Bono Mack: Industry Not Doing Enough to Protect Consumers Online

Says government also tends to overreach, so key is finding balanced approach to important issue

By John Eggerton -- Broadcasting & Cable, 10/13/2011 1:03:45 PM

The House Commerce Subcommittee held its second hearing in as many weeks on online privacy Thursday, this time looking at how much consumers know about the issue. To the degree there was a consensus, it was that consumers need more control over their online information and an easier way to be informed about how it is being used.

In fact, one witness at the hearing, put the problem with 30-page, small type privacy policies into perspective. Alessandro Acquisti, associate professor of information systems and public policy at Carnegie Mellon, said that the opportunity cost of everyone actually reading all those policies would be about two-thirds of a trillion dollars.

Subcommittee chair Rep. Mary Bono Mack (R-Calif.) labeled the issue of consumer impact "where the 'rubber hits the road' with respect to online privacy."

She said at the root of the issue was targeted advertising and whether the process of collecting consumer's online behavior to target that advertising was sufficiently transparent and whether those consumers have the tools and information they need to opt out of data collection and sharing if they want to.

"I don't believe industry has proven that it's doing enough to protect American consumers," she said, "while government, unfortunately, tends to overreach whenever it comes to new regulations."

Neither Republican not Democrat argued for getting rid of targeted advertising or the free online content it underwrites, but online privacy protection legislation is a bipartisan issue and that was on display not only in Bono Mack's, with Rep. Joe Barton (R-Tex.) and Cliff Stearns (R-Fla.), both of whom have introduced privacy legislation, suggesting that more than self-regulation was needed in the space.

Barton talked about online privacy "outrages" surfacing almost weekly, and said "enough is enough" and that it was time to pass strong privacy legislation. That was seconded by Acquisti, who said that legislation should incentive new technologies, like better anonymization of data, saying that "it is possible for companies to make innovative uses of personal data, and tap information as an economic resource, in ways that do not sacrifice privacy."

Also backing legislation, though saying she thought it was unlikely to pass, was Pam Dixon, executive director of the World Privacy Forum. She added that if self-regulation wound up being the route privacy protection takes, it needs to be stronger self-regulation and focused not simply on behavioral advertising, but information tracking. She pointed out that consumers are not ware that opting out of tracking means the info will not be used to deliver targeted ads, which she said in many cases she does not have an issue with, not that the information is no longer being tracked.

Definitely opposed to online privacy legislation was Linda Woolley of the Direct Marketing Association speaking on behalf of the Digital Advertising Alliance (DAA). She pointed out that, based on DMA figures for the first half of 2011, online advertising would account for $30 billion in ad spending in support of e-commerce and subsizing a "rich variety" of commerce.

DAA comprises companies including including Comcast, Time Warner Cable, Google, Yahoo!, Disney, AT&T and others, who subscribe to a self-regulatory "icon" system for web sites that subscribe to basic online info protection principles and for allowing for opting out of behavioral advertising.

Woolley said that system is working, and evolving to make it more consumer friendly. She said data being used by online targeted marketers is generally not personally identifiable except when users choose to share it, but that DAA understand that some consumers do not want to receive targeted ads and that was why they came up with the icon system in 2009, a simple one or two-click opt out mechanism, she said. DAA's principles cover education, enhanced notice, choice, data security and consent for retroactive changes to data collection, and are flexible and "nimble, which was the advantage over legislation, she said.

She pointed to the high-profile members of the initiative, including the above-mentioned companies as well as Honda, American Express, Verizon, and Microsoft.

But a Microsoft exec was also on the panel, Michael Hintze, associate general counsel, who pointed out at several junctures that Microsoft supports principles-based privacy regulation, so long as it has a carve-out for successful self-regulation -- which Stearn's legislation has -- and is not overly prescriptive.