The document was based on information gathered by FTC staff during a series of workshops that began on December 7, 2009 (notably Pearl Harbor Day), and concluded on March 17, 2009. The purpose was to “explore” privacy issues of all kinds on all types of platforms. The workshops themselves were, in turn, very much an outgrowth of the FTC’s 2009 proposed self-regulatory framework for behavioral advertising.

Back at the first workshop last December, Chairman Liebowitz plainly stated in his opening remarks that, “I’d argue that we’re at another watershed moment in privacy, and that the time is ripe for the Commission to build on the February behavioral targeting principles and to take a broader look at privacy writ large.”

We knew then where the Commission was heading and many in the industry mobilized to create the newly launched “Ad Choices” effort and the website: www.aboutads.info.

The advertising options icon is now embedded in millions of ads across the web, including those served up to consumers by the most popular search engines.  The effort was nearly two years in the making, and was launched only a week or so before the FTC’s staff report was issued.

Notably, the FTC’s chief criticism of the business community is that it has done too little, too late.  This assessment has to be more than a bit frustrating for those who were part of the self-regulatory effort. As it is newly launched, no-one has been able to collect metrics or study its efficacy yet, but the FTC is on to bigger things. Namely, promoting the creation of a national “Do Not Track” system, which unlike the self-regulatory effort would not be voluntary.

The day after the report was made public, the FTC was off to Capitol Hill to testify on the creation of a “Do Not Track” mechanism, which “would likely involve placing a setting similar to a persistent cookie on a consumer’s browser, and conveying that setting to sites that the browser visits, to signal whether or not the consumer wants to be tracked or receive targeted advertisements,” according to the testimony of David Vladeck, Director of the FTC’s Bureau of Consumer Protection.

Other witnesses on the panel testified about what consumers really want and expect in terms of online privacy. The testimony was mixed and contradictory with everyone involved articulating their own views on what consumers want and need.

It would likely take a legislative effort to make a national “Do Not Track” system a reality and to implement other suggestions made in the staff report (the topic of future blogs).

Until then, the newly launched self-regulatory effort will play out, and hopefully, through the metrics that will be collected, help all parties get a better sense of what consumers’ actual preferences really are.

An excerpt from Scott’s open letter:

1. Believe in the power of the community. The need for the Shop.org community – to share best practices, learn about new trends, hire people, find new jobs and, sometimes, to commiserate – is needed just as much now as when Shop.org was founded in 1996. Innovation never stops and it moves particularly fast in this industry. Those who attempt to navigate these complex waters on their own will never be able to keep up and will make expensive mistakes. Get involved and stay involved.

2. Closely monitor the online privacy debate in Washington. Technology and social networking are redefining how people think about privacy and what information will be collected and used. New laws will be proposed and eventually some will be passed. It’s critical that the digital retail industry participate in the debate and provide a point of view from the very beginning. Find time to be an industry advocate.

3. Stay passionate. The passion of Shop.org members never ceases to amaze me, even after more than ten years. Shop.org members believe in the power of online retail more than anyone else. This is why the industry is as big and impressive as it is now.

Click here for the full letter. Or read about Scott’s decision to embark on a new journey with an internet start-up.

Updates (Conference call, 3 pm ET, Thursday, August 5)
Shop.org members are invited to join a conference call about this topic hosted by NRF’s government affairs team scheduled for Thursday, August 5, at 3:00 pm ET.  Also, for a comprehensive update on pending online marketing legislation, Shop.org members may access a memo entitled Update on Consumer Privacy and Online Legislation on the Shop.org site (membership log in required). 

Industry Activism Opportunities
To help us in these activities, we would like to ensure that our committees are comprised of executives best suited to consider and address these issues on behalf of their company.

There are three basic tasks – some individuals may be positioned to deal with more than one.

1. The first is the policy considerations. What comprehensive changes, if any, should the industry be considering in light of advances in technology, tightening of other groups requirements and the increasing sophistication of policy makers. Your Chief Privacy Officer (CPO) might be the best participant.
2. The second task is to address the renewed interest in behavioral advertising. These issues arise most frequently in e-commerce on the retail side and at the Federal Trade Commission on the governmental side.
3. The third task is to locate individuals with a government relations focus who would be willing to come into Washington and meet with policy makers to help shape the congressional and regulatory responses. (Although there are other issues that allegedly have privacy implications, such as cybersecurity, we will not be focusing directly on those at this time.)

Please give some thought to whom in your company best serves the three roles outlined above and ask them to join us, beginning with a conference this week. Suggestions should be sent to Mike Epstein.

Thank you again, we look forward to speaking to you on August 5.

Now Congressman Rick Boucher, Chairman of the House Subcommittee on Communications, Technology and the Internet, is circulating draft legislation that adopts many of the concepts of the self-regulatory principles, but broadens their scope far beyond behavioral targeting, to cover any and all collection of consumer data, both online and off. 

