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THE STATE OF ONLINE CONSUMER PRIVACY 

HEARING 

BEFORE THE

COMMITTEE ON COMMERCE, 

SCIENCE, AND TRANSPORTATION 

UNITED STATES SENATE 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

MARCH 16, 2011 

Printed for the use of the Committee on Commerce, Science, and Transportation 

( 

(II) 

SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

JOHN D. ROCKEFELLER IV, West Virginia, Chairman 

DANIEL K. INOUYE, Hawaii 

JOHN F. KERRY, Massachusetts 

BARBARA BOXER, California 

BILL NELSON, Florida 

MARIA CANTWELL, Washington 

FRANK R. LAUTENBERG, New Jersey 

MARK PRYOR, Arkansas 

CLAIRE MCCASKILL, Missouri 

AMY KLOBUCHAR, Minnesota 

TOM UDALL, New Mexico 

MARK WARNER, Virginia 

MARK BEGICH, Alaska 

KAY BAILEY HUTCHISON, Texas, Ranking 

OLYMPIA J. SNOWE, Maine 

JOHN ENSIGN, Nevada 

JIM DEMINT, South Carolina 

JOHN THUNE, South Dakota 

ROGER F. WICKER, Mississippi 

JOHNNY ISAKSON, Georgia 

ROY BLUNT, Missouri 

JOHN BOOZMAN, Arkansas 

PATRICK J. TOOMEY, Pennsylvania 

MARCO RUBIO, Florida 

KELLY AYOTTE, New Hampshire 

ELLEN L. DONESKI, Staff Director 

JAMES REID, Deputy Staff Director 

BRUCE H. ANDREWS, General Counsel 

ANN BEGEMAN, Republican Staff Director 

BRIAN M. HENDRICKS, Republican General Counsel 

(III) 

C O N T E N T S 

Page 

Hearing held on March 16, 2011 ............................................................................ 1 

Statement of Senator Pryor .................................................................................... 1 

Prepared statement .......................................................................................... 2 

Statement of Senator Kerry .................................................................................... 3 

Statement of Senator Isakson ................................................................................. 6 

Statement of Senator McCaskill ............................................................................. 29 

Statement of Senator Klobuchar ............................................................................ 31 

WITNESSES

Hon. Jon D. Leibowitz, Chairman, Federal Trade Commission .......................... 6 

Prepared statement of the Federal Trade Commission ................................. 9 

Hon. Lawrence E. Strickling, Assistant Secretary for Communications and 

Information, National Telecommunications and Information Administration, 

U.S. Department of Commerce ........................................................................... 16 

Prepared statement .......................................................................................... 18 

Erich Andersen, Deputy General Counsel, Microsoft Corporation ...................... 34 

Prepared statement .......................................................................................... 36 

John Montgomery, Chief Operating Officer, North America, GroupM Interaction ..................................................................................................................... 41 

Prepared statement .......................................................................................... 43 

Ashkan Soltani, Independent Privacy Researcher and Consultant ..................... 50 

Prepared statement .......................................................................................... 52 

Barbara Lawler, Chief Privacy Officer, Intuit Inc. ............................................... 59 

Prepared statement .......................................................................................... 61 

Christopher R. Calabrese, Legislative Counsel, American Civil Liberties 

Union, Washington Legislative Office ................................................................ 65 

Prepared statement .......................................................................................... 67 

APPENDIX

Hon. Mark Begich, U.S. Senator from Alaska, prepared statement ................... 85 

Response to written questions submitted to Hon. Jon D. Leibowitz by: 

Hon. Mark Pryor ............................................................................................... 85 

Hon. Kay Bailey Hutchison ............................................................................. 87 

Response to written questions submitted to Lawrence E. Strickling by: 

Hon. Mark Pryor ............................................................................................... 89 

Hon. Mark Begich ............................................................................................. 90 

Response to written questions submitted to John Montgomery by: 

