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FTC Releases Extended Guidelines for Online Marketing and Privacy Protection

The Federal Trade Commission has released a report, Self-Regulatory Principles for Online Behavioral Advertising, which revises and extends guidelines for online marketing and privacy protection the FTC issued for public comment back in December 2007.

The guidelines urge companies to adopt an opt-in model for collecting sensitive online data to use for behavioral marketing. The FTC has defined that information generally as having to do with information about finances, children, health or Social Security numbers, but suggests companies adopt more specific standards.

But the report also says no guidelines are needed for contextual advertising, in which the ad is based on a consumers current visit to a single web page or search and includes no retention of other surfing, or to so-called "first-party" behavioral advertising "by and at" a single Web site.

The report extolled the virtues of behavioral advertising, including "the free online content that advertising generally supports and personalization that many consumers appear to value," and talked about the concerns over the invisibility of the data collection involved and risk that data could fall into the wrong hands.

The FCC and Congress have also been concerned about online marketing and privacy as it relates to ad-tracking software that was being tested by phone and cable companies. Last fall, a number of cable and phone companies came out in support of an opt-in model for online ad tracking.

The FTC said the report was the next step in an ongoing dialog about consumer privacy and behavioral advertising, and that it will continue to evaluate industry self-regulatory policies and investigate potential violations of FTC prohibitions on unfair or deceptive practices.

The vote for issuing the report was unanimous, but two commissioners had caveats.

"This staff report, while commendable, focuses too narrowly," said Commissioner Pamela Jones Harbour. "Threats to consumer privacy abound, both online and offline, and behavioral advertising represents just one aspect of a multifaceted privacy conundrum surrounding data collection and use."

Commissioner and likely next chairman, Jon Leibowitz, warned the industry that this could be their last chance to get it right. "Industry needs to do a better job of meaningful, rigorous self-regulation, or it will certainly invite legislation by Congress and a more regulatory approach by our Commission," he said. "Put simply, this could be the last clear chance to show that self-regulation can - and will - effectively protect consumers' privacy in a dynamic online marketplace."