P994809 / DOCKET No. 990811219-9219-01

COMMENTS OF THE
DIRECT MARKETING ASSOCIATION

I. INTRODUCTION

The Direct Marketing Association ("The DMA") is pleased to comment on the inquiry of the Federal Trade Commission ("The Commission") into online profiling. The DMA member companies have a major stake in the success of electronic commerce, and are among those most likely to benefit immediately from its growth. The DMA in the past several years has participated in the Commission’s workshops on online issues including privacy and consumer protection.

With the rapid developments in technology and the Internet marketplace, the Commission’s workshops have provided a useful forum for the timely discussion of online privacy. These workshops have been important to the development of The DMA’s very successful self-regulatory program for online privacy. We believe that this workshop helped raise awareness about issues associated with online profiling. These issues and their solutions, like the broader issue of online privacy, can be most effectively addressed through continued industry self-regulation. We take this opportunity to summarize the position set forth by The DMA at the November 8^th workshop.

The main focus of the workshop was on network advertisers, third parties that serve ads to web sites that they do not operate. This recently developed industry provides an effective and efficient means of marketing on the Internet. As with other Internet developments, consumers’ lack of familiarity with new technologies employed by network advertisers has raised concerns over privacy with regard to the practices of these companies. The DMA believes that self-regulation and technology are the most effective methods for establishing privacy protection for network advertising practices. Consumers’ understanding of the relationship between the network advertisers and the web publisher through effective notice and choice will foster an effective self-regulatory program in this area.

The following summarizes The DMA’s position regarding how to provide effective privacy practices for network advertisements:

• Effective notice and choice by both web sites and network advertisers will effectively empower consumers with regard to their information.
• Web publishers should provide notice and a means of contacting all network advertisers who collect information as a result of an individual’s interaction with their site.
• Network advertisers should provide individuals with notice of the types of information that they collect from sites to which they serve ads.
• Consistent with widely adopted industry practice, web sites that collect personally identifiable information should provide notice of any transfer of that information to third parties and an ability to opt out of such transfers.

For DMA members, the main use of information collected over the Internet is for marketing purposes. New technological capabilities have resulted in the development of the network advertising industry, which uses information collected from web sites to improve the efficiency and quality of online marketing. The use of technology employed by network advertisers enables customization and personalization of experience aimed at providing advertisements more likely to be of interest to individual consumers. This type of personalization, which is enabled through network advertising, is one of the unique attributes of the Internet that is driving its growth.

The many benefits of the use of network advertising technologies should be derived in a way that provides individuals with effective privacy protection. Transparency that provides consumers with an understanding of the relationship of the parties involved in network advertising can assist consumers in better understanding this industry and its benefits to the healthy development of the medium.

When the issue of online profiling is analyzed as a function of the different parties involved in the serving of advertisements, it becomes apparent that fair information practices can apply effectively to the network advertising businesses. The key to effective privacy practices for this industry is for consumers to understand the relationship between the parties involved in the delivery of third-party advertisements. These parties are: (1) the web site ("publisher"); (2) network advertisers; and (3) the advertiser.

Of these parties, only the network advertiser is new to the online privacy discussion. They are the focus of this workshop. The presence of these third-party providers of advertisements is not readily transparent to individuals interacting with web sites. The concern was raised at the workshop that as a result of this lack of transparency, individuals may unknowingly enter into relationships with these entities. As with other issues of online privacy, the key to addressing this concern is through effective notice and choice. To be effective, this notice and choice should be provided by both the publisher and the third-party ad servers.

Web publishers should provide notice of all network advertisers who collect information as a result of an individual’s interaction with their site. This will empower consumers with information that may be relevant to their interaction with the web site. The notice should be incorporated into the publisher’s posted policy and include a means of contacting the network advertiser. Contact information could include a hyperlink to the posted privacy policy of the network advertiser. In order to help ensure that this practice is widespread, network advertisers could require through contract that sites employing their services disclose this relationship in their posted policies.

Consistent with widespread industry practice, web sites that collect personally identifiable information should provide notice of the transfer of information to third parties and an ability to opt out of such transfers. Thus, if information collected by a publisher will be matched with navigational data collected by network advertisers, this should be disclosed in the publisher’s notice. Individuals should have the opportunity to opt out of the transfer of the information from the publisher’s site to the network advertiser.

Concerns about the use of information also could be reduced through transparency by the network advertiser of its information practices. By providing individuals with notice of the types of information they collect from sites to which they serve ads, as well as the types of information they collect as a result of a user’s interaction with the publisher, individuals will be aware of how information gathered from their interaction with web sites is being used.

