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By Angelique Carson, CIPP

Online privacy matters to consumers when it comes to their own data, agreed lawmakers at yesterday’s House subcommittee hearing on consumer privacy expectations. But how to ensure those expectations are met was up for debate, with some arguing baseline privacy legislation has been a long time coming and others advocating for industry self-regulation.

Representatives of the Commerce, Manufacturing and Trade Subcommittee heard testimony on topics such as online behavioral targeting and the collection, use and sale of consumer data from witnesses representing industry, advocacy and trade groups. Data processing costs have decreased, while the value of consumer data has increased, a subcommittee internal memorandum noted, raising concerns from privacy advocates on a “lack of transparency and, and in some cases, a lack of choice for the consumer to opt out of having their data collected and/or shared with unknown parties.”

Though Mozilla and Microsoft both introduced do-not-track features into their browsers earlier this year, there are no regulations requiring website operators to comply with user preferences, resulting in low levels of compliance.

The World Privacy Forum’s Pam Dixon submitted a report stating the industry’s track record with self-regulation is marred with failures. The report cites examples such as the Individual Reference Services Group, the Privacy Leadership and the Online Privacy Alliance.

“Is there any reason to think that privacy self-regulation will work today when it did not work in the past?” the report asks.

Dixon did not call for federal legislation as a remedy, but Rep. G.K. Butterfield (D-NC) said he “feels strongly that a national baseline privacy law is the best way to ensure that consumers have basic common sense and permanent rights over the collection and use of their information.”  Rep. Joe Barton (R-TX) agreed, as did Microsoft’s Michael Hintz who added, however, that decisions about consumer privacy are complicated.

“Privacy means different things to different consumers,” said Hintze. “Consumers also have different privacy expectations depending on the context in which their data is collected and used.”

Barbara Lawler, CIPP, of Intuit said the company’s position on consumer data is that it belongs to the consumer, not the company.

“Data privacy matters to consumers,” she said. “While they don’t pour over privacy statements, they do care deeply about privacy and how their data is used.”

Barton, who earlier this year questioned 15-plus companies including Groupon and Verizon on their data collection practices, said the time for privacy legislation has come.

Representing the Direct Marketing Association (DMA) Linda Woolley said it’s impossible to overstate the economic importance of the Internet, noting that online behavioral ads represented a $30 billion economy in 2011 alone and more than 80 percent of online ads are based on user behavior.

“Behavioral, business-based advertising is essential,” she said. “These revenues support e-commerce and a rich variety of content consumers and businesses rely on and value.”

Hundreds of companies, including Yahoo, Google, Hewlett-Packard and General Motors, now subscribe to trade group Digital Advertising Alliance’s self-regulatory program for behavioral targeting—which uses an in-ad icon to notify users that the ad was generated from behavioral targeting and allows them to opt out.

“The DAA program is effective and easy to use for consumers, and the program is backed up by strong enforcement managed by the DMA and the Council for Better Business Bureau,” Woolley said.

But Carnegie Mellon University Professor Alessandro Acquisti—whose research this year found that applying facial recognition technology to social network data could re-identify people thought to be operating anonymously and that Social Security numbers can be predicted using publicly-available information—testified that giving consumers choice about how their data should be used online doesn’t mean they’ll be safe. It’s a problem of overconfidence, he said; individuals feel protected and so end up taking more risks.

For example, he said, studies have shown that “when you ask people to wear seatbelts, some of them may start driving faster…If we give more control, do we solve privacy problems? This study suggests no.”

The challenge, said Microsoft’s Hintze, is to get in front of people when you’re most likely to capture their eyeballs and attention. 

“Sometimes that means at the point of their decision-making, but sometimes that can be too disruptive, and if you put something in front of them, they’ll just hit cancel,” he said.

The DMA’s Woolley, meanwhile, was quick to remind lawmakers that Internet users will vote with their eyeballs when it comes to which sites they trust with their data.

“It’s accurate that people are concerned about privacy, but it’s also accurate that people are not afraid to use technology,” she said, adding that Internet sales have gone up exponentially in the last three years.

The DAA will announce within two weeks that companies complying with the DAA’s self-regulatory program will be prohibited from making eligibility decisions based on data collected from advertising and marketing data. FTC Chairman Jon Leibowitz has raised concerns, for example, that a user searching online for a deep fryer may be denied health insurance based on data collected on that user’s online activities or an online profile of that user build upon aggregated tracking data.

“That kind of decision is not acceptable and not part of the program. If you do that and you are part of the program, you’ll be thrown out of the program and referred to the FTC,” Woolley said.

Whatever mechanisms are put in place to protect consumers, they themselves should be part of the process, the World Privacy Forum’s Dixon said.

“If self-regulation is going to be the way forward, we need to reform it,” she said. “We support legislation that will protect the consumer, but the reality check is that we don’t see any likelihood of that happening in the near future.”


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