Published in The Washington Times<?xml:namespace prefix = o ns = “urn:schemas-microsoft-com:office:office” />
August 1, 2000
“We are from the government and we're here to protect you from free content online, lowered costs of doing business, advertisements that you might actually be interested in, and the free flow of information.” In light of Thursday's deal between the government and a group of Internet advertisers, the above statement's not far from the truth. Under the agreement that both the Federal Trade Commission and industry leaders cannot stop congratulating themselves for, online advertisers must inform Web surfers about information collection practices and give them the option of not participating. Additionally, anonymous data cannot be merged with information that personally identifies a consumer without that individual's consent. The rules are only binding for the companies that signed on to the deal, but the FTC is sending legislation to Congress that would force the entire industry to comply with the regulations. The members of the Network Advertising Initiative (NAI) include market leaders like DoubleClick, Engage, 24/7 Media and AdForce and represent almost 90 percent of the online advertising market. For members of NAI, this deal has some very tangible, if not immediately apparent, perks. Mark Horn, director of public policy for advertising agency Engage pointed out, “We already meet and exceed these standards.” But he added that it was an important step to take to assure consumer confidence. In other words, Engage's cost of complying with the deal will be zero. And the group's other market leaders that will need to modify their business practices to comply with the costly rules have sufficient cash flow to do so. But many smaller and yet-to-be started agencies will find the cost of compliance prohibitive and will be forced out of business. So while it is true that leading advertisers will have one less thing to worry about, that one thing will be competition from up-and-coming firms, not lagging consumer confidence. In addition to the leading advertising agencies, the other winner is the FTC itself. With these new pre-regulations, they have expanded their grip on the Internet and pushed Congress one step closer to mandating restrictions on online information collection. So instead of elected members of Congress making rules the FTC has to enforce, unelected bureaucrats are setting the agenda and pressuring Congress to follow their lead. This might make for a happy FTC, but it should be a red flag for the public. Conspicuously absent from the negotiating table was a consumer representative. Not coincidently, consumers are the group that will not be enjoying the big benefits the FTC and big advertising firms are so excited about. It is true that less user information will be collected and moved around, but is that necessarily a good thing? The free flow of consumer information has meant increased lending, lower interest rates and even tracking down so-called “dead-beat dads” with data collected in the financial sector. Marketing lists comprised of consumer shopping habits have meant the successful launch of new small businesses because they don't have to waste precious cash resources on advertising to uninterested consumers. On the Internet, information collection benefits often take the form of free content, personalized sites and, more accurately, targeted marketing. If the free flow of information is thwarted, consumers will be forced to give up these benefits, and for what? The peace of mind that no one is keeping track of what your hobbies are or what sort of travel deals most appeal to you? Privacy concerns will be valued over the convenience of personalized sites and better tailored advertising for some consumers. But better to let individual consumers decide where the tradeoff lays for them than to impose costly, one-size-fits all regulations on everyone. Only the marketplace is decentralized enough to cater to Web surfers individually – the FTC can only dream of that kind of scope. Jessica Melugin is a technology policy analyst at the Competitive Enterprise Institute.