This is a sweeping proposal and may push us closer to, or even eclipse, the European Union’s privacy regime. NRF and Shop.org submitted comments to Rep. Boucher and the Ranking Member of the Subcommittee, Rep. Cliff Stearns.  Shop.org is very concerned about restricting information collection and use, especially given the troubles retailers are already facing in this challenging economy.  Hearings on the proposal are expected this summer, but no bill has been officially introduced yet.  It is our understanding that Boucher will have a high volume of comments to read through on this initial proposal.

Shop.org will continue to closely monitor the progress of this bill and other privacy developments in Washington.  As always, we welcome industry input and participation.  One of the best ways is to be a part of Shop.org’s Policy Advisory Group.

There are important issues facing our industry and nothing speaks louder to lawmakers than seeing members of industry actively involved  in providing input on potential laws and regulations.   

The larger context of any issue facing online retailers is that e-commerce is a bright spot in retail and the overall economy.  While many parts of the U.S. economy have declined during the recession and are still suffering, online retail has and is experiencing double-digit growth and creating jobs.   Any government action that potentially impacts our industry must take this into consideration.  This is a point we reinforced in every meeting and discussion.

With that context in mind, we had two primary goals of our meetings and lobbying visits.

1) Providing input to an online privacy bill introduced recently by Congressman Boucher (D-VA) that requires notice to and consent of an individual prior to the collection and disclosure of certain personal information.  Our goal was to ask for clarification on the specific mechanism for getting consent from consumers.  Does this mean, for example, that customers must click an “approve” button following a change to a retailer’s privacy policy before continuing to receive relevant offers?  Our questions were received with much head nodding and appreciation for how these well-intentioned proposals could cause unintended consequences.  We expect to see hearings on this bill in the next couple of months, which will provide additional opportunities for input.

2) Raising concerns about a provision contained in the House-passed financial regulatory reform legislation added at the request of the FTC to give that agency broad new authority.  These new powers would change the core mission of the FTC, making it an agency with combined power to act as both law-maker and law enforcement agency over nearly every segment of the business community – especially those with consumer-facing operations.  More than 40 industry trade associations, including Shop.org and its parent organization, NRF, are united in opposition to proposed expansion of FTC powers.  We are hopeful that the Senate version of the financial regulatory reform legislation will not include such a provision.  This was the message we delivered to everyone with whom we met on Capitol Hill.

This is the 3rd year of Shop.org’s participation in NRF’s Washington “fly in.”  I want to thank all of the Shop.org members that participated this year.  You made a difference and I hope that you learned a few things along the way and had fun being a part of legislative process (it’s hard not to  be impressed walking through Congressional office buildings and past the Capitol and Supreme Court on the way from the House to the Senate side of Capitol Hill).

Shop.org’s presence at this annual event has grown over the years and we expect to see more people participate next year.  Online retail is only getting bigger and the stakes are getting higher when it comes to laws and regulations that impact our industry.

If you are interested in being part of the Shop.org Policy Advisory Group, please drop me a line at scott at shop dot org.

President Obama recently named sitting Federal Trade Commissioner Jon Leibowitz to be the new Chairman of the FTC. As expected, we’re beginning to see the online privacy issue heat up in Washington, DC.

We had our first glimpse into what the future of online privacy policy may look like from speeches by Chairman Leibowitz and Rep. Rick Boucher (D-VA), Chairman, Subcommittee on Communications, Technology and the Internet House Committee on Energy & Commerce. The speeches were given earlier this week at a Center for Democracy and Technology gala dinner in which these government officials were keynote speakers. Although the text of their speeches was not published, a summary of the key points they made regarding online marketing and privacy compiled by a Shop.org representative who attended the dinner are below.

Shop.org and its parent organization, the National Retail Federation, continue to closely monitor online privacy policy developments. In fact, we have scheduled a meeting of Shop.org’s Policy Advisory Group for early next week to collect input on how the FTC’s revised principles could impact online retail current practices and future plans. As always, we encourage industry participation in policy issues. If you are interested in getting involved, please go to www.shop.org/policy or contact Josh Greene, Shop.org’s VP of Member Services who coordinates our policy initiatives.

Notes from Keynote Speeches at the the CDT Gala

Jonathan Leibowitz, Chairman, Federal Trade Commission

> Websites are not doing a good job now of protecting consumer privacy interests related to behavioral advertising.

> The FTC staff issued a report with its proposed principles to improve the online environment and staff will continue to actively monitor the marketplace.

> The FTC Commissioners expect industry to adopt industry self-regulatory policies along the same lines as the proposed FTC principles and to do so soon.

> A self-regulatory approach, if successful, can be the fastest and best way to ensure rapid improvement in this area.

> If industry does not improve its online practices, however, the FTC and Congress will move to a more regulatory model for behavioral advertising.

Rep. Rick Boucher (D-VA), Chairman, Subcommittee on Communications, Technology and the Internet House Committee on Energy & Commerce

> If a website collects any information from a consumer, it must conspicuously provide the consumer with notice of what information it is collecting and how that information may be used.

> If a website wants to use that consumer’s information for its own marketing purposes, then it must provide consumers with a choice to “opt-out” of that marketing.

> If a website wants to share that consumer’s information with unaffiliated third party websites, then it can only do so if it first obtains an “opt-in” consent from the consumer.