Ad Group Pushes Net Privacy Self-Regulation

Hoping to fend off government regulation of online privacy, the Internet Advertising Bureau (IAB), a trade group that counts among its more than 300 members some of the most recognized names in cyberspace, has issued a set of privacy guidelines for companies doing business on the Internet.

While members are being encouraged to develop their own standards as appropriate, the New York-based IAB suggests that, at a minimum, privacy guidelines address disclosure of how personal information is collected, individual consent for collecting the data, and protection of personal information from improper use.

Currently on the IAB membership rolls are online giants America Online, Yahoo! and Alta Vista. The membership also includes More.com, DoubleClick, and Sony Online Entertainment.

Guidelines Voluntary

The guidelines are voluntary, but the IAB said that its members will be required to establish and post privacy policies “designed to protect the information that can be associated with an individual’s personal identifiable information in an online or electronic advertising environment.”

Rich LeFurgy, IAB Chairman and General Partner of WaldenVC, said, “In effect, we have established a baseline for IAB member companies to ensure the protection of individual’s privacy.”

He added, “The IAB has been working with the Privacy Leadership Initiative (PLI), the Online Privacy Alliance and a number of other organizations to define workable and effective policies that can be implemented not only by our members, but by the industry at large.”

Too Little, Too Late

Privacy advocates have been highly critical of attempts by industry to create a self-regulatory framework for profiling Web surfers and e-commerce shoppers. According to many observers, online profiling has been extremely invasive of individual privacy. As a result, watchdog groups and others have been calling for federal laws and regulations to curb abuse.

In June, speakers from the Electronic Privacy Information Center told a U.S. Senate committee what they told the Federal Trade Commission (FTC) last year: that online profiling by Web advertisers must be governed by federal law, not self-regulation.

The activists told senators that legal protections for online consumers are long overdue, and that the lack of substantial privacy protection is stunting the growth of e-commerce.

Full Disclosure

The IAB guidelines require that member companies implement privacy policies that disclose to individuals what information is being collected, how that information will be used, what choices the individual has with regard to disclosure, and what consequences the individual will face for refusal to disclose information. Companies are also required to notify individuals how the collected information will be used.

The IAB also advise that privacy policies fully disclose that consumer information may be disclosed without their consent if such disclosure is required by law. Instances in which disclosure is required by law include receipt of a subpoena or search warrant.

Third Party Disclosure

Member companies are also required to notify individuals of possible third-party distribution of personal information. If the information is being distributed to a third party, the IAB recommends that the policy make reference to what information is disclosed, why this disclosure takes place, and the relationship of the organization to the third party.

The recently departed Toysmart.com is currently at the center of a controversy involving the disclosure of customer information to third parties. The defunct online toy store is having a fire sale, and one of the most coveted items for sale is its customer database, which reveals individual customer preferences.

The problem is that during its nearly year-long existence, Toysmart promised its customers that it would never share or sell the private information of its customers with third parties. The proposed sale of its customer list has drawn ire from both the U.S. Federal Trade Commission and online privacy watchdog group TRUSTe, of which Toysmart was once a corporate member.

Privacy Crisis Coming

A recent report by IAB member Forrester Research predicts that the online privacy debate will subside temporarily, and then reach a crisis point before 2004.

The report went on to say that by 2005 the online privacy battle will come to a head, as anti-government advocates start to join forces with anti-corporate activists — injecting new life into the controversy.