Schwartz On Security: Online Privacy Battles Advertising Profits

Do businesses have the right to make money from the unregulated buying and selling of personal information?

Are people being hurt when their browsing habits and personal details are collected by online advertising groups?
Privacy rights organizations say yes, that peoples sensitive information shouldnt be left in the hands of businesses that benefit from buying and selling it. Online advertising and financial services groups, however, argue that tracking is essential for delivering more relevant advertising, and of course its the uptake of this advertising that keeps the lights on at many a Web site.
Those opinions come from the 442 comments received by the FTC after it released, in December 2010, its
proposal for a privacy framework
for public feedback. In the framework, the FTC proposes regulating companies that handle or collect peoples personal information, and providing options such as
Do Not Track
for consumers to opt out of online tracking.
As that proposal suggests, the currently unregulated, free-market approach to selling peoples personal information is drawing intense scrutiny. Thats due in no small part to
The Wall Street Journal
s July 2010
What They Know
investigative reporting, which detailed the array of cookies and surveillance technologies being used to monitor the who, what, and where of Web site visits. The latest technology can even function in real time, correlating email addresses, movie preferences, income, medical conditions, and more, while resisting attempts to be deactivated.
Online tracking isnt a small business. Notably, the
Journal
s investigation found that the top 50 Web sites -- which account for about 40% of all page views -- kept close tabs on their users, installing on average 64 different pieces of surveillance technology. For comparisons sake, noted the reporters, Wikipedia installed none.
Furthermore, a thriving micro-economy has emerged in which collected information gets traded on stock-market-like exchanges. According to the report, in between the Internet user and the advertiser, the
Journal
identified more than 100 middlemen -- tracking companies, data brokers, and advertising networks -- competing to meet the growing demand for data on individual behavior and interests.
These businesses like life just the way it is, thank you very much. In particular, the Interactive Advertising Bureau -- its nearly 500 members sell and support interactive advertising -- believes that the appropriate approach to addressing consumer online privacy issues is through industry self-regulation and education, according to its
comments
on the proposed FTC privacy framework. Self-regulation, it said, will address privacy concerns while ensuring that the Internet can thrive, thereby benefiting both consumers and the U.S. Economy. That golden goose may go bye-bye if the government enshrines a persons right to online privacy. The White House is backing
stronger privacy rights
, as are three bills pending in the House and one in the Senate.
What might such legislation look like? Sens. John Kerry (D-Mass.) and John McCain (R-Ariz.) are co-sponsoring a Privacy Bill of Rights. While the bill is still a work in progress, a
recently leaked
, draft version aims to regulate organizations that use, transfer, or otherwise handle personally identifiable information (PII) or unique identifier information relating to 5,000 or more people per year.
Some provisions require businesses to comply with specific obligations when dealing with sensitive PII, which is defined as PII which, if lost, compromised, or disclosed without authorization, could result in harm to an individual, said attorney Nicole Friess, an associate at Information Law Group, in a
blog post
.
Fines would run $16,500 per day, multiplied either by the number of days of noncompliance or the number of people harmed. However, liability is capped at $2 million or $3 million depending on the nature of the violation, she said.
But many questions remain unanswered, such as what constitutes tracking or harm. For example, in its comment on the FTCs privacy framework, the Mercatus Center at George Mason University made the humorous, but often true, observation: How Do We Conduct Cost-Benefit Analysis When Creepiness Is the Alleged Harm? noted attorney Richard Santalesa, senior counsel at Information Law Group, in a
blog post
.
In fact, the Mercatus comment argues that consumers stand to gain more than they lose from tracking. Importantly, nothing in the Commissions proceeding has thus far demonstrated that online data collection and tracking represent a clear harm to consumers per se, or that any market failure exists here, it said. Such a showing would be difficult since using data to deliver more tailored advertising to consumers can provide important benefits to the public.
So lets put the question out there: Is better advertising worth the potential tradeoff of anyone being able to buy detailed information about your browsing habits, income, or medical conditions? Because with luck, youll be able to decide.

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Schwartz On Security: Online Privacy Battles Advertising Profits