Hon. Kay Bailey Hutchison ............................................................................. 90 

Response to written question submitted to Erich D. Andersen by: 

Hon. Kay Bailey Hutchison ............................................................................. 92 

Hon. John Ensign ............................................................................................. 92 

Response to written questions submitted to Barbara Lawler by: 

Hon. Mark Pryor ............................................................................................... 93 

Hon. Mark Begich ............................................................................................. 94 

Hon. Kay Bailey Hutchison ............................................................................. 94 

Hon. John Ensign ............................................................................................. 96 

Response to written questions submitted to Christopher R. Calabrese by: 

Hon. Mark Begich ............................................................................................. 96 

Comments on ‘‘The State of Online Privacy’’ by Adam Thierer, Senior Research Fellow, United States Senate, Committee on Commerce, Science, 

and Transportation .............................................................................................. 98 

(1) 

THE STATE OF ONLINE CONSUMER PRIVACY 

WEDNESDAY, MARCH 16, 2011 

U.S. SENATE, COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION, Washington, DC. 

The Committee met, pursuant to notice, at 10:05 a.m. in room 

SR–253, Russell Senate Office Building, Hon. Mark Pryor, presiding. 

OPENING STATEMENT OF HON. MARK PRYOR, 

U.S. SENATOR FROM ARKANSAS 

Senator PRYOR [presiding]. I will go ahead and call this to order. 

I want to thank everyone for being here. And we have several witnesses today, and we’re going to have a great hearing. And I want 

to thank everyone. 

First, I want to thank the Commerce Committee staff for pulling 

this hearing together. They really have pulled together an excellent 

panel, two panels of witnesses. 

One thing that Senator Kerry and I were just talking about is 

the Senate is supposed to vote at 10:30. And based on Senate time, 

we don’t know if that means 10:30, 10:45, 11, whatever. But we’re 

supposed to vote at 10:30. So at some point we’re going to have to 

swap the gavel back and forth and race and vote and come back. 

But we’ll try to keep the hearing going during that time. 

Also I know that Senator Kerry has really been a leader on this 

type of legislation, looking at privacy concerns and has been working on a bill and so we would like to hear from him in just a few 

moments on that. 

What I thought I would do is just give a very brief statement. 

And I know that Senator Hutchison is on the way and other Senators are on the way. We might dispense with the opening statements for all the Senators, if that’s OK, except I thought I might 

call on Senator Kerry for just a few moments to talk about his legislation and then go onto the panel. And once Senator Hutchison 

shows up we’ll certainly recognize her for her opening statement. 

But let me just say that as we start today I want to welcome everyone to the Commerce Committee’s hearing on ‘‘The State of Online Consumer Privacy.’’ This is a very challenging endeavor. We 

want to balance the free Internet, you know, the ability to access 

free content and services for all users, with concerns that are 

raised about user’s privacy and general information collection practices online. 

So consumers can conduct research and read online newspapers. 

They can write e-mails and respond to each other in real time. 

2 

Some of them will be worried about how their information is being 

collected online. Some of them may be willing to surrender some 

information in exchange for the free content. Others don’t have any 

idea this is going on. 

So this is a real challenge. As many good things as we can say 

about the Internet and how it has really revolutionized information, and it’s been so great in so many ways, privacy is an area 

that we need to keep focused on and try to balance these interests 

and try to make sure that it’s a good place to be and a good place 

to conduct business. 

So our first panel is going to be the Federal Trade Commission 

and the Department of Commerce. 

Our second panel we’ll hear from consumer advocates, technology 

specialists and members of the business community. Their insights 

and experience are valuable and very much appreciated. 

I don’t know if everyone knows the polling data, but recently 

Common Sense Media published some results that said 85 percent 

of parents say they’re more concerned about online privacy than 

they were 5 years ago. 

Seventy-five percent of parents don’t think social networking 

sites do a good job of protecting their children’s online privacy. 

