Will New FTC Privacy Recommendations Challenge E-Commerce?

While the Federal Trade Commission's final recommendations on online privacy are now public, discussion about what that will mean for the e-commerce and online advertising communities is far from over.

The FTC report (PDF), released Monday, called for organizations to build privacy protections into their offerings by design, simplify privacy choices for consumers, and be more transparent about the collection of data. The commission also recommended Congress consider enacting legislation to enforce that transparency for "information brokers" to ensure consumers have reasonable access to the data companies gather and store about them.

But the report still left some feeling as though the FTC's proposals could create a burden for businesses and restrict online advertising. For instance, it may not always be appropriate for companies to provide consumers access to their data, says Daniel Castro, senior analyst with the Information Technology and Innovation Foundation (ITIF).

"For example, does every online retailer really need to create an interface to its back-end CRM? Does every charity with over 5,000 donors need to provide access to the personally identifiable information it maintains about its supporters?" Castro says. "Organizations should not have to create a system or process so that any individual can inspect what data is stored about them. The costs involved in setting up such a system would be burdensome, unnecessary, and ultimately benefit few at the expense of many."

He says the big challenge of building in privacy "is that privacy is one of many objectives for an organization, and these objectives cannot be legislated no matter how noble the cause."

"As long as we are legislating business processes, why not add in 'security by design,' 'green by design,' 'accessible by design,' 'cost-effective by design,' 'works by design,' and 'good design by design?'"

Privacy by design works best as an approach when it is aligned with the business requirements of a company offering a service to individuals, says Forrester Research analyst Eve Maler.

"If those individuals are paying customers, and they value the ability to do 'selective sharing,' privacy by design can help them make privacy-sensitive choices," she explains. "By contrast, if they are not customers but rather the product -- see Facebook and others -- then I don't believe privacy is even the right word to apply. In this latter case, social pressure, which we sometimes see when privacy policy changes generate ill will around a brand, and regulatory pressure are the only factors likely to militate for true privacy-enhancing service features."

Craig Spiezle, executive director of the Online Trust Alliance, says self-regulation by the industry is preferable to government involvement, as long as the self-regulation efforts are meaningful and universal.

"I believe a lot has changed on both sides of the camp," Spiezle says. "The privacy advocates recognize that consumers get a tremendous amount of value from services that require information. At the same time, I think the business community ... is recognizing that it's no longer the Wild West and that better controls need to be put in place for the long-term vitality of the marketplace and also to ensure innovation."

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