Lobby Regroups After Privacy Bills' Defeat

Online privacy advocates postpone hopes of victory until 1997

Supporters of a bill intended to curb companies' collection and use of child consumers' data are regrouping for another lobbying battle next year following their defeat in Congress by a powerful industry coalition.

"We have to step back and re-evaluate our position and options.... This is a David and Goliath struggle," said Marc Klaas, director of the Klaas Foundation for Children, Sausalito, Calif. The foundation was formed to campaign against child abuse following the murder of Klaas' child, Polly. Better privacy rules are needed to prevent pedophiles from gathering data about children, he said.

The privacy campaign is working in tandem with the Federal Trade Commission, which is investigating industry's collection and use of consumer-related data. In 1997, the commission may issue regulations or guidelines to protect consumers' privacy, said FTC commissioner Christine Varney. However, "the political reality is that we are not in a time where Congress is likely to regulate" the industry, she said.

On Sept. 23, the FTC sent a letter to Congress asking for greater privacy protection.

Also, a new report on privacy-protection options is being prepared for release in October by the multiagency National Information Infrastructure Task Force. One of the options outlined in the paper is the creation of an "organizational entity" to promote consumer privacy, said government officials.

Klaas and an alliance of privacy advocates called the Kids Off Lists Coalition had backed two matching bills by Sen. Dianne Feinstein, D-Calif, and Rep. Bob Franks, R-N.J., that would have required companies to win the approval of parents before collecting or storing data about children age 16 and younger. But Feinstein has dropped plans to push her bill, S 1908, in the few weeks before Congress adjourns, and Franks' bill, HR 3508, has been held up by Rep. Bill McCollum, R-Fla., the chairman of the House Judiciary Committee's crime panel, said congressional staff members.

The data is collected from online Web registration forms, product warranty cards and other sources, to aid marketing by companies such as The Walt Disney Co., Los Angeles, and Time Warner, New York. Companies offering education services and government agencies, such as the departments of education and defense, also use the information.

As greater numbers of children use the Web, they are being asked to give up personal data about their birthdays, parents, addresses and spending habits, said Varney. Companies collect the data from registration forms at kid-friendly Web sites, giving them "enormous amounts of information... that they can't get from the parents," she said.

The fight against the bills was led by the Direct Marketing Association, in alliance with other Washington-based groups such as the Information Technology Association of America. Direct marketing campaigns yielded sales of $1.1 trillion in 1995, according to DMA-sponsored research, ensuring massive political clout in Congress. Among the 3,600 companies represented by the DMA are Dell Computer Corp., Gateway 2000 Inc. and IBM Corp.

The bills "would level a severe and counterproductive blow the viability of our industry, depriving children and their parents of useful goods and services.... Standard industry practices have effectively protected the public from misuse of data in directing marketing databases," according to a DMA statement. But the privacy bills are needed to protect children from being targeted by pedophiles and from being harassed by corporation's advertising campaigns, said supporters.

Under the existing opt-out provision, parents can ask the DMA to end direct marketing of their children, said Richard Barton, the DMA's chief lobbyist. But Klaas and other supporters wanted an opt-in provision that would allow companies to collect and use the data only after getting approval from the children's' parents.

The opt-in rule would have ended the collection of data about children, hurting education and non-profit groups, said Barton. "Most of the lists would go out of business," even if Congress amended the bills to allow the collection of information on kids for education and non-profit groups, he said.

"Sure they'll collect it, because when that child becomes 16 years old, the information becomes fair game," responded Klaas.

The privacy bill could be amended to allow an exemption for education, law enforcement and non-profit groups, said a staff member in Franks' office. "We've been trying to craft language to solve those problems," he said, adding that there is a "very, very outside chance" of winning approval this year.

"We find there might be other ways to skin the cat," perhaps by asking the FTC to draft regulations during 1997, said a staff member on the crime subcommittee. The committee wants to protect kids from pedophiles, but does not want to disrupt the direct-marketing industry, she said.

The FTC has held a public hearing to discuss the issue and is now debating whether to write regulations or guidelines, said Varney. "We need to be thinking about [this... but] industry ought to step forward with a plan to get verifiable parental consent" before the collection of data about children, she said.

In alliance with the Interactive Services Association, a Silver Spring, Md., coalition of Internet companies, the DMA recently declared its intention to create a voluntary policy to promote consumer privacy and to publicize some details of its reviews into consumer complaints. The "draft of new ethical principles for marketing online to children [recognizes] the sensitivity that is required when communicating on the Internet with children," according to the DMA.

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