FTC Releases Privacy Report Proposing New Framework for Collection and Use of Consumer Data
December 2, 2010

In an attempt to address consumer privacy interests and to “inform policymakers, including Congress, as they develop solutions, policies, and potential laws governing privacy,” the Federal Trade Commission (“FTC”) issued a comprehensive preliminary staff report (“Report”). The FTC raised concerns that despite industry self-regulatory measures, many marketers either do not disclose their data practices or disclose them in unintelligible manner. FTC Chairman Jon Leibowitz said, “The FTC wants to help ensure that the growing, changing, thriving information marketplace is built on a framework that promotes privacy, transparency, business innovation and consumer choice. We believe that’s what most Americans want as well.”

Significantly, in the Report the FTC also expressed support for a “Do Not Track” approach to behavioral advertising.

In the Report, the FTC sets forth a three-part proposed framework for entities that collect or use consumer data that may be linked to a specific consumer (or electronic device).

• Companies should adopt a “privacy by design” approach. Companies should take privacy concerns into consideration in their every day practices, such as only taking data needed for a specific business purpose and only maintaining that data for as long as necessary to fulfill that purpose.
• Companies should simplify consumer choice. Although companies do not generally need to provide choice before collecting and using consumers’ data for things consumers expect and generally accept (e.g., product fulfillment, legal compliance, etc.), companies should provide choice at the point the consumer provides the data for any uses that are not generally expected or accepted.
• Companies should increase the transparency of their data collection practices. Companies should use clearer, shorter and more standardized privacy policies and should also provide a mechanism whereby consumers can access the data that is being collected from them.

While the aim of the Report may have been to light a fire under the industry and Congress to take more forceful action, the FTC took the opportunity to remind marketers that it will not be shy in pursuing claims where it finds that consumers’ privacy rights have been infringed. Chairman Leibowitz warned that the FTC “will take action against companies that cross the line with consumer data and violate consumers’ privacy – especially when children and teens are involved.”

Public comments on the report will be accepted until January 31, 2011. The FTC said that a final report will be issued later in 2011.

If you have any questions about the Report other advertising, marketing, and privacy law issues, please contact Jeffrey A. Greenbaum at 212.826.5525 or jgreenbaum@fkks.com, Terri Seligman at 212.826.5580 or tseligman@fkks.com, Michael Schiffer at 212.705.4827 or mschiffer@fkks.com, or any other member of the Frankfurt Kurnit Advertising Group or Jerry Spiegel at 212.826.5543 or jspiegel@fkks.com or Glen Westerback at 212.826.5563 or gwesterback@fkks.com or any other member of the Frankfurt Kurnit Technology, eCommerce and Privacy Group.

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