Critic: FTC needs to take action on targeted ads

The U.S. Federal Trade Commission needs to take action to protect consumers against invasive targeted advertising practices, one critic said Thursday.

Targeted advertising vendors are tracking children and conducting racial profiling, said Jeffrey Chester, executive director of the Center for Digital Democracy (CDD), firing an opening salvo at an FTC e-behavioral advertising workshop that runs through Friday.

Online advertisers are adopting an "ever-growing sophisticated array of ploys to track our every move," Chester said. "Few members of the public understand what's going on, that ... our mouse clicks are tabulated and stored and sold to the highest bidder."

The CDD and the U.S. Public Interest Research Group (US PIRG) filed a complaint on targeted advertising with the FTC a year ago, and on Thursday, the groups filed a supplemental complaint. The 65-page supplemental complaint details some companies' efforts to target teenagers based on their interests, as well as consumers based on sexual orientation and health concerns.

In many cases, notice about data-collection practices are buried, CDD and US PIRG said.

The FTC should investigate online advertising practices, create a task force to focus on targeted advertising aimed at children and also look into targeted advertising on social-networking sites, the groups said.

The FTC has shown concern about these practices, Chester said. "But we believe the time for fact-finding is over," he said. "The commission ... must now act to protect Americans from the unfair and deceptive practices that have evolved."

Representatives of the online advertising industry defended their actions, saying targeted advertising benefits consumers. Targeted ads help pay for customers to "receive more and better free content and services," said Randall Rothenberg, president and CEO of the Interactive Advertising Bureau, a trade group for online advertisers.

Without targeted advertising, there'd be no free online services such as e-mail, added Michael Walrath, senior vice president for Yahoo Inc.'s marketing products division.

The online advertising industry takes several steps to protect customer data, and the vast majority of large companies have privacy policies that they enforce, even though many are not required to have policies, said Trevor Hughes, executive director of the Network Advertising Initiative (NAI), a coalition of online advertisers focused on educating consumers and creating standard practices.

In addition to those protections, consumers have other options, Hughes said. "Every browser in the United States and the world has cookie controls within three clicks," he said. "You can switch off third-party cookies, you can switch off first-party cookies, you can manage cookies in many ways."

But FTC Commissioner Jon Leibowitz said some online advertising practices raise questions. "I am concerned ... when my personal information is sold or shared with third parties, or when my online conduct is monitored across several Web sites, especially when there's no effective notice or consent," he said.

Contextual ads can be disconcerting to some people, he said. "Perhaps it's because we don't quite understand what Web sites and online advertisers are doing, or how they're doing it," he said. "Perhaps it's because we don't feel like we have any meaningful choice or control in the matter."

A recent study submitted as comments for the FTC workshop found that Fortune 500 privacy polices were "incomprehensible," Leibowitz said. About 27 percent of the privacy policies surveyed allowed consumers to opt out of data collection, but none decline to collect data by default unless customers opt in, he said.

"Your only choice, really, is take it or leave it" with most Web sites, he said.

Leibowitz called on online advertisers to adopt simple, conspicuous data-collection notices and to consider opt-in mechanisms instead of opt out.

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