“Self-regulation is about creating standards and holding members accountable for those standards,” said Robert Gratchner, chairman of the NAI board. “Having a seasoned and respected FTC attorney take the helm at NAI continues our deep commitment to meaningful self-regulation, effective enforcement of industry standards and further development of best practices in online behavioral advertising.”

As executive director, Groman will leverage over a decade of experience to tackle cutting-edge privacy issues. Groman has a deep knowledge of today’s complex policy debates around online advertising, privacy and self-regulation.

“Marc really understands the privacy issues facing consumers and businesses today, and has remarkable creativity, problem-solving and people skills,” said Jessica Rich, deputy director of the Federal Trade Commission’s Bureau of Consumer Protection. “The NAI is really lucky to get him at this critical time for privacy.”

“NAI member companies, along with the rest of industry, have been doing incredible work to advance consumer choice. In selecting Marc, the NAI has chosen a strong, respected leader who will continue to advance those initiatives,” said Alan Chapell, vice chairman of the NAI.

Groman replaces current executive director Charles Curran, who will continue to serve as an advisor to the NAI. “It has been an honor to have Chuck lead the NAI since 2009,” commented Gratchner. “During the NAI’s rapid expansion to more than 75 member companies, Chuck’s leadership enabled us to make significant progress in implementing credible compliance and best practices for companies engaged in interest-based advertising. As he leaves to pursue new challenges, I want to thank Chuck for his tireless efforts to broaden the scope of self-regulation and enhance consumer transparency and choice.”

If behavioral targeting practitioners do not inform consumers of being behaviorally targeted or misuse the information they collect, Congressional legislation or FTC regulation could be passed. Previously on Adotas, we covered how the FTC is monitoring behavioral advertising.

The group that is currently guiding self-regulation of behavioral advertising includes the Interactive Advertising Bureau, the American Association of Advertising Agencies (4A’s), the Direct Marketing Association, the Association of National Advertisers, the Council of Better Business Bureaus (BBB), and various businesses, consumers, and stakeholders. The main concern of this cross-industry group is that the proposed principles would constrain access to information that would be beneficial to internet marketers.

Companies like Google and Yahoo also have a say, according to FTC Director Charles Harwood. Facebook, for instance, argues the need for distinction between personal and non-personally identifiable information. The company is in favor of transparent data collection and control of what happens when the data is collected. Meanwhile, Google calls for the creation of privacy laws that would build consumer trust.

The FTC encourages the existence of privacy statements on all Internet websites where any information is collected. According to Harwood, companies must adhere to their own policies. If the manner in which data is collected changes, consumers should be notified and required to provide affirmative consent before further information can collected.

“Where we found that policy is misrepresented in a company’s actual practices,” said Harwood, “the FTC has filed lawsuits to require the company to post an accurate policy and to implement strict standards to ensure that company adheres to the policy.”

Behavioral Targeting

Is opting in or opting out of behavioral advertising an effective means of privacy control? Harwood thinks it’s more complicated. It may be ineffective if consumers do not know what they opt into or opt out of. When consumers opt out, they think they are opting out of all tracking activities, which may not be the case. To consumer advocates, they may really just be opting out of better targeted ads.

So what is FTC’s take on this? It’s inherent in the guidelines that consumers should have the choice of deciding whether they want their information collected, said Harwood, but he also noted that companies do not want to give consumers that option. If companies told consumers they do not have a choice, whether or not it is a violation of the FTC Act depends on the information collected.

In FTC guidelines, certain kinds of PII (personally identifiable information) should be collected only if consumers opt in about consumers are required to be manually opted into. Some information should not be collected at all, said Harwood, such as medical information and information about children unless parents are involved. The NAI (Network Advertising Initiative) agrees, and proposes that information of children under 13 not be used for behavioral targeting. This is currently permitted with parental consent.

The lack of transparency from companies about how information is used collected is an issue that concerns frustrates the FTC. Beyond serving behaviorally targeted ads, companies may not be are not disclosing other uses of the information that they collect, said Harwood. Perhaps the data is combined with other sensitive PII, or even being used to engage in price discrimination, which potentially violates the FTC Act.

According to Harwood, Chairman Jon Leibowitz has indicated the FTC may issue a CIDs (civil investigative demand), a type of subpoena, to help FTC understand how behavioral targeting data is combined with other data for uses beyond serving ads. The FTC can seek court enforcement for failure to respond may lead to fines and imprisonment.

The FTC may pursue voluntary standards, but it is up to the industry to keep itself in check. Within the February 2009 release, Leibowitz stated that the “industry needs to do a better job of meaningful, rigorous self-regulation or it will certainly invite legislation by Congress and a more regulatory approach by our Commission.

Put simply, this could be the last clear chance to show that self-regulation can – and will – effectively protect consumers’ privacy in a dynamic online marketplace.”

“Online behavioral advertising continues to provide significant benefits to internet users by supporting an amazing array of free content and services,” said Trevor Hughes, Executive Director of the NAI. “At the same time, NAI members believe that revisions to the NAI Principles are appropriate in response to the explosive growth of the field, and changes to technology, business models, and practices in the marketplace.”

In addition to addressing the elements of the suggested “self-regulatory principles” released recently by the Federal Trade Commission, the NAI will target discussion on specific attributes of their 2000 Principles program, including:

–  Scope & enforcement
–  Sensitive consumer characteristics
–  Choice-enabling technologies
–  Consumer education
–  Standards for use of personally identifiable information
–  Membership outreach
   
Input from stakeholders will be sought on proposed amendments in the early months of 2008.

Compliments of Marketwire.com

COO of 360i, Jonathan Ragals commends the firm for their action saying that this should not be a major blow to the advertising industry and just makes sense for better business. He was quoted to say, “For consumers it’s a trade-off between being served information that’s potentially more relevant to you versus having control over your privacy and information.”

Third-party ad networks will not be served at Microsoft until the acquisition of aQuantive is closed. Microsoft will continue the trend set forth by Google in making personal data anonymous after a year and a half by removing the IP address, cookies and any other identifiers.

Director of privacy strategy for Microsoft Brendon Lynch said, “Something we recognize is that customers [need to be] in control of the collection of their personal information. They need o be able to trust us. I think there’s been a lot more discussion recently about privacy issues and we saw this as a good opportunity to evolve our policy.”

This is another step to creating an industry-wide standard for privacy protection.