Consumer Privacy in the Online Marketplace Addressed in FTC Staff Report

“Notice” “Choice” “Security” “Access” -- Participants in a public workshop held by the Federal Trade Commission on privacy in the online marketplace stated that these are the four necessary elements of protecting consumer privacy online, according to a Commission staff report released today.

“Notice” to consumers about how personal information collected online is used.  

“Choice” for consumers about whether and how their personal information is used.  

“Security” of personal information, if commerce in cyberspace is to flourish on the Internet.  

“Access” for consumers to their own personal information to ensure accuracy.

According to the report, "the benefits of the free flow of information in this medium are apparent, both for consumers and for industry. . . . The proliferation of readily available personal information, however, also could jeopardize personal privacy and facilitate fraud and deception."

"The vast new marketplace in cyberspace poses both tremendous opportunity and risk," said Jodie Bernstein, Director of the FTC’s Bureau of Consumer Protection. "Privacy concerns must be addressed or consumers may be reluctant to go online. The FTC’s Bureau of Consumer Protection is committed to understanding these issues and to working with industry and consumer groups concerning responsible use of personal information in the online marketplace."

The workshop and report are part of the FTC Bureau of Consumer Protection’s Consumer Privacy Initiative undertaken to examine consumer privacy in the online context and to promote consumer and business education about the use of personal information online.

The FTC staff report, titled "Public Workshop on Consumer Privacy on the Global Information Infrastructure," discusses the great variety and depth of personal information that is becoming more accessible to a greater number of information users, and notes that because much online information-gathering is automated, it often takes place without the consumer’s know ledge or consent. The June 1996 workshop was convened to allow the broadest possible groups of interested parties to express their views on (1) privacy issues posed by the emerging online marketplace, and (2) online protections for consumer privacy. The staff report summarizes participants’ views. “The workshop produced a rich factual record about the current collection and use of personal information online, the technology that exists to collect such information, and the still developing technological and self-regulatory initiatives to address online privacy concerns. It also prompted an extremely thoughtful discussion about self-regulation and the role of government in this new and rapidly evolving marketplace,” the report says.

While the workshop testimony reflected broad areas of agreement on the elements of protecting consumer privacy online, panelists disagreed about specific areas of implementation. For example, while participants agreed that consumers should have the ability to choose how their personal information is used online, they differed on how that choice should be exercised. According to the report, participants representing industry favored an "opt-out" approach, "which allows personal information to be used unless consumers notify marketers that their information is not to be used in specified ways." Some privacy advocates favored "opt-in," in which marketers must obtain "affirmative consent prior to any collection or commercial use of a consumer’s personal information." According to the report, participants also disagreed "about whether government regulation is needed, or whether the issues addressed at the workshop, at least initially, should be addressed by self-regulatory efforts and emerging technologies."

Special attention at the workshop was paid to examining the issue of children and privacy online. “Although traditional offline media offer a useful reference for defining online privacy issues regarding children, the Internet makes it comparatively easy to collect information without any parental involvement or awareness,” the report says. The workshop and subsequent staff surveys produced a significant amount of data about the online collection of information from and about children.

The consensus that emerged among the participants according to the report was that (1) children are a special audience; (2) information collection from children raises special concerns; (3) there is a need for some degree of notice to parents of Web sites’ information practices; and (4) parents need to have some level of control over the collection of information from children. Virtually all workshop participants agreed that “Knowledge, Notice and No” is the paradigm to address information collection issues involving children.

During the workshop, there were demonstrations of software designed to give parents the ability to “monitor, filter, and prevent the disclosure of information by their children.” The consensus was that development of technological solutions for privacy protection should be continued.

The FTC, in releasing the report, announced plans to convene a follow-up workshop to provide an update on self-regulation and the progress made by technology. A date for the workshop will be set shortly.

The Commission vote to release the staff report was 5-0.

Copies of the report are available on the FTC’s web site at http://www.ftc.gov and also from the FTC’s Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-326-2222; TTY for the hearing impaired 202- 326-2502. To find out the latest FTC news as it is announced, call the FTC NewsPhone recording at 202-326-2710.

(FTC File No. P954807)