FTC Releases Report to Congress on Consumer Online Privacy, Recommends Legislation to Protect Children

Date: Jun 08, 1998

"Industry's efforts to encourage voluntary adoption of the most basic fair information practice principle--notice--have fallen far short of what is needed to protect consumers," the Federal Trade Commission concludes in its June 3, 1998, document, Privacy Online: A Report to Congress. The report presents the results of a survey of more than 1,400 Web sites. As a result of the findings, the Commission is not only considering other mechanisms to spur self-regulation, but it is recommending that Congress develop legislation to allow parents to control online collection and use of personal information from children.

The FTC survey reveals that while more than 85 percent of Web sites collect personal information from consumers, only 14 percent provide notice of their information practices, and only 2 percent do so by providing a privacy policy statement. Eighty-nine percent of children's Web sites collect information from children. About 54 percent of children's sites provide some sort of disclosure of information collection practices, but few sites take steps to provide for meaningful parental involvement, and only 10 percent provide for parental control over the collection and/or use of information from children. The Commission concludes that effective industry self-regulation "has not yet taken hold."

The privacy issue will take center stage again at the National Telecommunications and Information Administration "summit" scheduled for June 23 and 24, 1998. With Congress facing an ever-shortening legislative calendar, with little tangible results to show for it and many contested elections in the fall, the political push to protect children may prove irresistible. Proposed legislation could be a vehicle for further children's marketing restrictions of dubious constitutionality. Privacy, however, is an issue of concern to all consumers; and Congressional proposals will likely extend to developing mechanisms to protect all consumers.

Equally troubling, in light of the existence of the European Union (EU) Data Directive, however, is the FTC's conclusion that self-regulation is ineffective. The result could be efforts by the EU to limit transborder data flows to the United States. Disruption of international electronic commerce is possible if industry does not act swiftly to respond to these concerns.

For more information on privacy and other Internet issues, please contact Sheila A. Millar at 202-434-4143, or by e-mail at millar@khlaw.com