Ninety-one percent of parents think search engines and social 

networking sites should not be able to share kid’s physical location 

with other companies until parents give authorization. 

So these are just a few of the issues that we’ll hear about today. 

And that as the Senate Commerce Committee and the Senate as 

a whole and the Congress as a whole moves through this Congress 

we’ll try to work through these issues as best we can. 

Again, Senator Hutchison is on the way. And we’ll recognize her 

in a few moments for her opening statement. But until she gets 

here, Senator Kerry would you like to say a few words? 

[The prepared statement of Senator Pryor follows:] 

PREPARED STATEMENT OF HON. MARK PRYOR, U.S. SENATOR FROM ARKANSAS

Welcome to the Commerce Committee’s hearing on ‘‘The State of Online Consumer Privacy.’’ 

Today we meet to discuss a challenging endeavor: how to balance a free Internet—the ability to access free content and services for all users—with concerns 

raised about users’ privacy and general information collection practices online. 

Consumers can conduct research and read online newspapers. They can write emails and respond to each other in real time. Some of them may be worried about 

how their information is being collected online. Some of them may be willing to surrender some information in exchange for free content. 

I look forward to listening to all sides to determine how best to negotiate these 

perspectives: consumers’ privacy concerns with a desire to preserve a robust and 

thriving Internet experience for all users. 

First, we’ll hear from the Federal Trade Commission and the Department of Commerce, both of which recently issued reports on consumer privacy and data security. 

I look forward to examining their findings. 

On the second panel, we’ll hear from consumer advocates, technology specialists 

and members of the business community. Their insights and experience are valuable 

and appreciated. 

While industry has dedicated much time to developing basic self-regulatory principles and their efforts are a great starting point, they alone have not eased peoples’ 

concerns about the collection of their personal information from on-line sources. And 

they will not, alone, prevent abuses from unscrupulous people and organizations. 

This is particularly true when it comes to information collected on-line about kids. 

The supporting statistics are clear. According to Common Sense Media: 

3 

• 85 percent of parents say they are more concerned about online privacy than 

they were 5 years ago; 

• 75 percent of parents don’t think social networking sites do a good job of protecting children’s online privacy; 

• 91 percent of parents think search engines and social networking sites should 

not be able to share kids’ physical location with other companies until parents 

give authorization. 

The Federal Trade Commission stressed in its December staff report the importance of improving transparency and consumer choice in the online privacy arena. 

Incomprehensible privacy policies and user agreements are out. Better disclosures, better consumer choice and improved safety features are in. 

Of course, one of the most elusive challenges we face as a society is how to address the seemingly permanent nature of written comments and information shared 

on the Internet. In other words, what will new kinds of information ‘‘sharing’’ mean 

for our children’s future—and for their reputations? 

Will they be discriminated against with insurers or future employers based on financial, health or personal data they disclosed online when they were teenagers— 

due to an assumption that the information they shared would be protected—or 

based on an assumption that they were controlling who could see that information? 

Is it clearly explained to them that when they download certain applications or 

‘‘apps’’ on their phones or computers, they may be allowing those ‘‘apps’’ to access 

their personal information—or their specific geographic location at any point in 

time? 

Many people in their teens and twenties now may well opt to share this kind of 

information—thinking that the privacy trade-offs are well worth it—but they should 

go into those choices with their eyes open. 

Behavioral advertising has transformed the advertising industry. That isn’t going 

to change. In fact, if anything, it will increase as more and more varied types of 

retailers and services do business online. 

However, there’s an inherent trade-off between free online content and the sale 

of personal information that keeps it free. We need to discuss the proper balance 

and think about whether this trade-off will remain relevant into the future. 

Finally, one of the most important questions and one I’m focused on this year is 

whether we should treat adults and children differently online and have different 

requirements for the collection and dissemination of their information. 

