Consumer Confidence in Internet Marketplace Depends on Privacy Protections, FTC Tells Senate Commerce Committee

The Federal Trade Commission today told Congress that consumers must be confident that their privacy will be protected if they are to be willing to take advantage of all the benefits offered by the Internet marketplace.

Commission testimony to the Senate Committee on Commerce, Science and Transportation, delivered by Commissioner Julie Brill, states that, “Privacy has been an important component of the Commission’s consumer protection mission for 40 years. During this time, the Commission’s goal in the privacy arena has remained constant: to protect consumers’ personal information and ensure that they have the confidence to take advantage of the many benefits offered by the dynamic and ever-changing marketplace.”

The FTC’s testimony states that the FTC has taken a three-pronged approach to preserving consumers’ privacy – law enforcement actions, consumer and business education efforts and policy initiatives.

It notes that in the last 15 years, the agency has brought more than 300 privacy-related actions, including: 34 data security cases; 84 Fair Credit Reporting Act cases; 97 spam cases; 15 spyware cases; and 16 cases enforcing the Children’s Online Privacy Protection Act.

In addition, the testimony states that the agency has distributed millions of copies of consumer and business education materials that address basic privacy issues and security and privacy threats.

Policy initiatives to advance the agency’s privacy agenda include three privacy roundtables that involved privacy experts, business representatives, and academics who examined the implications of new technologies and business practices on consumer privacy. Based on the roundtable discussions, FTC staff issued a preliminary report proposing a privacy framework with three main concepts, the testimony states.

“Staff recommended that companies should adopt a ‘privacy by design’ approach by building privacy protections into their everyday business practices, such as collecting or retaining only the data they need to provide a requested service or transaction, and implementing reasonable security for such data,” according to the testimony.

The staff report also called for companies to provide an easy way for consumers to control the collection and use of their personal information. “One example of how choice may be simplified for consumers is through a universal, one-stop choice mechanism for online behavioral tracking, often referred to as Do Not Track. The testimony explained that “any Do Not Track system should not undermine the benefits that online behavioral advertising has to offer, by funding online content and services and providing personalized advertisements that many consumers value.” Any Do Not Track mechanism should be “flexible” and “should allow companies to explain the benefits of tracking and to take the opportunity to convince consumers not to opt out of tracking,” and “could include an option that enables consumers to control the types of advertising they want to receive and the types of data they are willing to have collected about them, in addition to providing the option to opt out completely.” The testimony notes that the industry “appears to be receptive to the demand for simple choices.”

In addition, the staff report recommended that “companies should improve their privacy notices so that consumers, advocacy groups, regulators, and others can compare data practices and choices across companies, thus promoting competition,” the testimony states.

The testimony notes that while the FTC has not taken positions advocating any particular legislative proposals, it favors data security legislation “that would (1) impose data security standards on companies, and (2) require companies, in appropriate circumstances, to provide notification to consumers when there is a security breach.” The testimony states that the Commission is committed to protecting consumers privacy both online and off, and looks forward to working with Congress to achieve that goal.

The Commission vote to issue the testimony was 5-0, with Commissioner J. Thomas Rosch issuing a separate statement recommending that the Commission and Congress learn more about Do Not Track before proceeding.

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