Federal Trade Commission Testifies on Online Profiling Report

Jodie Bernstein, Director of the Federal Trade Commission's Bureau of Consumer Protection, presented FTC testimony today before the Senate Committee on Commerce, Science, and Transportation on the Commission's report titled "Online Profiling: A Report to Congress." The report, issued today, describes the nature of online profiling, consumer privacy concerns about these practices and the Commission's efforts to date to address these concerns. The report does not include any legislative recommendations to Congress.

The Commission has encouraged effective industry self-regulation in the area of online privacy, and has engaged in discussions with industry members from the Network Advertising Initiative (NAI) about how to achieve this goal. The NAI has formulated working drafts of self-regulatory principles for consideration by the FTC and Department of Commerce staff. Bernstein testifies that discussions between industry and the FTC on these principles are not yet complete; the Commission plans on supplementing this report with "specific recommendations to Congress after it has an opportunity to fully consider the self-regulatory proposals and how they interrelate with the Commission's previous views and recommendations in the online privacy area."

The Commission's testimony outlines the privacy concerns of consumers in the online marketplace, and discusses the FTC's approach to online privacy since 1995. The FTC began to examine the issue of online profiling on November 8, 1999 at a joint public workshop on the issue with the United States Department of Commerce. Today's testimony and report address some of the issues raised at that workshop and in subsequent discussions with the network advertising industry.

Online profiling is the process by which network advertising companies that manage and provide advertising for numerous unrelated web sites gather data about the consumers who view their ads, primarily through the use of "cookies" that track individual surfing habits. This information is often anonymous - the profiles are linked to an identification number of the cookie on the computer rather than the name of a specific person. However, in some circumstances "the profiles derived from tracking consumers' activities on the Web are linked or merged with personally identifiable information," according to the testimony.

According to the FTC, these profiles are created using banner ads that "appear as a seamless, integral part of the Web page on which they appear and cookies are placed without any notice to consumers. Unless the Web sites which carry these banner ads provide notice to consumers of the network advertisers' practices, consumers may be totally unaware that their activities are being monitored."

While these marketing programs "can benefit both consumers and businesses," the FTC has found "widespread concern about current profiling practices," especially profiling conducted without consumers' knowledge. The Commission has also found concern about the detailed monitoring of consumer behavior across many Web sites over a long period of time, and addresses such concerns in today's report.

The Commission vote to issue the report and testimony was 5-0 with Commissioner Swindle concurring in part and dissenting in part.

Swindle dissented from how consumer opinion surveys were used in the report and prepared testimony, because such surveys "often are not reliable predictors of consumer behavior." He also criticized the Commission’s use of statistics and projections without an evaluation of the underlying methodology or an explicit qualification of the uncertainties attached to the numbers.

The views expressed in the written testimony represent the views of the Federal Trade Commission. The oral presentation and responses to questions do not necessarily reflect the views of the Commission or any individual Commissioner.

Copies of the testimony are available from the FTC's web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580; toll-free: 877-FTC-HELP (877-382-4357); TDD for the hearing impaired 202-326-2502. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.

(FTC Matter No. P994809)