Antitrust Law Daily Wrap Up, ADVERTISING NEWS: FTC official urges companies to give consumers choices on the collection, use of information , (Jan 26, 2015)

By Dan Selcke, J.D.

Being transparent with consumers about the way they collect and use consumer information will ultimately help companies’ bottom lines, Bureau of Consumer Protection Director Jessica Rich said during a January 21 speech at the AdExchanger Industry Preview in New York City.

In her remarks, entitled “Beyond Cookies: Privacy Lessons for Online Advertising,” Rich said that 91 percent of adults “agree” or “strongly agree” that consumers have lost control over how personal information is collected and used by companies. Instead of hiding the ways they collect that information, companies should be open with consumers and give them choices as to how and whether it gets used. Consumers will then be willing to trust the companies, which will result in increased revenue.

Rich began her speech by acknowledging that, while targeting advertising can be beneficial to consumers, it also raises obvious privacy concerns. Consumer behavior is no longer just followed through the use of “cookies.” Rather, companies are developing universal identifiers capable of tracking consumers across multiple devices, while device fingerprinting identifies a broad range of internet-connected devices and builds profiles around the people who use them. According to polls, consumers care about their privacy and take steps to protect it.

The business case for privacy. Ultimately, Rich suggests, companies are best off leveraging this uneasiness by letting consumers make meaningful choices about their privacy. Companies that go the other way and try to obscure their real intentions run of risk of getting sued by the FTC. For example, the FTC took action against Snapchat, a messaging application, for allegedly deceiving consumers by telling them that messages sent through the app would “disappear forever” after the sender-designated time period expired. This was the app’s primary selling point, but there were simple ways recipients could save messages indefinitely, making it an empty promise.

On the other hand, a company like Acxiom, the nation’s largest data broker, was doing a good job of providing transparency. It launched a web-based tool, “About the Data,” that allows consumers to view portions of their marketing profile by seeing certain categories of information. Consumers appreciate this strategy, and adopting it can be a selling point for businesses. Rich also highlighted the usefulness of industry-created groups like Digital Advertising Alliance (DAA) and Network Advertising Initiative (NAI), the members of which agree to adhere to codes of conduct regarding online tracking.

These efforts are commendable, Rich said, but need to reflect what is actually occurring in the marketplace today to be successful. For example, privacy programs need to apply to newer tracking techniques like device fingerprinting. Also, privacy policies cannot include exceptions that swallow the rules, such as defining “sensitive data” in a very narrow way. The choices available to consumers regarding their privacy must be easy to find and use. Companies should compete to see which of them can protect their consumers privacy the most, a contest that will help consumers trust them.

Privacy rules for the road. Next, Rich went over three basic principles set forth by the FTC that companies should implement as part of their business models. Adhering to these principles will help them create a privacy policy to which consumers respond positively.

Privacy by design. Privacy protections are most effective as part of a company’s fundamental model rather than added as an afterthought, Rich said. Therefore, companies should build in privacy protections at every stage as they develop products and services. The protections should include reasonable data collection and retention limits, de-identification of data where feasible, and sound data security and disposal practices. Rich focused particularly on the de-identification of data, encouraging companies to strip data of identifying markers whenever possible and to commit to a policy of not re-identifying it later, even if it could be done.

Increased transparency. Rich also encouraged companies to write privacy policies that are easy to read and understand, as well as to provide consumers with key information and choices just before they are about to provide data about themselves.

“Usable” choice. Companies should give consumers easy-to-exercise choices for those practices that might come as a surprise given the context of the consumer-company relationship. Internet-based companies that do not have interactions with customers will have to find a way to convey this information, whether it’s through an internally designed tool or through their consumer-facing partners.

Rich ended her speech by warning companies against potential pitfalls. She cautioned them to keep any claims they made about how they collected, used, or shared data truthful and open. By the same token, they should not omit any information about how they tracked consumer behavior. Otherwise, they risked being on the receiving end of a suit from the FTC. Also, companies should be careful about who they do business with. If they do not vet their partners, they run the risk of purchasing information they think is legitimate but which was actually obtained in a way that controverts the FTC Act. Depending on how they use the information, the companies could be liable under the Act alongside the organization that sold it.

Lastly, Rich warned against using sensitive data—for example, information pertaining to cancer, sexual preference, or pregnancy—to drive marketing strategy. Avoiding these traps in favor of giving consumers meaningful choices about their privacy will encourage them to allow use of some of their data, Rich concluded, whereas hiding the ball will erode their confidence and make them more likely to opt out of using the company’s services altogether.

News: Advertising Privacy FederalTradeCommissionNews