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Many people are unaware the Federal Trade Commission issued a set of guidelines regarding advertising on the web several years ago, known as the "Dot-Com Disclosures". Well, the FTC has decided to revisit these guidelines to determine their applicability with the rapidly changing digital landscapes, and to seek comments from the general public as to what still works and what needs to be fixed. Please enjoy this client alert that details the FTC's efforts in this endeavor.

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This post was written by Edgar Hidalgo.

The online behavioral advertising sector received a rude awakening at the end of 2010 from unsatisfied federal regulators. Both the Federal Trade Commission and the Department of Commerce published reports espousing increased regulation of online behavioral advertising – the former report encouraging Congress to consider a “Do Not Track” regime and the latter expressing an arguably more favorable stance on industry self-regulation. Similarly, legislators on one side of the aisle have introduced online privacy legislation, and those on the other side have at least intimated interest in the issue. Thus, it comes as no surprise that just three weeks into 2011, the advertising industry has taken steps to strengthen its collective effort at keeping the government at bay and beefing up its self-regulation arsenal.

On Tuesday, January 18, the president and CEO of the Association of National Advertisers, Bob Liodice, reached out to the association’s members in direct response to the FTC’s report. Via email, Liodice encouraged the ANA members to adopt privacy best practices and the self-regulation program the association and its progeny, the Digital Advertising Alliance (DAA), published and implemented in the past two years. Additionally, the email was accompanied by a newly drafted toolkit geared to facilitating compliance with these best practices. (The email and toolkit can be seen in full here.)

Right on the heels of the ANA’s outreach, on Thursday, January 20, the DAA announced its approval of a third trustmark privacy platform provider, TRUSTe and its TRUSTed Ads platform. TRUSTe joins DoubleVerify and Evidon as the third approved provider of consumer privacy icons and platforms. These icons and platforms form a significant piece of the DAA’s self-regulation program that seeks to appease privacy concerns by giving consumers clear disclosures on how data collected through ad is used, as well as providing them with opt-out mechanisms. (More details on the DAA program can be found at http://www.aboutads.info/home/.) To encourage advertiser compliance with the DAA’s self-regulation program, TRUSTe is offering its platform for free on a trial basis. With more trustmark ad platform options, the DAA can expect to gain additional buy-in from online advertisers.

While commentary on the FTC report does not close until the end of this month, regulators have clearly presented the ad industry with strong incentives to speed up its self-regulation efforts – and thus far, the industry seems to be responding swiftly.

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A draft Commerce Department report being reviewed by the White House that recommends the creation of a privacy policy office and passage of legislation that establishes "a baseline privacy framework" was leaked yesterday and is proliferating as we speak (or write). In all, the report makes 10 recommendations and poses dozens of questions on many of the proposals. The department plans to seek formal comment on the questions in a separate Federal Register notice.

The 54-page draft document, entitled "Privacy and Information Innovation: A Dynamic Privacy Framework for the Internet Age," is the work of Commerce’s Internet Policy Task Force. The Task Force held more than six months of consultations, issued a notice of inquiry in April 2010, and held a symposium in May. The document is expected to be released in the coming weeks. The Task Force is a joint effort of the Office of Commerce Secretary Gary Locke, the National Telecommunications and Information Administration, the International Trade Administration, and the National Institute of Standards and Technology.

Recently, the Obama administration created a federal interagency panel to work on privacy and Internet policy. It is chaired by Commerce General Counsel Cameron Kerry and Assistant Attorney General Christopher Schroeder.

The report seeks to demonstrate that a compelling need exists "to provide additional guidance to businesses, to establish a baseline privacy framework to afford protection for consumers, and to clarify the U.S. approach to privacy to our trading partners – all without compromising the current framework’s ability to accommodate new technologies."

However, several industry groups, like broadband industry providers, have staunchly opposed any legislation, recommending in its stead that online privacy protections be pursued through self-regulation, industry standards, and best practices.

The Commerce's report said that baseline legislation should be "built on an expanded set of Fair Information Practice Principles (FIPPs). Widespread adoption of comprehensive FIPPs is essential to achieving the goals we have set for the Dynamic Privacy Policy Framework. Widespread adoption of FIPPs would protect privacy interests in data that currently receive little or no statutory privacy protection. Also, given the flexibility inherent in the individual principles, a FIPPs baseline would help ensure consumer privacy protection as new technologies emerge. Finally, the FIPPs-based framework that we envision would allow companies to direct resources to the principles that matter most for protecting privacy in a particular technological, business, or social context. Legislation would authoritatively establish a FIPPs-based framework, but action by industry, civil society, the Executive Branch, and enforcement agencies can also help this framework take hold." It asks whether the Federal Trade Commission should be given authority to impose rules implementing the privacy principles adopted by Congress.

