Internet Giants’ Online Advertising Practices Challenged

Just as one might wonder whether the FTC had decided to choose its battles and allow the online behavioral marketing dog to continue its nap, the dog has been awakened with a loud boom. Targeted behavioral advertising practices have been in the crosshairs of privacy advocates for several years, and the privacy advocates have finally pulled the trigger. The Center for Digital Democracy (CDD) and two other public interest groups filed a complaint with the Federal Trade Commission last week challenging the tracking and profiling practices used by Internet companies such as Google, Yahoo and Microsoft. Specifically, the complainants ask the Internet companies to acknowledge that the software “cookies” they embed in a Web browser collects data about a person’s online movements that should be considered personally identifiable information, even though the cookies don’t have a person’s name attached to them.

The privacy groups claim they are not calling for an outright ban of behavioral advertising. Instead they seek a balance between what they term the “Wild West” of data collection in the world of online advertising, and privacy controls such as notice and consent. Specifically, CDD, U.S. PIRG and World Privacy Forum called on the FTC to investigate the internet companies using its Section 5 authority for conduct that constitutes unfair and deceptive practices, and to issue an injunction against the unfettered use of what they claim is personal information collected by the companies. A full copy of the complaint can be found here.

The use of targeted behavioral advertising has been a controversial practice for several years, with privacy advocates sounding the alarms, and advertisers pushing for self-regulation. Following the release by the FTC of the FTC Staff Report: Self Regulatory Principles for Online Behavioral Advertising in February, 2009, various industry associations released the Self-Regulatory Principles for Online Behavioral Advertising in July, 2009. In the Conclusion to its Report, the FTC stated that it would continue to evaluate the industry’s efforts at self-regulation, monitor the marketplace and conduct investigations to determine whether there have been violations of Section 5, and meet with industry representatives and consumer protection groups to keep pace with changes. There has been no official word from the FTC in response to the industry’s publication of its Self-Regulatory Principles.

One can only surmise that the consumer protection groups simply got tired of waiting. How the FTC proceeds in response to the complaint will reveal how forcefully the FTC intends to address the online behavioral marketing phenomenom going forward.