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US FTC Proposes Consumer Privacy Framework

by Glen Shapiro, LawAndTax-News.com, New York

02 December 2010


The United States Federal Trade Commission (FTC) has issued a preliminary report that proposes a framework to balance the privacy interests of consumers with innovation that relies on consumer information to develop new products and services.

The proposed report, entitled “Protecting Consumer Privacy in an Era of Rapid Change: A Proposed Framework for Businesses and Policymakers”, also suggests the implementation of a “do not track” mechanism on consumers’ browsers, so that consumers can choose whether to allow the collection of data regarding their online searching and browsing activities.

“Technological and business ingenuity have spawned a whole new online culture and vocabulary that consumers have come to expect and enjoy,” said FTC Chairman, Jon Leibowitz. “The FTC wants to help ensure that the growing, changing, thriving information marketplace is built on a framework that promotes privacy, transparency, business innovation and consumer choice.”

He added that the FTC, in addition to making policy recommendations, “will take action against companies that cross the line with consumer data and violate consumers’ privacy.”

The report states that industry efforts to address privacy through self-regulation have been too slow, and up to now have failed to provide adequate and meaningful protection. According to the report, “this proposal is intended to inform policymakers, including Congress, as they develop solutions, policies, and potential laws governing privacy, and guide and motivate industry as it develops more robust and effective best practices and self-regulatory guidelines.”

The FTC said that it developed the proposed framework “in recognition of increasing advances in technology that allow for rapid data collection and sharing that is often invisible to consumers. Although many companies use privacy policies to explain their information practices, current privacy policies force consumers to bear too much burden in protecting their privacy.”

To reduce the burden on consumers and ensure basic privacy protections, the report first recommends that “companies should adopt a ‘privacy by design’ approach by building privacy protections into their everyday business practices.” Such protections would include reasonable security for consumer data, limited collection and retention of such data, and reasonable procedures to promote data accuracy.

In addition, companies should implement and enforce procedurally sound privacy practices throughout their organizations, including assigning personnel to oversee privacy issues, training employees, and conducting privacy reviews for new products and services.

Second, the report states, consumers should be presented with choice about collection and sharing of their data at the time and in the context in which they are making decisions – not after having to read long, complicated disclosures that they often cannot find.

The report adds that, to simplify choice for both consumers and businesses, companies should not have to seek consent for certain commonly accepted practices. It is “reasonable for companies to engage in certain practices – namely, product and service fulfilment, internal operations such as improving services offered, fraud prevention and legal compliance,” the report states. “By clarifying those practices for which consumer consent is unnecessary, companies will be able to streamline their communications with consumers, reducing the burden and confusion on consumers and businesses alike.”

One method of simplified choice the FTC’s report recommends is a “do not track” mechanism governing the collection of information about consumer’s internet activity to deliver targeted advertisements and for other purposes. Consumers and industry both support increased transparency and choice for this largely invisible practice.

The FTC recommends a simple, easy to use choice mechanism for consumers to opt out of the collection of information about their internet behaviour. The most practical method would probably involve the placement of a persistent setting, similar to a cookie, on the consumer’s browser signalling the consumer’s choices about being tracked and receiving targeted ads.

The report also recommends other measures to improve the transparency of information practices, including consideration of standardized notices that allow the public to compare the information practices of competing companies; and consumers being allowed “reasonable access” to data that companies maintain about them.

Public comments on the report will be accepted until January 31, 2011.

TAGS: compliance | business | commerce | law | internet | e-commerce | United States | standards | regulation

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