FTC COMMISSIONER:
PRIVACY CONCERNS CURTAIL E-SALES

Byline: Vicki M. Young

NEW YORK — Consumers may not mind being watched online provided they have some control over how much personal information to offer Web sites that they visit and the manner in which it will be used.
“Consumers consistently ask: What are companies doing with their personal information?” said Mozelle Thompson, commissioner of the Federal Trade Commission. Web sites that don’t disclose how they use personal information, the commissioner observed, reinforce the sense of many consumers who believe those Internet destinations don’t value them enough to cater to their concerns.
“More and more consumers are telling Congress they want something done to protect their personal information,” Thompson noted, adding he expects some form of legislation addressing those concerns to be passed into law during 2001. Thompson made his comments during a presentation entitled, “Privacy and the Law,” part of a marketing forum held here last month by Forrester Research.
“Consumers have told us they are reluctant to buy on the Web because they are concerned about what happens to their personal data,” Thompson recounted. “Consistently, over the past several years, it’s the top reason why consumers don’t buy on the Internet.”
Internet players have been slow to respond, but Thompson pointed out that those issues are, in fact, moving to the forefront of the decision-making processes at a growing number of Web sites. That’s partly because they’re realizing that if they treat consumers more like partners, they can forge a much closer connection with those people, rather than risk alienating them.
In an interview following his presentation, Thompson told WWD a number of dot-coms have lost out on various opportunities to build their businesses — let alone attain market leadership — by not being direct or honest about what they do with Internet users’ personal data. “They haven’t taken charge in formulating an adequate privacy policy, nor have they sufficiently dealt with the issue of accountability,” he said. As the Net offers a wide array of Web site choices, consumers who aren’t satisfied can easily go elsewhere, and many companies with some potential never achieve it because of such lingering doubts over the medium, Thompson said.
A five-pronged approach by Web sites — offering consumers notice, choice, access, security and enforcement regarding the use of their data — is what Thompson is advocating. “Notice and choice have been real surprises and disappointments for me,” he conceded, noting those two concerns generally are the easiest for companies to address. “If those are the easiest,” he added, “and there are flaws even from responsible companies, there is a problem.”
According to the commissioner, for a Web site’s privacy notice to be effective, it needs to clearly and simply tell its visitors what it is doing with their personal data. When companies decline to do so, he projected, consumers are likely to keep assuming the worst.
“A privacy policy that takes 12 pages to explain what a company is doing is a turnoff,” Thompson said. “Consumers want fairly simple things. They want the option of deciding how much information to give. They want companies to explain what the value is for them in [disclosing] that information.” Having an opt-out/opt-in option for individuals’ most sensitive of data, including financial and medical information, could be an especially wise choice for companies, he advised.
The anticipated federal legislation would also help the FTC grapple with the privacy issue, one that can turn into a tug of war between national and state legislatures: It would provide the agency with an enforcement mechanism to guard consumer rights. “Right now, we can go after fraud and deception,” Thompson pointed out. “If a company doesn’t say anything about its privacy policy, there is no deception, and that rewards bad companies.” He was referring, in part, to Section 5 of Federal Trade Commission Act.
The FTC has been busy on other privacy-related concerns. “We’ve been encouraging more technological responses to consumers’ needs regarding the use of cookies,” he said of the application that enables Web sites to monitor users’ behavior at those destinations online. He’s hoping that consumers get more say over what kinds of cookies are used and what kind of information they can collect.
Armed with information gleaned from cookies, Web sites can better market to cyber-shoppers, whether via pop-up ads aimed at individuals’ interests, targeted e-mail campaigns or otherwise. Some privacy watchdogs have cited worries among consumers that even anonymous information from a certain user profile can eventually be matched with actual identifiable information — such as name, address, credit card numbers — because it came from the same computer the user is accessing.
For now, it looks as if Internet players will be grappling with privacy concerns for some time. Thompson predicts that, someday, there will be one standard, whether the information is used online or off. “It’s hard for me to believe that if companies are using information off-line and online, there will be two different standards. A company such as American Express will have to look at the issue across the board. They’ll ask themselves, ‘What is our relationship with our consumer?’ and ‘Do we want to keep that customer?”‘

load comments
blog comments powered by Disqus