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U.S. ONLINE PRIVACY LAWS MAY BE INEVITABLE

Posted on March 6, 2001

      Harris Interactive plans to release a study this month revealing what most people already know: Americans don't trust major corporations, or the government, to protect personal information.

      In the survey, about 40 percent of 3,113 adults said they had never purchased products or services online, and nagging doubts over Internet privacy and security topped their list of worries.

      Only 10 percent of online users said they completely trusted companies to safeguard their data. Many Web surfers continue to express reluctance about sharing personal information, even though they like the idea of Web sites with more personalized offerings.

      What's news here is not the results of the study, but its sponsors: Some of the major players in electronic commerce, who have banded together to create the Privacy Leadership Initiative.

      "With this trust deficit we know exists, we know we have a big job in front of us," said Walter O'Brien, executive director of the initiative, which includes IBM, Procter & Gamble Co., Ford Motor Co., ETrade Group Inc. and DoubleClick Inc.

      Indeed, corporate executives collectively sighed in relief last year when a bevy of online privacy bills fell short of passage in Congress. But it's clear that they are sensing a disturbing change in the political climate.

      Many lawmakers who once advocated a hands-off policy now recognize that the Web has become such an integral part of Americans' daily lives that they cannot afford to ignore glaring privacy breaches. Without new laws, they say, the Internet marketplace may end up hurting itself.

      "Too many online customers feel insecure about the privacy in the online world," said Sen. John F. Kerry, D-Mass. "This insecurity is the biggest threat to the new economy." The Privacy Leadership Initiative, which says it remains neutral on legislation, hopes to change consumers' views by offering tips on protection -- both online and offline -- and educating businesses. This fall, the organization will begin spending up to $40 million on an advertising campaign to educate consumers about privacy.

      Consumer advocates say corporate efforts to educate businesses and consumers will not help an industry that has squandered opportunities to prove it can police itself. Thanks to a series of privacy blunders by Internet companies, consumers are well aware that the market for their personal data is growing.

      Last year, consumer advocates were enraged by Toysmart.com's attempts to sell an extensive consumer database that included names, addresses, shopping preferences and children's birthdays.

      In return for customers' cooperation, the Waltham, Mass., online seller of toys promised consumers it would never share their personal information. But after its collapse, Toysmart.com, majority owned by Walt Disney Co., put the database on the market.

      Embarrassed by the controversy, a Disney subsidiary paid $50,000 for the database, which will be destroyed by Toysmart.com to satisfy a Federal Trade Commission settlement.

      More recently, N2H2 Inc., a Seattle developer of Internet filtering software, agreed to stop gathering data on the Web habits of millions of schoolchildren. The company had planned to sell the information to marketers and the Defense Department.

      "I think it's finally gotten to the point where members of Congress realize they have a problem on their hands," said Andrew Shen, a policy analyst for the Electronic Privacy Information Center in Washington, D.C. "The current approach is not working."

      In fact, it may get worse as more firms flock to the Internet and try to boost sales by learning more about consumers, privacy specialists said. Already, companies are building extensive profiles based on your mouse clicks and shopping preferences. In some cases, diligent Internet users may be able to track down your divorce case or medical data.

      Most technology trade groups make a strong case that your information is already being traded by marketers, retailers and others. Why then, they ask, should the Internet have separate rules?

      But Congress is already responding to consumers' concerns with a flurry of legislation. In the House, the Consumer Online Privacy and Disclosure Act and the Online Privacy Protection Act would direct the FTC to draft guidelines on how information can be gathered online. Another bill would ban businesses from sharing consumers' financial or medical data without permission.

      Two of the most prominent pieces of legislation are returns from last year's congressional session.

      The first will come from Sen. Ernest Hollings, D-S.C., who wants to require specific consent from consumers before their information can be used. In other words, the onus is on the Web sites to get clearance before they can troll for data.

      "Our bill grants consumers -- not companies -- control over their personal information on the Internet," Hollings said.

      But corporations are more likely to favor a provision in privacy legislation by Sens. Kerry and John McCain, R-Ariz., that calls for "opt-out" approval. This places the burden on Internet users.

      The McCain-Kerry bill also would require Web sites to post clear privacy policies that list what information is being collected and shared. Violators would face fines of $22,000 apiece.

      Although the Information Technology Association of America and other trade groups continue to push for no regulation, some organizations have distanced themselves from such hard-liners.

      E-CommerceALERT Comment: Click here for a look at Canada's Privacy Legislation.

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