Are self-regulatory ad guidelines sufficient to satisfy federal regulators?
By Adam Snukal
Earlier last month the leading media, advertising and marketing trade associations, including the American Association of Advertising Agencies, Association of National Advertisers, Interactive Advertising Bureau, Direct Marketing Association and the Better Business Bureau, representing an overwhelming majority of industry participants, released their Self-Regulatory Principles for Online Behavioral Advertising (the "principles"), with the objective of protecting consumer privacy in ad-supported interactive media.
These generally follow the advisory principles that were released in February 2009 by the Federal Trade Commission. In fact, upon the FTC's release, then-commissioner Jon Leibowitz remarked that anything industry can do to adopt, promulgate and enforce the principles represents "the last clear chance to show that self-regulation can -- and will -- effectively protect consumers' privacy in a dynamic online marketplace."
The principles were aimed at the following categories: education, transparency, consumer control, data security, material changes, sensitive data and accountability. Each principle is well thought out and tailored to specific areas within the universe of online behavioral advertising.
These principles can be summarized, in part, as follows:
1. Educate consumers and businesses about online behavior advertising.
2. Disclose and inform consumers about data collection and use practices, including various forms of notice that may be required depending on the nature of the data collected and the party collecting it.
3. Give consumers options regarding the collection, use and sharing of information to non-affiliates.
4. Require service providers and carrier networks -- for example, non-first or third parties -- to obtain consent before a user's data may be used for behavioral advertising.
Thereafter, the data may only be obtained for as long as necessary to fulfill a legitimate business need, or as required by law.
5. Special treatment afforded to sensitive information, such as medical and financial information, as well as information from users under the age of 13.
Moreover, service providers engaged in online behavioral advertising should undertake steps to help preserve the de-identified status of data collected and used if and when that data is shared with non-affiliates.
6. Entities should maintain appropriate physical, electronic and administrative safeguards to protect the data collected and used for online behavioral advertising purposes.
7. A user's consent must be obtained before either a Web site or some other third party uses the previously collected data for materially different behavioral advertising purposes. Typically, a material change would be a more expansive collection or use of data than previously disclosed to the user.
8. Establish accountability processes that should consist of monitoring programs, complaint procedures, reporting and compliance requirements, enforcement and public disclosures of offenders.
Does any of this sound familiar?
As early as 2007, many leading agencies, aggregators and publishers throughout the mobile marketing industry have stood behind most of these same principles and incorporated them into various codes of conduct and best practices.
Less talk, more teeth
Albeit in a somewhat different medium, the commonalities between data collected via the Web and that which is collected by mobile marketers are substantial.
Appreciating the sensitivity of a person's confidential and/or personally identifiable information and the harm that can result from misuse, the mobile marketing industry instituted similar policies, including:
1. Notice: Mobile marketers are required to inform consumers of the marketer's identity and products/services offered, as well as the key terms and conditions that will govern the interaction between a marketer and the user.
2. Consent: Mobile marketers must ask for and obtain explicit opt-in consent by a user for each mobile marketing program. Consent may not be carried into other marketing programs unless the user has consented to such communications.
3. Constraint: Mobile marketers must limit and target the mobile messages to that which the user requested.
4. Security: Mobile marketers must implement reasonable technical, administrative and physical procedures to protect the user information that is collected in connection with mobile marketing programs.
The one area in which the principles clearly extend beyond the codes of conduct and best practice documents born out of mobile marketing is in the area of enforcement and accountability.
For example, the Mobile Marketing Association has seemingly acknowledged its limited enforcement capabilities by stating in its Code of Conduct that "? until the Code can be enforced effectively by a third-party enforcement organization, mobile marketers are expected to use evaluations of their practices to certify compliance with the Code."
In contrast, the Web principles expressly state in one place that "? any actions taken with respect to instances of non-compliance with be publicly reported by the programs" and in another, "When an entity engaged in [O]nline [B]ehavior [A]dvertising is informed by a program regarding its non-compliance with the Principles ? The programs will send the public reports of uncorrected violations to the appropriate government agencies."
Moreover, the Council of Better Business Bureaus, along with the Direct Marketing Association, has agreed to implement accountability programs to promote widespread adoption of the Web principles.
The one question that many industry experts are still asking themselves is whether the self-regulatory principles instituted by both Web and mobile industry players is sufficient to keep the federal government on the sidelines.
There still appears to be strong indications to suggest that Congress will be taking its turn by enacting general consumer privacy legislation, which may provide some absolute protections, and give both the FTC and Federal Communications Commission greater authority to regulate in this area.
Interestingly, Chairman Boucher of the FCC keyed in on this theme when he was asked during some recent hearings in Washington how statutory and regulatory regimes could exist on top of a self-regulatory one and how would consumers know where to turn in such a maze?
While the similarities between the Web principles and the mobile industry's primary code of conduct are striking though not all that surprising, the uniform message that is being conveyed by all concerned participants in the digital advertising industry is clear -- a new day has arrived in which transparency, education and reasonable choice for consumers must be part of the online advertising industry's best practices.
The successful marketers going forward will be those that understand and appreciate this message, and build cultures which foster -- rather than circumvent -- respect for the consumer while continuing to market, advertise and promote the goods and services which are so intertwined in our daily lives.
Adam Snukal is senior associate in law firm Reed Smith's advertising technology and media group in New York. Reach him at .