U.S. Is Said to Seek New Law to Bolster Internet Privacy

May 19, 2000

U.S. Is Said to Seek New Law to Bolster Internet Privacy

By STEPHEN LABATON

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ASHINGTON, May 19 -- Concluding that companies on the Internet have not properly protected the privacy of consumers, the Federal Trade Commission has decided to ask Congress for authority to impose tough consumer privacy safeguards, government officials said today.
In an unannounced vote taken today, the commission approved a staff recommendation to seek legislation giving the agency such authority. The action comes after the recent completion of a survey by the commission that found that only about 20 percent of major companies on the Internet had adequate standards for protecting the privacy of Internet users.
The commission's decision comes as the agency has stepped up its investigation of major Internet companies over their use of consumer data. It represents a sharp departure from the agency's previous policy of relying almost entirely on the industry to police itself. But lawmakers said that the prospects were not strong for Congress to adopt legislation so late in the session.
The legislation sought by the commission would permit it to regulate the kinds of notice given to consumers about use of information regarding them, as well as whether consumers can block that use.
It would allow the commission to establish rules for keeping the information secure from third parties. And it would authorize the commission to penalize companies that violate privacy rules.
Commission officials are preparing to brief members of Congress about the proposal on Monday.
The commissioners are also planning to testify before the Senate Commerce Committee on Thursday.
Democratic lawmakers in both the House and Senate who have been the most vocal advocates for privacy legislation said this week that the prospects for final passage of any privacy measure were not strong, since the Republicans have largely sided with industry and there are not enough legislative days remaining to pass a significant new measure.
"I would say the chances are virtually nil," said Representative Edward J.
Markey, Democrat of Massachusetts, whose own privacy bill has stalled. "The Republican leadership is committed to not doing privacy this year in any area."
Nonetheless, a group of nine Democratic senators led by Ernest F. Hollings of South Carolina and John D. Rockefeller 4th of West Virginia is preparing to introduce a measure next week that is similar to what the commission has sought. The legislation also contains measures that appeal to Internet companies, most notably a provision that pre-empts all state law on Internet privacy.
"For many, privacy concerns represent the only remaining obstacle impeding consumers' full embrace of the Internet's ample commercial opportunities," Mr. Hollings said today. "Advances in technology have provided information gatherers the tools to seamlessly compile and enhance highly detailed personal histories of Internet users.
"Nonetheless, industry has to this point nearly unanimously opposed even a basic regulatory framework that would ensure the protection of consumer privacy on the Internet -- a basic framework that has been successfully adopted in other areas of our economy. My bill gives customers, not companies, control over their personal information on the Internet."
A report accompanying the commission's proposal for legislation found that the industry had made significant progress in policing itself, but not enough. Robert Pitofsky, the chairman of the trade commission, has said recently that there is a big role for companies to monitor themselves, but that as the market develops, there may also be a need for government to play a role as well.

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Mr. Pitofsky has recently told others at the agency that while self-regulation was a crucial element of protecting privacy rights, he had also come to believe that the marketplace had developed sufficiently to seek new authority to give the government tools to prosecute companies that do not police themselves.
But industry groups say any effort to give the commission new rule-making authority would be an unwarranted incursion by the government into regulating cyberspace and could discourage the development of many start-up Internet companies.
"Even though this industry is the basis for a tremendous economic boom, most of these companies in fact aren't making money right now," said a lobbyist for a major Internet and entertainment company.
Christine A. Varney, a former member of the trade commission who is now representing an industry group, said the agency already had significant authority to crack down on companies that violated the privacy interests of consumers by engaging in deceptive practices.
"Clearly they already have authority and they have exercised it," said Ms. Varney, an adviser to the Online Privacy Alliance, a group of about 100 companies and associations interested in Internet issues.
But some privacy advocates call the agency's record disappointing.
"The bottom line is that the privacy gap between the safeguards in place and the intrusions seems to be growing not narrowing, and that has as much as anything to do with the lack of enforcement at the F.T.C.," said Marc Rotenberg, director of the Electronic Privacy Information Center, a research organization that studies privacy issues and technology. "There is little indication that self-regulation is working."

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