It's Privacy, Stupid

A consumer backlash against questionable information-management practices spurs government intervention

E-commerce site operators, Web advertisers, and database vendors are eager to mine consumer data to gain marketing leads, but privacy advocates are increasingly opposing such efforts in Congress and in the courts. Recent lawsuits filed in California, New York, and Texas have sparked official inquiries into how Web data is collected and used.

The latest salvos fired in the privacy wars include a suit filed in California on January 27 against DoubleClick Inc., the largest U.S. Web advertising agency. According to an article in the E-Commerce Law Weekly, the complaint seeks an injunction against DoubleClick, alleging that the company has been using browser cookies containing personal user data in conjunction with direct-marketing databases obtained through its recent acquisition of Abacus Direct Corp. ( The company has reportedly aggregated nearly 100,000 profiles that link people with their online behaviors.) In a similar vein, the New York Times has reported on a $500 million class-action lawsuit filed in California in November 1999 against RealNetworks for allegedly saving information on users’ music choices without their consent when they visited www.real.com to download music files. The Times is also following a novel lawsuit filed in Texas against Yahoo Inc. and its subsidiary Broadcast.com, which claims $50 billion in damages under the state’s anti-stalking law, saying that Yahoo’s cookie technology amounts to surveillance, or stalking of users, without their permission or knowledge.

While much of the legal action has been at the state level, regulatory response is also being contemplated by various federal entities, as reported in the Wall Street Journal. The U.S. Federal Trade Commission (FTC) has established an Advisory Committee on Online Access and Security (ftc.gov/acoas/index.htm) and is conducting an informal FTC inquiry into Amazon.com’s zBubbles shopping utility, which is the subject of a complaint alleging that the software covertly transmits personal e-shopper tidbits to Amazon’s Alexa Internet data repository. On Capitol Hill, lawmakers are forming both a U.S. Senate Democratic privacy task force and a bipartisan congressional privacy caucus to consider online matters.

DoubleClick, Amazon, and RealNetworks have been quick to set up and publicize consumer-friendly privacy policies and options in the wake of their lawsuits and investigations. Other e-commerce companies have heeded privacy complaints and made efforts to self-regulate their use of consumer Web data, but some e-tailers are not yet convinced that consumers are all that concerned about what happens to their personal information. A Fall 1999 “E-customer 2000 Internet Customer Survey” conducted by Primary Knowledge and Greenfield Online suggests that 59 percent of the 2,000 e-customers canvassed do not want the government to regulate online data collection. The study also found that most respondents would supply personal data to a site in exchange for rewards and incentives, but that close to 80 percent still want access to, and control of, any data a Web site collects about them. However, a Forrester Research report from the same time period found that 80 percent of surveyed Internet users would like to have a policy prohibiting sales of their personal data to other companies.

Marketing and advertising proponents acknowledge that consumers deserve to be fully informed and should be given choices about how much privacy they are willing to give up when they visit a Web site or shop online. However, as business professor Val Larsen and marketing professor Newell D. Wright note in their Clickz Forum posting entitled “Lose Your Privacy, Gain the World,” e-commerce decision-makers are weighing customer privacy concerns against the economic advantages of analyzing all that free data streaming into their sites. Companies are still struggling to strike a balance between freedom of choice, freedom of information, and the free market, but the government may decide to get involved if a resolution is not reached soon. — Claudia Willen

Continued in News and Analysis Part II >>>

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