ReactS : Advertising Lawyers & Attorneys : Reed Smith Law Firm : Marketing Regulations, Product Placement

Earlier this month I reported on the fiasco of the Article 29 Working Party's Opinion which favoured prior opt in before cookies are attached to your PC or laptop to track future on line activity. Now a new system to police privacy abuses by companies that track consumer' on line behaviour for targeted advertising purposes is about to be launched in the US.

The Federal Trade Commission in the US has made in abundantly clear to the advertising industry that, as Peder Magee, senior attorney at the FTC said according to the Wall Street Journal, advertising businesses are sophisticated and complicated and if they can collect, use and monetize data they can find a way to make their practices more transparent to consumers. The same attitude has been adopted by EU and regulators across the world.

In response the Internet Advertising Bureau, IAB, in the US and UK, have been pushing members to adopt best practice guidelines. Now though a new business called the Better Advertising Project is launching technology which tracks the trackers. The software it has developed allows consumers to see which companies are tracking them as they surf the web. 300,000 people have volunteered in the US to use the software so the Better Advertising Project can send information to the Council for Better Business Bureaus and the Direct Marketing Association in the US. Initial reports are that more than 250 companies were tracked collecting and using consumer data.

The idea is that if a company is then found to be violating industry principles and refuse to respond to warnings from self regulatory bodies, their actions will be reported to government bodies with greater powers. While no such proposals have yet surfaced in the UK it is likely the technical innovation will spread across the Atlantic fairly swiftly. Advertisers and their agencies in the EU need to act to be more transparent. The proposal to place a universally agreed icon on websites and advertisements to alert consumers if their activities on a web page are being tracked giving them the option to opt out of such tracking appears the only way forward.

IAB UK is submitting a set of proposals to the EU to demonstrate that self regulation is effective in protecting consumers and that the Art 29 Working Party Opinion is an overly restrictive interpretation of the Privacy and Electronic Communications Directive. According to New Media Age Nick Stringer, IAB head of regulatory affairs said "we are proposing aims to enhance transparency and give users greater control".  AOL, AudienceScience, Crimtan, Google, Microsoft, Specific Media and Yahoo were the first seven digital companies to be independently audited in April pursuant to the IABs behavioral targeting best practice principles. Amongst other things these companies promote the IABs consumer facing website Your On Line Choices which gives further information to consumers about privacy on line and behavioural advertising.

All this matters because companies could well fall foul of legislation and self regulatory codes if active steps to warn consumers about tracking and to protect data are not adhered to. In future monitoring activity of on line advertising companies is clearly going to be easier and best practice needs to be adopted, not only to protect consumers but to protect brand reputation.

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It is not good news for advertisers, search engines, digital agencies and affiliates. The European Data privacy regulators have published an Opinion (22^nd June 2010) which states that behavioural advertising, which drives more than 23 billion dollar revenues on the Internet , must change its approach to collecting data on web users and cease delivering advertising to children.

What is clear is that Regulators and Politicians across Europe and internationally are aware of the growing public concern about online data privacy, whether justified or not. Authors of the Opinion state that what is at stake is that many consumers are not aware that their surfing behavior is being monitored and data are being stored for advertising purposes.

The  EC press release states that although online behavioural advertising may bring advantages to online business and users alike, its implications for personal data protection and privacy are significant.

In a strong rebuttal, Europe's media and advertising industry united to reject the Opinion, which the Word Federation of Advertisers , the IAB and EACA and others claim is out of step with the relationships that businesses and consumers are building online and flies in the face of the reality of the Internet.  The authors of the Opinion say that while they do not question the economic benefits that behavioural advertising may bring for stakeholders', such practice must not be carried out at the expense of individuals' rights to privacy and data protection.

The 22 June Opinion also recommends a total ban on behavioural advertising directed at children.

"This opinion takes no account of the support we get from our consumers for interest-based advertising nor of the exchange in value they receive between effective advertising and access to high quality media content for free." said Stephan Loerke, Managing Director, World Federation of Advertisers (WFA).

Why does this Opinion matter? It could of course impact on how national governments interpret the ePrivacy Directive and implement national law making opt in a requirement. In practical terms, in the worse case scenario for marketers and consumers, such a requirement would mean that Internet users would have to confirm every single cookie placed on their PCs! 

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The Office of Fair Trading has just (May 2010)  announced the result of its

study into on line targeting of advertising and pricing and calls for more transparency to allay users fears about privacy and misuse of personal data. The OFT has indicated that web users need to know when they are being served targeted ads and be provided clearer ways to opt out and that if the industry does not improve self regulation the OFT and the Information Commissioners Office will increase external regulation. 

Why does this matter? The behavioural advertising sector is already worth and estimated £64-£95 million and is growing. The benefits to advertisers of reaching targeted audiences are huge. A failure to adopt good practices, such as set out in the IAB's Good Practice Principles could lead to legislative intervention and restrictions on behavioural advertising and even the adoption of an opt in regime rather than a opt out system as presently exists.

One recommendation by the OFT is to "increase transparency to consumers by developing 'clear ad' notices alongside behavioural adverts including information about opting out". This is rather alarming and suggests that users might be served some sort of notice on their screens every time a targeted ad appears...what could be worse and more invasive! It also assumes the majority of Internet users are fools. Clearly more needs to be done to educate users and for advertisers to fully comply with the IAB's  transparency recommendations but there is a concern that alarmist media and privacy advocates will lead to unintended consequences. 

For example on line publishing is financially unsustainable with the current model,  hence  shrinking news organisations and attempts to require paid for news services on line. Advertising pays for our diverse and free media , further restrictions could back fire leading to less choice, reduced services and poorer quality content. Interestingly the OFT's research discovered that many consumers were not concerned by behavioural advertising, and that any concerns that did exist would be greatly reduced if they were told it was happening and given control over the process.

"We found that attitudes to online targeted advertising are mixed with 40% of consumers holding neutral views, 28% disliking it and 24% welcoming it," said the report. "Concerns decreased when consumers were able to opt-out of behavioural advertising, and the associated tracking, if they wished. Around 40% of consumers said they would take some actions to prevent behavioural advertising (such as deleting cookies), although only a very small minority would reduce their internet usage to avoid it. Around 60 per cent would not alter their behaviour at all."

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