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So says attorney D. Reed Freeman Jr., who is one of many who are paying close attention to Federal Trade Commission discussions dubbed "Exploring Privacy: A Roundtable Series." On Dec. 7, when the first of three day-long public events took place in Washington, D.C., behavioral targeting proponents, opponents and FTC representatives gathered for a panel discussion specifically meant to address the practice.
"Right now, behavioral advertising is not directly regulated but is subject to broad consumer protection laws written decades ago," says Freeman, a partner in the Washington, D.C., office of law firm Morrison & Foerster. Freeman, who also is on the board of directors of the International Association of Privacy Professionals, specializes in consumer protection law.
"This time next year, there will be a direct regulatory regime for online behavioral advertising. And marketers can expect that, and they should hope for and work towards that regime being the [industry self-regulation] proposed and being rolled out by the [Direct Marketing Association] and the [Interactive Advertising Bureau] and others," he continues, referring to the Self-Regulatory Principles for Online Behavioral Advertising.
The Debate Status
"The debate is constructive, and the dialogue is ongoing," according to a Dec. 16 e-mailed response from Peder Magee, an FTC staff attorney who co-moderated the Dec. 7 panel. "The stakeholders have the opportunity to weigh in, and are learning a lot by doing so. But because there are two more roundtables still to come, it would be premature to try to gauge the direction in which the debate seems to be headed."
(The next meeting is slated for Jan. 28 in Berkeley, Calif., and according to Freeman's firm, the last roundtable is slated for March 17, back in the nation's capital.)
Magee further comments that online behavioral targeting is just one aspect of the FTC roundtable's holistic approach to the privacy question. That is evident in outgoing Commissioner Pamela Jones Harbour's comments: "The United States needs comprehensive privacy legislation. If we continue the piecemeal approach to privacy in this country, we merely push aside the underlying issues. The privacy debate goes far beyond online advertising, because behavioral targeting represents just one aspect of a multifaceted privacy conundrum. Data collection, aggregation and use, as well as reuse, sale and resale are driving the creation of [online] and offline digital dossiers. Capturing data reflecting individual interests and habits is an enormous and growing business; evidence that consumer privacy is under siege."
Bad Actors
Privacy advocates brought up the topics of data misuse, while industry proponents discussed best practices and the self-regulation plans.
FTC questions also centered around "red lining" and "boxing" consumers, or categorizing people into price brackets or products and services, respectively. "Daisy chaining" (when the original ad host recycles ads to other sites in order to boost revenue) and circumvention of consumer controls (for instance, when a consumer has opted out or erased a browsing history but an advertiser already has copied his cookie into flash—where cookies aren't as easily erased) also were included in the queries.
"I think the fact is that the FTC recognizes that most marketers are playing well within the boundaries, well within the guidelines," says Adonis Hoffman, senior vice president and legal counsel to the American Association of Advertising Agencies and an adjunct professor of marketing, advertising and public policy at Georgetown University. "They will be identifying those marketers, those companies that are egregious, that refuse to play by the rules. And I think that bodes well for the larger community, because it lets you know where the lines are."
Freeman, however, notes that during the December roundtable the FTC did explore the rather nebulous concept of "intangible harms," or a harm that can't be rectified with money. (Specifically, Magee discussed how a male friend of his may not be sensitive about others knowing he uses Rogaine, but Magee's friend's grandmother might be sensitive about it.)
"To say something is a harm is shorthand for saying, 'Qualifies for enforcement as an unfair activity under the FTC Act,'" Freeman says.
Being Proactive
Eric Porres, chief marketing officer of Elkridge, Md.-based social ad network Lotame, is following the debate closely.
"The FTC roundtables will mean that companies who are on the right side of data policy/retention (clear opt-outs, [Network Advertising Initiative] association [a site where consumers can opt out of ad networks], preference managers, etc.) will be the last companies standing," Porres thinks. "And we'll see a slew of other companies, notoriously opaque with their business practices, quickly out of business."
For those that aren't already adhering to best practices, Freeman says get cracking or there may be consequences.
"[Direct marketers] should be anticipating the rollout of the self-regulatory program, and they should enroll in it," he says. "Because failure of the program to be sufficiently populated with members would be detrimental to the industry's effort to show the government that it can regulate itself."
If the advertising and marketing industry cannot persuade the government that self-regulation is working, Freeman offers a few nonexclusive outcomes:
- The FTC could apply whatever current regulatory powers it possesses in a way that is far more restrictive than the principles generated in unison by the various advertising and marketing industry associations.
- Congress might decide to get involved, Freeman explains, "declaring that the gap between practices and consumer expectations is to broad, that industry's not doing enough about it and pass a new law." Such a new law could give the FTC the go-ahead to develop stronger regulations on behavioral advertising.
- The Senate could get behind a bill that just passed the House of Representatives, and which creates a new Consumer Financial Protection Agency. "Buried in that 1,200-plus-page bill is a couple of pages called the FTC Improvements Act. That act would give the FTC more power than it has ever had before, including the ability to get big civil penalties where it was previously only able to get an injunction. And the ability to more easily write new trade regulation rules that have the force of law," Freeman says. "That bill probably ... won't be heard by the Senate this year. But you can imagine a confluence of circumstances where the [Direct Marketing Association] launches and hobbles, rather than launches with vigor. And [privacy] advocates and the FTC have some arguments to take to Capitol Hill to say, 'This bill should pass and it needs to pass soon, because we need it to deal with behavioral advertising.'"
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