Bloomberg News

Obama Turns to Web Industry for Consumer Privacy Standard

February 23, 2012

The Obama administration unveiled an initiative to give consumers more control over their personal information online, calling on Internet companies such as Google Inc. (GOOG) and Facebook Inc. (FB) to develop common privacy standards.

Congress should enact a privacy bill of rights for Web users, the administration said in a report released today in Washington. The U.S. Commerce Department also plans to convene industry and consumer groups to develop voluntary codes of conduct for online privacy that would be enforced by the Federal Trade Commission, according to the report.

“Consumers can’t wait any longer for clear rules of the road that ensure their personal information is safe online,” President Barack Obama said in a statement. “As the Internet evolves, consumer trust is essential for the continued growth of the digital economy.”

Revelations about potential privacy vulnerabilities during the past year have spurred calls from regulators and lawmakers in Washington for stronger protections of personal data online and on Internet-connected mobile devices.

Google and Facebook, the world’s largest social network, are among Web companies facing scrutiny over their handling of consumer data used to power an online ad market projected to reach $39.5 billion in the U.S. this year, according to eMarketer Inc., a New York-based research firm.

Targeted Advertising

The White House report sets broad principles for the use of personal information that include giving consumers control over what data is collected on them and how it is used; providing understandable privacy policies; and handling consumer data securely. The Commerce Department will meet with companies and privacy advocates to develop voluntary standards for businesses based on the principles.

Jeff Chester, executive director of the Center for Digital Democracy, which has urged regulators to review the handling of consumer data by companies including Facebook and Google, said privacy advocates “cannot accept any ‘deal’ that doesn’t really protect consumers, and merely allows the data-profiling status quo to remain.” Consumers, not Internet companies, should be in control of their personal information, Chester said.

The FTC, which can act against companies that engage in unfair or deceptive trade practices, last year settled complaints against Google, Facebook and Twitter Inc. over how those companies handle consumer data.

Do Not Track

Privacy advocates have expressed concern that Internet companies are tracking consumers without permission to send targeted advertising based on their Web-browsing habits.

Online-advertising networks are committing to adhere to anti-tracking tools on most major Web browsers, said Stu Ingis, general counsel of the Digital Advertising Alliance, an association of online ad groups that is spearheading the effort.

“The consumer will have the ability to exercise choice,” Ingis said at a White House briefing today. He said the development of a new browser tool will make it clear and simple for consumers to say whether they want to be tracked or not.

Google, owner of the world’s most-popular search engine, said today it would allow a “do-not-track” button to be embedded in its Web browser to let users limit the amount of information gathered on their browsing habits.

“The best way to protect your privacy is to enable you to exercise choice through meaningful product controls,” Susan Wojcicki, Google’s senior vice president of advertising, said in a statement. “We are pleased that today’s agreement will ensure that users are given an explicit choice.”

Privacy ‘Milestone’

Companies including Facebook and Microsoft Corp. (MSFT), the world’s largest software maker, welcomed what they called a balanced approach to online privacy.

Calling on industry to sit down with privacy advocates seeks “to both honor the expectations consumers have when they use online services and to promote the innovation that has fueled the growth of the Internet into an engine of job creation and a provider of invaluable services,” Erin Egan, Facebook’s Chief Privacy Officer for Policy, said in an e-mailed statement.

Fred Humphries, Microsoft’s vice president of U.S. government affairs, called the administration report a “milestone” for consumer privacy.

“We are hopeful that the policy’s establishment of a robust stakeholder dialogue will lead to more specific solutions and help overcome challenges faster,” Humphries said in an e- mailed statement.

‘Legal Certainty’

U.S. lawmakers have yet to approve comprehensive legislation on online privacy. A law based on the White House consumer-privacy bill of rights “would increase legal certainty for companies, strengthen consumer trust, and bolster the United States’ ability to lead consumer data privacy engagements with our international partners,” the administration said.

Even if Congress doesn’t enact the principles, they “will serve as a template for privacy protections that increase consumer trust on the Internet and promote innovation,” according to the report.

Senator John Rockefeller, a West Virginia Democrat who chairs the Senate Commerce Committee, said he would still push for a privacy law, “because I believe consumer privacy is a right, not a luxury.” Rockefeller said that he would “closely monitor” the industry effort to work out voluntary codes of behavior “to make sure that consumer expectations are, in fact, being met.”

Google Privacy Policy

Complaints have been sparked by a new privacy policy announced by Google, owner of the world’s most-popular search engine. Under the change set to take effect March 1, Mountain View, California-based Google will unify privacy settings for 60 different services, including YouTube videos and mobile devices running on its Android software.

The National Association of Attorneys General criticized the company’s decision, saying the new policy doesn’t give consumers choices about pooling their data, according to a letter sent yesterday to Google Chief Executive Officer Larry Page signed by 36 state attorneys general.

The Electronic Privacy Information Center, a Washington- based advocacy group known as EPIC, filed a lawsuit Feb. 8 seeking to compel the FTC to sue Google to block the changes.

“The White House has set out an important and far-reaching framework for online privacy,” Marc Rotenberg, EPIC’s executive director, said in an e-mailed statement today. “The key now is enforcement and the immediate test facing the FTC is whether it will block Google’s proposed changes prior to March 1.”

Chris Gaither, a spokesman for Google, said in an e-mail that the new policy will make privacy practices easier to understand and Google’s services easier to use.

“We’ve undertaken the most extensive notification effort in Google’s history,” he said. “We’re continuing to offer choice and control over how people use our services.”

To contact the reporters on this story: Eric Engleman in Washington at eengleman1@bloomberg.net; Sara Forden in Washington at sforden@bloomberg.net

To contact the editors responsible for this story: Michael Shepard at mshepard7@bloomberg.net; Michael Hytha at mhytha@bloomberg.net


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