As for other congressional action, the report said that lawmakers "should pass a data breach law for electronic records that includes notification provisions, encourages companies to implement strict data security protocols, and allows states to build upon the law in limited ways. The law should track the effective protections that have emerged from state security breach notification laws and permit enforcement by state authorities." And while it called for "baseline" privacy legislation, the report said that such a measure "should not preempt the strong sectoral laws that already provide important protections to Americans, but rather should act in concert with these protections."

In addition, the document said that "[a]ny federal law or regulation should seek to balance the desire to create uniformity and predictability across state jurisdictions with the desire to permit states the freedom to protect consumers and to regulate new concerns that arise from emerging technologies when federal law lags behind privacy issues created by a rapidly changing technological environment." Among the questions posed is whether state attorneys general should be given the authority to enforce national legislation.

The report also called on the Obama administration to "review the Electronic Communications Privacy Act (ECPA), paying particular attention to assuring strong privacy protection in cloud computing and location-based services. The goal of this effort should be to ensure that, as technology and market conditions change, the ECPA continues to provide a fair balance between individuals' expectations of privacy and the legitimate needs of law enforcement to gather the information it needs to keep us safe."

Regarding the privacy policy office (PPO), the Task Force has suggested that it could either be housed within Commerce or in the Executive Office of the President. The office would not have enforcement authority. As both a convener of diverse stakeholders and a center of Executive Branch privacy policy expertise, the PPO would work with the FTC in leading efforts to develop voluntary but enforceable codes of conduct. Voluntary principles developed through this process would be enforceable by the Federal Trade Commission and would serve as a safe harbor for companies facing complaints about their privacy practices.

We will certainly report on more developments with respect to this topic, as these leaks turn into babbling brooks and streams of information.

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This post was written by Laura Hicks.

This article was previously published in Media & Marketing Online.

It is no secret that the consumer habits for accessing and consuming music are changing incredibly quickly. In December 2009, radio audience measurement body Rajar revealed that 4.5 million people in the UK regularly use personalised online radio services, an increase of 1.6 million from October 2008. These figures reflect the explosive growth in online music consumption over the past year and highlight the potential gains to be made by advertisers who target the ad-supported music services sector. In this article, we will look at some of the major online music services and then outline key developments and opportunities to be aware of when considering this new market proposition.

The most successful online music service providers (both in terms of subscriber numbers and press coverage) rely at least partly on advertising to help cover the significant operational cost of obtaining the licences necessary to make premium content available to the public. Last.fm is the largest, with over 30 million users. The service, part ad-funded and part subscription funded, differentiates itself with its “scrobbling” system, which recommends songs to users based on their musical taste. Users can also engage with the Last.fm community through the site’s social networking features or create custom radio stations and playlists from the Last.fm music library. Spotify’s service has turned column inches into subscriber numbers, boasting an ad-supported streaming service with over 6 million users, around half of whom are in the UK. It comprises both Spotify Free, with commercial breaks, and Spotify Premium, which is ad-free. And We7, with over 2.5 million users and 4 million tracks available for streaming in the UK is a predominantly ad-based service. Each time a user plays a track the site has four opportunities to show an advertisement targeted at the user.

Until these newer services offered a legitimate alternative to illegal peer to peer file sharing networks, advertisers and brands were understandably cautious about being associated with online music sites. So, how should you make the most of the opportunities now available in the legal online music ecosystem?

The commercial value is obvious; the proliferation of personalised music services allows more effective and targeted advertising. Let’s take an example: If an advertiser wishes to sell trainers endorsed by, say, Jay-Z, they will wish to target fans of Jay-Z (and other similar artists). Personalised services provide a demographic identification service which is invaluable. If a sportswear brand wants to target fans of hip hop or other urban music, they can now do so, and better still, they can engage with them in ways not previously possible with traditional advertising.

Behavioural targeting uses information collected about an individual's online behaviour, such as the pages they have visited or the searches they have made, to select which advertisements to display to that individual. This helps advertisers deliver online advertisements to the users who are most likely to be influenced by them, thereby making campaigns more effective. Because of the individual nature of the information used to identify users, the law and regulations dealing with this kind of advertising are subject to constant review. For example, under European e-privacy law, it will soon be a requirement that a user’s consent is actively obtained before cookies are employed to identify user preferences.

