Antitrust Law Daily Wrap Up, CONSUMER PROTECTION NEWS: FTC describes recommendations for online advertising before Senate Homeland Security Subcommittee, (May 15, 2014)

By Linda O’Brien, J.D., LL.M.

The FTC testified at a hearing today held by the Senate Committee on Homeland Security and Governmental Affairs’ Subcommittee on Investigations into online adverting and the hazards to consumer security and data privacy.

Testifying on behalf of the Commission, Maneesha Mithal, Associate Director of the FTC Division of Privacy and Identity Protection, outlined steps the agency is taking to address concerns related to online advertising through enforcement and consumer education.

In a prepared statement, entitled “Emerging Threats in the Online Advertising Industry,” the FTC informed lawmakers that online advertising offers many benefits to consumers and helps support a diverse range of online content and services that might not be otherwise available. But online behavioral advertising can raise a number of consumer protection concerns.

The testimony highlighted the efforts by the FTC on three consumer protection issues affecting the online advertising industry: privacy, spyware and other malware, and data security. In the area of privacy, the testimony noted the recommendations put forth in the Commission’s 2012 privacy report, which encouraged businesses to provide consumers with simpler and more streamlined privacy choices about their data, through a robust universal choice mechanism for online behavioral advertising.

The testimony also addressed a number of privacy cases brought by the FTC against companies in the online advertising industry. For example, the testimony described the FTC’s 2012 settlement with Google, in which the company agreed to pay a $22.5 million civil penalty to resolve charges that it misrepresented to some consumers that it would not place tracking cookies or serve targeted ads to them.

The testimony also described the FTC’s cases to combat spyware and other malware. The enforcement actions support three core principles: first, that a consumer’s computer belongs to him or her, and it must be the consumer’s choice whether to install software; second, that buried disclosures about material information necessary to correct an otherwise misleading impression are not sufficient in connection with software downloads; and third, that a consumer should be able to disable or uninstall any software they do not want on their computer, the testimony noted.

In addition, the testimony highlighted the FTC’s extensive consumer education work aimed at helping consumers avoid and detect spyware and other malware, including its sponsorship of OnGuardOnline.gov, a website designed to educate consumers about basic computer security.

On the topic of data security, the testimony underscored the Commission’s enforcement actions, noting that the agency has obtained settlements in 53 data security cases, including recent cases against the mobile app company Snapchat, as well as with Credit Karma, Fandango, and home security camera maker TRENDnet.

The testimony recommended expanding efforts to educate both consumers and businesses, and also encouraged industry self-regulation efforts aimed at protecting consumers from malicious online advertisements.

The FTC renewed its call for the enactment of a strong federal data security and breach notification law, noting that a national law would simplify compliance for businesses while ensuring that all consumers are protected. The testimony also noted that supplementing the Commission’s existing data security authority with the ability to seek civil penalties in appropriate circumstances would provide a deterrent to those engaging in unlawful conduct that puts consumers’ personal data at risk.

The subcommittee also heard from representatives from the online advertising industry and an online self-regulatory organization.

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