FTC Wants Internet Data Trading Regulated for Transparency

03/27/12

On Monday, the Federal Trade Commission requested Congress to formulate Internet privacy laws that would compel data traders and brokers to reveal the nature of the data on consumers that they are into sale and purchase. FTC has submitted an in-depth report that includes suggested measures like self-regulation by businesses, but did not come out in support of laws mandating anti-tracking buttons. The FTC report follows the trend of suggestions made by the White House last month and reaffirms the consensus that stronger regulations are needed to protect the online privacy of consumers and internet users.

The FTC has been active over the past couple of years in cornering social media giants over abusive use of user data. Companies like Google and Facebook have come under heavy scrutiny and applications in new platforms like the iPhone and iPad have been found abusive of user rights and reprimanded.

However, instead of resentment, internet data traders are actually desirous of having the suggestions of FTC passed, as it would then assure them of the legal standings of their own activities – what they can and cannot do. Right now, most internet data traders and brokers are unsure of the issues surrounding their business activities, and firm and transparent regulations in place would assure them of the limits to which they may use consumer data.

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As FTC Chairman Jon Leibowitz told the media during a news conference, the FTC wanted “no to erect a stop light, (but to) take a closer look at traffic patterns.”

The FTC report focused heavily on the need for companies to be transparent about their methods of data collection and the use of the collected data. The report also asked for specific legislation on data brokers like Lexis Nexis and Choicepoint – who acquire data that has been collected online and merge the same with offline documents to create reports upon consumers.

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The report mentioned that the brokers “sell a wealth of highly personal information about consumers but never interact directly with them … Consumers are often unaware of the existence of these entities, as well as the purposes for which they collect and use data.”

According to the FTC, a consumer should have discretion and control over the publication of his/her data portraits published by agencies not authorized to do so by the consumer. The FTC also suggested strongly that data brokers be compelled to reveal their practices and methods of data-collection.

The Digital Advertising Alliance, representing the biggest majority of Web advertisers, has promised to offer anti-tracking icons by the end of this year, and to work with the Commerce Department, FTC and private advocates to create the technology.

But the FTC has warned that if businesses do not come up with self-regulatory mechanisms within the year then it would push for laws. While the FTC has little power to create laws, it has the authority to enforce laws set by the Congress. And they are serious.

Leibowitz told the media, “We are confident that consumers will have an easy-to-use and effective do-not-track option by the end of the year because companies are moving forward expeditiously to make it happen and because lawmakers will want to enact legislation if they don’t.”