FTC proposes ‘Do Not Track’ button for browsers #ftc #privacy

The Federal Trade Commission is considering a  “Do Not Track” approach in a proposed framework for consumer privacy.

The preliminary staff report notes that current ‘opt-out’ mechanisms are piecemeal and ineffective, and concludes:

Given these limitations, Commission staff supports a more uniform and comprehensive consumer choice mechanism for online behavioral advertising, sometimes referred to as “Do Not Track.”
Such a universal mechanism could be accomplished by legislation or potentially through robust, enforceable self-regulation. The most practical method of providing uniform choice for online behavioral advertising would likely involve placing a setting similar to a persistent cookie on a consumer’s browser and conveying that setting to sites that the browser visits, to signal whether or not the consumer wants to be tracked or receive targeted advertisements. To be effective, there must be an enforceable requirement that sites honor those choices.

The staff proposes further discussion on several issues:

1) that such a “universal choice mechanism” should not “undermine the benefits that online behavioral advertising has to offer”
2) that the mechanism should preferably be a “browser-based mechanism through which consumers could make persistent choices” – i.e. a browser “Do Not Track” button.
3) that provision may have to be made for selective opt-in within the opt-out mechanism.
4) that the mechanism be simple
5) that the mechanism be comprehensive, i.e include mobile
6) that it be mandatory

In a response in the report’s appendix, Commissioner William E. Kovacic has qualms. He raises some interesting questions about the economic effects of such a mechanism on advertising supported free web content:

It is possible that if online content providers can deny free access to those who opt out of tracking, they can prevent free riding. Setting prices is costly; if willingness to pay to avoid tracking varies substantially, the informational requirements to set access prices will be large. For a number of content providers, a price-for-content model is likely to provide less revenue than monetization via advertising; that most websites choose an ad-driven model rather than a direct fee model suggests that the former is a more efficient means than the latter to monetize content in most circumstances. At the margin – which may be large – forcing firms away from their revealed-preferred method of monetization may reduce revenue and hence degrade quality. In discussing whether website content might be degraded by consumers choosing not to be tracked, how, if at all, should such risks impact the Commission’s analysis?