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The "landmark" privacy agreement between the Clinton Administration and online-advertising firms may make it a tiny bit harder for marketers to snoop on Web surfers. But the deal, announced the week of July 24, hardly qualifies as tough-minded consumer privacy protection.
In fact, it hardly qualifies as protection at all.
To be sure, it asks online-ad firms to state their privacy policies in legally binding documents subject to some enforcement by the Federal Trade Commission -- but under existing deceptive-practices laws rather than any rules specific to the Internet. Deceptive-practices laws, as currently written, don't specifically cover marketers' new ability to merge online data they collect about individuals with the myriad offline databases that contain all sorts of other personal details.
Under the FTC deal, inked on July 27, online marketers promise, for now, to hold off on combining info. But this, too, falls short. It's only a promise, and the deal carries no enforcement bite in this area. Marketers also promise not to use sensitive personal data -- such as medical history, sexual orientation, and Social Security numbers -- for marketing purposes. But here, too -- it's just a promise. There's no law that says marketers can't gather sensitive data or one to bar them from using it as they please.
ALL GUMS. The deal also promises to give consumers access to the info that marketers have been collecting about them. Marketers had previously insisted that such access would be too difficult and costly to provide. But again, the FTC doesn't have the power to force these online marketers to keep their word.
And here's another thing that makes this pact weak: It doesn't bar companies from merging offline profiles with the real-world identities of consumers. It merely says that consumers who don't want this to happen must tell the firms not to do it. The burden is on consumers to figure out how to opt out of the datapool.
EYE IN THE SKY. Why should the average consumer care? After all, it's only a name and an address. Think again -- and think ahead. It's not just a question of what advertisers do with your name and address. It's whether they'll have the power to create ever-richer data profiles on each individual and someday be able to pinpoint each person's precise value to a company's bottom line. Will your e-dossier show you to be a conservative tightwad, based on a random interpretation of your driver's license data, salary information, medical ailments, grades in college, and online shopping habits? Would they be correct or only get it half-right? Marketers argue that more data will mean better service. Privacy advocates worry that more data will mean unfair and inaccurate stereotyping -- and possibilities for product, price, and distribution abuses, if not commercial and social discrimination.
That's why I think these FTC rules don't go nearly as far as they should. Most significantly, they cover only online marketers -- and not the thousands of traditional companies, from auto makers and appliance manufacturers to airlines and medical centers -- whose plans for the future include creating products and services based on the detailed data they collect, online and off.
Ford and General Motors and a number of insurance companies, for example, have already begun gathering data about individual consumers from the satellite receivers they've installed in some cars. The receivers can pinpoint a driver's precise location and usage patterns -- from how fast you're driving at any given time to whether you're wearing your seatbelt. Ford is signing up companies like IBM to help them develop data-marketing systems that can harness GPS satellites and sensors in people's cars and appliances. They expect to have an early system in place by next year.
STOPGAP MEASURE. Whirlpool and other appliance makers, meanwhile, are building applications with embedded networking technology that enables companies to, say, track the way you use your refrigerator. These "smart appliances" are already being sold in test markets and are expected to hit the market next year.
Sure, most of these new Net-enabled data-gathering systems are being created in the name of better service to customers. But the Internet is a two-way information pipe, and companies see such devices as more sophisticated ways to collect data about individual customers, from their eating habits to their lifestyle decisions, so as to give people the services and products that fit their profiles. In the past, the theory was that people should get access to any product or service, as long as they could pay for it. In the future, data profiles being created about people could determine the access they get.
The new FTC deal doesn't even begin to contemplate these things. At best, it's a stopgap measure forged for an election year that simply gives marketers more time to stave off regulation.
For more reasons than you can count on your fingers, the FTC guidelines represent hardly a squeak in the name of meaningful consumer privacy protection. A roar is required -- and the sooner the better.
Stepanek's column runs twice a month on Business Week Online. She invites you to discuss these issues on our Privacy Matters forum Edited by Beth Belton
Copyright 2000, by The McGraw-Hill Companies Inc. All rights reserved.
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