The DMA believes that the "relationship issues" of online profiling are best addressed through self-regulation. To this end, The DMA is very supportive of the initiative of the network advertising industry that was announced at the workshop. A self-regulatory framework adopted by this group will have widespread effect as its members deliver the vast majority of third-party advertisements. The DMA also continues to take significant steps to help consumers understand the relationships between the parties with whom they interact online. A description of the effectiveness of The DMA’s Privacy Promise and the steps The DMA is taking to protect privacy including transparency of the relationship with network advertisers is set forth below.

The DMA and its members are constantly examining and evolving their privacy programs to ensure that consumers are afforded opportunities both to learn about products and services of interest to them and to express and obtain their preferences regarding marketers’ collection, use, or dissemination of information about them. Appropriate notice and choice, together with technology solutions, provide the best means for protecting privacy in the online environment.

Self-regulation continues to be best suited for protecting privacy as the diversity and technology of this medium foster an environment that is responsive to market forces. This medium is truly global in nature and the technology is changing rapidly, with new issues and solutions thereto emerging daily. In fact, the development of a marketplace in network advertising represents the type of rapid change in this medium that warrants a flexible and responsive self-regulatory framework for online privacy. Companies at the forefront of the Internet’s development truly appreciate how to address consumer concerns without stifling the growth of the medium.

As the impact of self-regulation on Internet privacy is being recognized and e-commerce continues to grow, The DMA continues to improve its self-regulatory efforts to empower consumers. On July 1, 1999, The DMA implemented its Privacy Promise. This initiative requires, as a condition of membership to The DMA, that companies participate in The DMA’s mail and telephone preference services. These services are offered free of charge to consumers, giving them the ability to remove their names from the lists of national marketers, substantially reducing their unsolicited commercial mail and telephone marketing calls. Companies must provide notice to consumers if they transfer data to others and provide the consumer with the ability to opt out of such transfers.

The success of the Privacy Promise is demonstrated by its widespread adoption by businesses. To date, more than 2,000 companies have signed on to the Privacy Promise. Moreover, just last week, The DMA announced the expulsion of several members that failed to comply with the Privacy Promise.

VI. TECHNOLOGICAL SOLUTIONS PROVIDE EFFECTIVE TOOLS TO EMPOWER CONSUMERS

In light of the unique characteristics of the Internet, technology also continues to play an important role in helping users determine and enforce the ways that information about them is used and collected. The DMA has been instrumental in using technology to develop consumer empowerment tools. Using these technology tools, individual users, rather than industry or government, will determine the uses of their personal information.

To this end, The DMA recently enhanced its Privacy Policy Generator to incorporate notice of third-party ad servers into the privacy notices it generates. This enhancement is designed to enable sites to inform individuals in their privacy notices about the use of cookies and arrangements with network advertisers. The Privacy Policy Generator (http://www.the-dma.org/policy.html) enables companies to develop customized privacy policies for posting on their web sites based on the companies' policies regarding the collection, use, and sharing of personal information. The utility of this tool, and the ease with which it is used, is demonstrated by the more than 1,000 companies that have used it and have sent policies to The DMA for review.

Another technology tool developed by The DMA that empowers consumers is its e-mail preference service. The DMA is very excited about this new service, which will allow individuals to remove their e-mail addresses from Internet marketing lists in a manner similar to The DMA’s long-standing telephone and mail preference services. As of January 10, 2000, consumers will be able to register for the e-MPS service at a special DMA web site. At no cost to them, consumers can use this service to place their e-mail addresses on a list indicating that they do not wish to receive unsolicited commercial e-mail. The e-MPS, once fully operational, will be part of the Privacy Promise.

VII. ABOUT THE DMA

The DMA is the largest trade association for businesses interested in direct, database, and interactive marketing and electronic commerce. The DMA represents more than 4,500 companies in the United States and 54 foreign nations. Founded in 1917, its members include direct marketers from 50 different industry segments, as well as the non-profit sector. Included are catalogers, financial services, book and magazine publishers, retail stores, industrial manufacturers, Internet-based businesses and a host of other segments, as well as the service industries that support them. Several major providers of online services, such as America Online, Time Warner, and The Walt Disney Corporation, are part of our vast membership. The DMA’s leadership also extends into the Internet and electronic commerce areas through the companies that are members of The DMA’s Internet Alliance and the Association for Interactive Media.

VIII. CONCLUSION

Self-regulation and technology continue to provide effective means of protecting privacy online. Electronic commerce continues to grow rapidly as does the adoption by businesses of flexible and effective privacy practices. This effective self-regulatory framework can be extended into the area of online profiling. Transparency of the relationship between publishers and network advertisers will empower individuals with information necessary to evaluate their online interactions. The DMA looks forward to continuing to explore these issues with the Commission.