UncleSam.reg - Online Privacy Protection Act

Brandweek, May 3, 1999 by Wendy Melillo

Private industry braces for government regulation of Internet issues.

Lawmakers have put the Internet under a microscope this legislative session, and after careful scrutiny some have concluded that industry self-regulation and marketplace approaches are not working when it comes to privacy and access.

Now the Hill is ready for action. Senators Conrad Burns, a Republican from Montana, and Ron Wyden, an Oregon Democrat, have jointly introduced the Online Privacy Protection Act of 1999, aimed at giving consumers more control over personal information collected about them.

Meanwhile, Arizona Republican Senator John McCain was expected to draft a hill last week requiring federal regulators to determine whether some rural and low-income urban areas lack access to the Internet. Further, there is concern that rural markets will also be denied high-speed access as it becomes more commonplace.

Both advertising lobbies and Internet industry groups argue that Congress is rushing in before self-regulatory efforts--particularly in the area of privacy--have had a chance to work. Given the boom in consumer e-commerce, they believe Americans are less concerned about privacy than legislators think.

A Battle on the Hill

The privacy bill, an adult version of the Children's Online Privacy Protection Act, which became law last October, requires commercial Web sites to notify visitors if personal information is collected and how that information will be used. Commercial sites must also offer consumers the chance to "opt-out" of having any information gathered about them. "The tone is now economics vs. consumer privacy, and I think that is a false choice," Wyden said at a press briefing April 15. "Folks don't want to shop at a Web site where they feel their privacy is threatened."

The bill was introduced on April 15, despite strong self-regulatory efforts urging commercial sites to adopt their own privacy policies, culminating in IBM's announcement last month that it will pull its advertising from any site that does not post a clear privacy policy.

The momentum for government regulation is so strong that Congress is not even waiting to see the results of a second Federal Trade Commission sweep of commercial sites to determine if the industry has improved its record of posting privacy policies online. In April 1998, the FTC found that only 14 percent of the 674 commercial sites surveyed had privacy policies.

The second survey of 360 sites, conducted by Georgetown University business professor Mary Culnan, was completed March 11 of this year. Culnan says the results are expected to be released May 13.

"Our job is to get in front of problems," Wyden said. "The voluntary efforts underway will only cover the best actors and will not have any meaningful enforcement."

Private Industry Bands Together

The Online Privacy Alliance, a group of 86 corporations and associations dedicated to encouraging businesses to adopt Web site privacy polices--among them IBM, America Online, Compaq Computer, Microsoft and Yahoo!--is frustrated by the Hill's willingness to forge ahead before all the facts are in.

"We believe that a credible self-regulatory system with real consumer recourse and real consequences for Web sites that violate privacy is a much better way to protect consumers than a static law," says Sydney Rubin, an Affiance spokesperson. "The fact is that the industry is doing a great deal and it would be extremely useful for Congress to look at what is being done before they pass any laws."

Irving Wladawsky-Berger; General Manager of IBM's Internet division, feels the key question to he answered is how society strikes the right balance between the value of a free flow of information and privacy. "In our opinion, a broad new statute is not the answer," he said at a Senate Judiciary Committee hearing on April 21. "The Internet is too global, too instantaneous, and too decentralized for a fixed, rigid statute to regulate."

But Senate Judiciary Committee Chairman Orrin Hatch, a Republican from Utah, says Internet industry representatives should work with Congress to craft reasonable Internet privacy legislation and avoid creating what he called "an Internet IRS." Says Hatch: "The last thing you want is for us to come in with a heavy hand, because I can tell you, that's where it is headed."

One possible compromise would be the creation of a commission to study the issue of privacy. Senators Herbert Kohl, a Democrat from Wisconsin, and Ohio Republican Mike DeWine are considering legislation to do this.

Consumers Spur Online Growth

But while such moves emphasize how concerned Americans are about what information is being collected, industry groups and advertisers counter that the recent surge in consumer online spending--$7.8 billion in 1998 compared with $2.4 billion in 1997, according to Forrester Research, a Cambridge, Mass. online research firm--is hardly insignificant.

"Customers are buying products online like never before, indicating their confidence in the Internet is significantly better than the public opinion polls might suggest," says John F. Kamp, senior vice president of the American Association of Advertising Agencies.