Industry Wins Another Online Privacy Battle

By Neil Munro

Staff Writer

Information technology industry has scored another Washington victory against privacy proponents with the release of a new government report on digital privacy that does not recommend any policy options.

The report comes as industry executives prepare for public hearings in Washington on online data collection in June, sponsored by the Federal Trade Commission.

The hearings were called to examine possible abuses by companies that collect data about online consumers' habits and preferences. The data is used to guide subsequent online advertising and marketing campaigns launched by companies such as Microsoft Corp., Redmond, Wash.; Compaq Computer Corp., Houston; America Online Inc., Dulles, Va.; and MCI Communications Corp., Washington.

The report, titled "Options for Promoting Privacy on the National Information Infrastructure," prepared by government officials from multiple agencies, describes several policy options for Congress and the White House, but rejected a proposal favored by privacy proponents, such as the Washington-based Electronic Privacy Information Center, to create a government organization with enough regulatory power to curb companies' use of data gathered on consumers' spending habits, medical conditions and financial records.

"Creation of a new government agency with regulatory authority is the antithesis of bottom-up government, and it is likely that any effort to create a new regulatory body to enforce fair information practices would face considerable public resistance at this time," said the report, released in late April.

The report also listed the advantages and disadvantages of several other options, including increasing public education on the extent of online data collection, creating a federal entity without regulatory authority and creating a nongovernment or advisory body.

Although the paper provides a good overview of U.S. privacy policy, "I would have liked to see more discussion of the options themselves, and especially of the importance of consumer education [which is what] our organization is primarily involved with," said Beth Givens, project director of the San Diego-based Privacy Rights Clearinghouse.

The most powerful organization working against the curbs on data collection is the New York-based Direct Marketing Association, which last year led a successful campaign to stop congressional bills that would have curbed the collection and sale of data about children.

"The report does recognize the direct marketing industry's leadership in self-regulation ... but the report requires greater attention to articulating [President Bill Clinton's] administration's policy relating to global commerce ... [that urges] a government hands-off kind of approach," said Patricia Faley, the DMA's Washington-based vice president for consumer affairs. "We think that [industry] self-regulation is what really needs to be encouraged. It does fuel economic growth through consumer trust," she said.

DMA members, including IBM Corp., Armonk, N.Y., and Compaq, sold more than $600 billion in goods and services during 1996 with the aid of direct-mail advertising campaigns, said Faley.

The DMA also has support from Washington-based groups, including the industry-sponsored Competitive Enterprise Institute.

In an April 15 letter to the FTC commissioners, the institute called on the FTC to let the market decide how corporations and consumers should collect or curb consumer-related data desired by companies for subsequent online advertising campaigns.

"Anything which makes it harder for advertising to work [online] will have direct effects on the quality and content of the Internet ... [and] will likely raise the cost to consumers of using the Internet," said the institute's letter. "The FTC should confine itself to policing fraud and investigating any actual injury" from online commerce, concluded the letter.

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