Looking forward, the partnership between artists and brands will continue to strengthen and develop, with artists such as Mariah Carey already breaking new ground. Those who bought her most recent album in certain markets were given a copy of an Elle magazine special edition dedicated to the singer. This collaboration demonstrates the shift from traditional advertising where a celebrity is used to promote a brand; here, it was Elle that effectively promoted the singer.

As artists and brands become more aligned, businesses dedicated to helping brands connect with their consumers through music are prospering. Organisations like VerveLife, a digital music marketing organisation, have established new promotion and distribution channels for thousands of content publishers, such as artists, movie producers, television and game distributors. Companies like Starbucks, Toyota and Burger King have recently sought to reach a particular demographic by focusing on the music that potential consumers listen to.

Along with these emerging models, new legal issues have inevitably arisen. Many of these typically emanate from the existing contractual relationship between artist and recording label. Record labels are increasingly trying to capture the ancillary revenue streams of artists by negotiating 360 record deals which may in turn affect the ability of an artist to engage with a brand. It is also important to be aware of who owns what copyright in music, and what rights need to be cleared.

As the scope and popularity of online entertainment services grows and the level of user-interactivity develops, the online music sphere will continue to provide numerous opportunities for brands and advertisers to connect with music fans in an aspirational way. The new breed of legal online music services offer a dynamic platform for advertisers and brands to reach a targeted and valuable audience.

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This post was written by Rachel Rubin.

Website users have grown accustomed to the quid pro quo of Internet use and advertising: we browse websites, and those same website collect customer personal data or habits that are used to generate targeted advertising. But how far is too far in terms of data collection? Is our current system of consumer privacy protection a functional one, or one that falls short of adequately protecting the individual and his/her personal information and data?

According to the Federal Trade Commission’s new chief of the Bureau of Consumer Protection, David C. Vladek, the answer is the latter, and our system gets a failing grade. The FTC has expressed both distrust and displeasure with the current standard practice of online disclosure statements, and one-click, cookie-cutter privacy statements that consumers rarely read or understand, as neither may be enough to protect consumers from increasingly invasive Internet tracking practices and technologies. Also, the FTC sees this issue as having a consumer dignity interest element at stake, not merely consumer economic interests. The New York Times and the Wall Street Journal recently reported that Mr. Vladek will be scrutinizing online advertising and consumer privacy issues closely. Within his first few days on the job, Mr. Vladek announced that one of his “major goals” was “rethinking” the FTC’s approach to consumer privacy issues. 

As yet, Mr. Vladek has not articulated what these changes will be, but said he is not committed to “imposing regulation.” [quote from NYT article]. In his first few weeks in office, Mr. Vladek has been working with companies, public interest groups, and academics to evaluate the current rules and to suggest new ways to better protect consumer privacy. According to the Wall Street Journal, “the goal [is to have] new privacy guidelines in place by next summer.” 

These changes are part of the FTC’s move toward close evaluation of online advertising practices, which included the June settlement of a case with Sears Holdings Management Corp. In that case, Sears invited customers to download onto their computers, “research” software that allowed the company to track their online browsing. In return, customers were paid $10. The FTC found that the software also tracked consumer bank statements and prescription records, which some consumers did not realize, despite a lengthy privacy policy. The company was required to stop the program and to destroy the information it had collected. Mr. Vladek emphasized that the FTC was not just interested in protecting consumers from economic harm, but also in protecting consumers’ “dignity interest[s] wrapped up in having somebody looking at your financial records when they have no business doing that.” [quote from NYT article].  

How and what consumer data is collected has been a hot issue in recent months, with the release of a report from the FTC on its online behavioral advertising principles, followed shortly thereafter with self-regulation guidelines from industry groups. 

Why This Matters

Some industry groups fear the potential stricter regulations will harm their business models. It is clear that the FTC will expect more transparency from companies, but Mr. Vladek’s approach seems to be a collaborative one so far. Advertisers and industry groups should take advantage of this opportunity. As a practical matter, advertisers should be vigilant in adhering to consumer privacy and consumer information protection guidelines already in place, and should stay abreast of any and all developments in this area. Advertisers should also evaluate the programs and policies they use to protect the consumer information they collect, and alternative means of communicating the extent and use of personal data collected to consumers.

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