Originally created 07/21/98

FTC sets privacy deadline for Internet businesses



WASHINGTON -- Federal regulators will tell Congress that unless companies on the Internet adopt plans to improve protection of consumer privacy by year's end, lawmakers should approve tough new privacy laws.

In testimony scheduled for Tuesday before a House panel, Federal Trade Commission Chairman Robert Pitofsky planned to tell lawmakers the agency hopes businesses can develop sufficient privacy rules for themselves, despite "considerable barriers."

"While some industry players may form and join self-regulatory programs, many may not," Pitofsky said in prepared testimony. "This would result in a lack of the uniform privacy protections that the commission believes are necessary to allow electronic commerce to flourish."

Pitofsky's remarks, to be made before a House Commerce subcommittee, are the strongest suggestion yet that the Clinton administration is serious about new federal privacy laws if the high-tech industry cannot regulate itself adequately.

Earlier Monday, an industry trade group trying to convince government that new laws aren't needed said it will use electronic seals on Web sites to assure consumers.

Under the proposal by the Online Privacy Alliance, these seals -- similar to approval by the Better Business Bureau -- would guarantee to consumers that a commercial Web site voluntarily complies with a privacy plan approved by the group. The alliance also planned to testify at Tuesday's hearing.

Critics worried the alliance plan might be too confusing to be effective.

"These seal programs are sort of a do-it-yourself privacy policy," said Marc Rotenberg, executive director of the Washington-based Electronic Privacy Information Center. "I don't think this is going to do it, and the pressure is growing for the administration to start thinking more seriously about legal rights for online users."

The White House has warned businesses that sell products on the Internet to improve protection of the information they collect from customers using online questionnaires, such as names, postal and e-mail addresses and personal preferences. Some Web sites sell the information to third-party advertisers and others.

"In order for self-regulation to work, you need third-party enforcement," said Christine Varney, a former federal trade commissioner and the alliance spokeswoman. "If consumers have a dispute with a company and can't get it resolved, they have to have somewhere else to go."

Two groups already offer such seals: California-based Truste and the Better Business Bureau with its BBBOnline program.

The proposal by the Online Privacy Alliance comes as Commerce Secretary William Daley is expected to report to President Clinton later this month on the industry's efforts to protect consumer privacy on the Internet.

The alliance -- a group of more than 50 companies and trade groups including Microsoft, America Online, IBM, Netscape and the Direct Marketing Association -- initially set a Sept. 15 deadline to develop enforcement rules for its own privacy guidelines. Those guidelines include telling consumers how personal information will be used, giving them the choice to participate, making sure the information stays safe and letting consumers review data collected about them.

"Secretary Daley looked us in the eye and said, 'That's not good enough"' Varney said.

The alliance said it described its plan Monday to the administration, but the Commerce Department said it had no immediate response.

Last month, Vice President Al Gore told high-tech executives: "People will not put their faith, their trust or their cash into electronic commerce if they feel that in order to buy a product, they must first sell their privacy."

Advocates want the administration to adopt tough privacy new laws, but the White House has said it's worried about stifling the growth of fledgling electronic commerce.

The privacy alliance previously endorsed rules that require businesses on the Internet to obtain a parent's permission before they try to collect information from children.