FTC Releases Privacy Report

The Federal Trade Commission issued a preliminary report that proposes a framework to balance the privacy interests of consumers wtih innovation that relies on consumer information to develop new products and services.

On December 1, 2010, the Federal Trade Commission issued a Privacy Report entitled “Protecting Consumer Privacy in an Era of Rapid Change” that could change the use of personal and profiling information across all industries, on and offline. The report is a preliminary examination into consumer privacy challenges posed by new technologies and comes after a yearlong series of roundtable discussions between FTC staff, industry leaders, scholars, and nonprofits. Targeted at the lawmakers and industry players who shape privacy policy in the Internet age, the report proposes a framework that aims to balance consumer privacy with the needs of institutions whose innovations and growth depend on understanding consumer practices.

Entities that collect or use data which can be linked to a specific consumer are the primary targets of the report’s three-part framework. The main use of this data is “online behavioral advertising,” a common practice involving detailed consumer profiles used by companies to create individually targeted advertisements. These profiles are typically generated by companies which surreptitiously track a user’s movements through the Internet using tracking features such as cookies.

In the first prong of its framework, the report suggests companies adopt a “privacy by design” approach by building privacy protections into their everyday business practices. An example of this approach is a company which only collects consumer data necessary for a specific business need and maintains the data only for as long as is required to fulfill that purpose.

The report goes on to suggest that companies simplify consumer choice before collecting and using consumer data. Significantly, the report endorses a standardized “Do Not Track” system that would allow individuals to restrict the flow of their personal data to advertisers. The “Do Not Track” proposal is similar to the successful federal “Do Not Call” registry for telemarketers.

The proposed framework’s third prong suggests companies increase the transparency of their data collection practices. Specifically, the report advises that companies use clearer, shorter, and more standardized privacy policies as well as provide a mechanism to allow consumers to access the data collected from them.

As a whole, the report signifies a shift from the principles of industry self-regulation which the FTC first proposed in 2007 because with this approach, companies “have been too slow, and up to now have failed to provide adequate and meaningful protection.” Indeed, while the FTC reminded marketers that it will not hesitate to pursue claims when it finds consumers’ privacy rights have been infringed, its ultimate goal is to have the finalized report used by Congress to formulate new privacy legislation, an initiative that may receive newfound attention in the U.S. House Energy and Commerce Committee.

The deadline for the public to comment on the report is February 18, 2011. Comments may be submitted at https://ftcpublic.commentworks.com/ftc/consumerprivacyreport