Protecting Privacy on the Internet: Melugin Op-Ed in Washington Times

Published in the Washington Times<?xml:namespace prefix = o ns = “urn:schemas-microsoft-com:office:office” />

July 5, 2000


The Federal Trade Commission's latest Online Privacy report calls for federal regulation of the way Internet companies collect and use information about their customers. But as bureaucrats call for clumsy rules, the marketplace is proving more adept at striking a balance between increased efficiency in marketing and consumer's privacy preferences.


Companies gather information about consumers online, just as they do offline, to more accurately target advertising. They do this two ways. The first is by asking visitors to fill out a form when they visit a site. Consumers can refuse to do this, but often it's a prerequisite for gaining access to that site's services or information. In this sense, the consumer's information acts as currency on the Internet. A 1999 study found that 86 percent of Internet users polled wanted the ability to exchange their personal information with Web sites so long as they knew the benefits for doing so and were informed about the use of their data.


The second way companies gather information is more controversial, but no less benign. Tiny files known as “cookies” are sent to the user's hard drive to keep track of the sites he visits and the advertisements that catch his attention. If consumers prefer, they can set their browsers to ask them before accepting cookies or to block them entirely (it takes four clicks on Microsoft's Explorer).


Supporters of new government regulations not only ignore the economic incentives companies have to cater to consumer privacy preferences, they also overlook the technological tools already available to give consumers increased control over their personal information. The following is a summary of just a few such products now on the market.


Browse the Web anonymously with Anonymizer ( While browsing the Web, users may inadvertently reveal information about their viewing habits, geographical location or even search terms they've entered on other sites. Anonymizer provides both a free and a premium service that uses an intermediary to prevent unauthorized parties from gathering this type of information. Instead of hopping from one Web site to another, users always leave from, and go to, the company's protected location. This prevents sites that usually gather information about where a visitor is coming from or going to from doing so.


Freedom 1.0, available from Zero-Knowledge Systems Inc. ( uses the technological equivalent of fake names to disguise a users' identity while online. The authenticated digital pseudonyms, called “nyms,” are unrelated to the users' actual information and are one of three elements that provide online anonymity to users. The use of a nym triggers a function that encrypts (scrambles) all outgoing data and messages from the users system in multiple layers of cryptography. Then the user's Internet traffic is routed through a series of “privacy enhancing detours” in a group of servers that strip out location information for the users' ISP and leave only the nym intact. Freedom users remain largely anonymous even to Zero-Knowledge; the company is unable to match the nym to the credit card information. Zero-Knowledge charges $49.95 for five nyms and one year of service.


Idcide Inc. offers a free browser plug-in called the Privacy Companion that distinguishes between first-party cookies (sent from the current site) and third-party cookies (sent from other servers). The tool can be set to accept all cookies, just first-party cookies or no cookies at all. In many cases, setting the Privacy Companion to block third-party cookies thwarts the tracking software used by advertising agencies, but still allows the first-party cookies that many companies require before granting access to their sites.


The Enonymous Advisor ( is a service that provides a “just-in-time” rating of more than 25,000 Web sites' privacy policy. The product is a browser companion that can be downloaded and starts automatically every time the browser is in use. After the user enters a web address, but before any user information is given to the site, a window automatically appears with links to details about that site's privacy practices. This service ensures consumer's privacy standards are always in line with the sites they use.


The Enonymous Advisor will also point out Web sites that carry a Better Business Bureau Online ( or Truste ( seal. Both seals signify that the Web site has complied with that service's standards for privacy policies, information collection, handling and more. More detailed information about standards for site membership is available on their respective Web pages.


Recently, allegations that some of these services contain inaccuracies have surfaced. But as the Internet and its related services grow, there are bound to be bumps in the road. Credibility is the essential ingredient in these groups' business model and, if they wish to remain viable, consumer trust is paramount.


The false notion of an impending “privacy crisis,” coupled with recent developments in online data collection, has inspired in some a knee-jerk reaction for government regulation. But the incentives businesses have to cater to consumer's privacy concerns render potentially costly government regulations unnecessary. As FTC Commissioner Orson Swindle recently noted, “Legislation could limit consumer choices and provide a disincentive for the development of further technological solutions.”


Consumers should continue to exercise their privacy preferences one-by-one and Congress should save the legislation for problems the market isn't already solving.


Jessica Melugin is a policy analyst at the Competitive Enterprise Institute.


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