on Web sites,” Pitofsky said. “We intend to monitor what we hope and expect will be continuing progress in development of privacy protection programs, as well as efforts to develop effective enforcement mechanisms.”

Among the FTC’s public workshop plans, one will address “online profiling,” the practice of compiling information about a consumer’s preferences and interests by tracking the consumer’s online movements. The commission will also establish two task forces of industry hands and consumer advocates — one to explore the costs versus benefits of implementing fair information policies, the other to discuss how to create incentives for online merchants to adhere to industry-accepted policies.

Committee Chairman Agrees

Commerce Committee Chairman Thomas Bliley (R-Virginia.), in whose committee any Internet privacy legislation would have to start, said he agrees with the FTC’s laissez faire approach — for now. “Electronic commerce changes so quickly, I am concerned that a government mandated privacy policy would stifle innovation. We would be imposing a static policy on a dynamic and constantly changing industry,” Bliley said.

Though he applauded the private sector’s moves to include privacy notices on their Web sites, Bliley reminded Internet businesses that adding a few words to a Web site is not enough. The chairman noted several areas where his committee will be watching closely for improvement in coming months. First, traditional retailers starting to put their wares online must follow established Internet merchants’ lead with appropriate privacy policies.

Second, all online businesses must implement solid follow-up programs. “The true test of a privacy policy is the remedy to consumers if their privacy is violated. A privacy policy is worth little if a company can ignore consumers who seek redress,” Bliley said.

Finally, the chairman said he worries about the transfer of personal information to third parties. “Consumers should be told when third parties may have access to their information and should have the right to refuse the transfer to others of such information,” he argued.