The Federal Trade Commission has been firing warning shots across the bow of marketers’ behavioral targeting practices for the past year. The most frank signs of the agency’s intention to compel stringent self-regulation have come from its release earlier this year of intensified guidelines for online behavioral advertising and a June ruling against Sears for alleged deceptive advertising.
In its February report, Self-Regulatory Principles for Online Behavioral Advertising, the agency emphasized not just a tougher code of conduct for consumer notification and data collection practices, but also the right to apply its unfair and deceptive advertising regulations to behavioral targeting. And to make this position as clear and conspicuous as it asserts consumer notification should be, the FTC leveled a complaint this summer against Sears Management Holding Corp. (parent company to Sears and Kmart) for insufficient notice to consumers regarding the extent of the retailer’s data collection practices via Web tracking software.
The commission didn’t take issue with Sears’ installation of tracking software on some MySears and MyKmart community members’ computers because consumers were made aware that by joining they were agreeing to be tracked. Rather, the FTC found fault with Sears for not disclosing this detail early enough or fully enough (considering the software tracked people’s Web usage and some non-Internet computer activities off the Sears sites) in the membership invitation process.
While Sears admitted to no wrongdoing in its settlement, Charles Kennedy of law firm Morrison & Foerster and an expert in cyberlaw, cautions marketers to heed this case as the public example it’s meant to be. He noted in a statement, “The FTC sometimes defines the kinds of practices it finds unacceptable not by writing rules, but by bringing individual enforcement proceedings and entering into settlement agreements that create a compliance framework for businesses that want to avoid becoming the target of similar proceedings in the future.”
The Direct Marketing Association, for one, is taking the FTC’s stance seriously. Working with other associations like the Better Business Bureau and the American Association of Advertising Agencies, it helped develop seven privacy principles to regulate behavioral data practices in online advertising. Not surprisingly, one of the principles stipulates consumer notice requirements that go far beyond what Sears had done.
As the conversation continues on how consumer privacy rights can be protected within the behavioral advertising environment, marketers first should consider carefully what behavioral data they truly need and can apply accurately for ad targeting. If you can’t achieve relevance that adds value to the customer experience, you’re needlessly risking your company’s reputation.