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Why FTC Asks for Online Privacy Laws

Only 42 percent of top sites adequately follow fair practices, report says.

By Keith Perine, The Industry Standard   

The commission's third annual congressional report was released on Monday prior to a scheduled Thursday appearance by the five Federal Trade commissioners before the Senate Commerce, Science and Transportation Committee chaired by Senator John McCain (R-Arizona).

On May 19 the commission voted 3-2 to ask Congress to pass a law guaranteeing "a basic level of privacy protection for consumer-oriented commercial Web sites."

The commissioners will ask Congress:

* To pass a law mandating "clear and conspicuous" privacy notices

* To require that consumers be offered a choice as to how their personal information is used

* To allow "reasonable" consumer access to personal information collected online

* To require sites to take "reasonable steps" to secure the personal information collected.

Crossing the Privacy Line

Monday's report, which signals an important shift in the FTC's official stance on online privacy, is based on a survey conducted earlier this year that gauged the privacy practices of hundreds of leading sites, including Amazon, Yahoo, and EBay.

The survey revealed that only 42 percent of the 90 most popular Web sites that collect personal information adhere to the FTC's "fair information practice principles" of notice, choice, access, and security regarding the collection and use of personal data. The report also includes recommendations made by a special advisory committee of industry experts that studied online information access and security questions.

For years the FTC has been telling Congress that consumers' online privacy is best protected by voluntary self-regulation, a position eagerly echoed by industry representatives. But the FTC's patience with the online industry apparently has worn thin.

During the past year, the commission has conducted investigations into the privacy habits of leading electronic-commerce sites, from Amazon to Yahoo. For the past several months the commission has been signaling a change of heart. In February, FTC Chair Robert Pitofsky told a Senate committee that he was "increasingly coming around to the view" that legislation was needed to supplement self-regulation.

"The question is not whether industry self-regulation has passed or failed a test," Pitofsky said in a statement issued with Monday's report. "Self-regulation alone, without some legislation, is unlikely to provide online consumers with the level of protection they seek and deserve." Pitofsky added that self-regulation was still "vitally needed" and that new legislation shouldn't be "unduly burdensome or expensive" to implement.

For more in-depth coverage of the Internet Economy, visit The Industry Standard.