These questions will engage the attention of this Committee during the 112th 

Congress and for a long time to come. I will be working over the coming months 

in an effort to address several of these issues. 

And nothing is off the table. I welcome the witnesses with us today and I look 

forward to hearing their testimony. 

STATEMENT OF HON. JOHN F. KERRY, 

U.S. SENATOR FROM MASSACHUSETTS 

Senator KERRY. Thank you, Mr. Chairman. I would like to just 

for a sec. 

First of all thanks for having this hearing with Senator Rockefeller, I know, wanted to be here, but was unable to be. 

And thanks for your leadership and stewardship on these issues. 

I must say I was impressed by the energy and amount of—we’re 

talking about the social network. It was a hell of a social network 

in here before this hearing started. 

[Laughter.] 

Senator KERRY. A lot of chatter. 

As we all know modern technology allows private entities to observe the activities and actions of Americans on a scale that is unimaginable. And there’s no general law of commerce to govern that 

surveillance. And that’s why I intend, along with other colleagues, 

to propose one, a commercial privacy bill of rights. 

The purpose of the legislation, I want to emphasize, is not to discourage information sharing but rather to encourage it. But under 

4 

a common code of conduct that respects the rights of both the people sharing the information and the legitimate organizations collecting and using it on fair terms and conditions. I think the folks 

that we’ve been working with, many of them here today in the industries, know that throughout my tenure on this Committee and 

now as Chair of the Communications Subcommittee, I have worked 

hard to protect the innovation and open architecture of the net. 

I’ve worked hard to fight for net neutrality. I’ve worked hard to 

prevent taxation and other things. So I believe in this now vital resource for our country in so many ways. But it is important to recognize that increasingly the American people have concerns and express those concerns. 

Every single app that any one of us applies to our smartphone 

or child applies to it is an observational opportunity for a private 

company. And, amazingly, Internet users collectively sent 107 trillion, that’s with a ‘‘t,’’ e-mail messages in 2010. Each of those messages is a scanable entity for key words that indicate the interests 

or patterns of the people who send them. 

Facebook started 2010 with 350 million users and ended it with 

more than 600 million, almost all of which are sharing information 

broadly whether they realize it or not. And the collection and use 

of information offline from grocery stores to hotels to airlines has 

also reached a record high enhancing the data businesses collect 

online. 

So on the positive side, all of this information sharing is generating enormous economic activity. And we like that. We want that. 

And it encourages all kinds of innovation. And we want that. 

But it’s also created new opportunities for unethical collectors of 

information, unwilling to abide by fair information practice principles. And the question can be asked, why should they? Because, 

you know, there’s no law that requires that they do. That has understandably generated a lot of anxiety among Americans about 

protecting their identity, protecting their personal information, protecting their habits. Protecting the choices that they make which 

they think they’re making in the privacy of their relationship to 

their keyboard and to their computer or to their phone or whatever 

instrument they’re using, iPad, otherwise. 

People have asked so what’s the problem that this legislation 

would seek to solve? Well under current law there are companies 

today engaged in the practice of harvesting information from 

websites and elsewhere and using and selling the information without the consent and/or notification or knowledge of the people to 

whom that information pertains. There are also companies engaged 

in the practice of using and collecting information that are not 

building privacy into the design of their services and as a result 

they lack the appropriate procedures and protections to ensure people’s information is secured and being treated fairly. Once a person’s information is collected there are no legal restrictions on the 

further distribution other than those that the collector chooses to 

impose on themselves. 

And lastly, Americans cannot today demand that someone who 

has collected their information stop using it. 

Each of these activities is a problem that Americans are asking 

us to address. Now I’ve long thought that baseline privacy protecVerDate Nov 24 2008 06:38 Mar 19, 2012 Jkt 073308 PO 00000 Frm 00008 Fmt 6633 Sfmt 6601 S:\GPO\DOCS\73308.TXT SCOM1 PsN: JACKIE
5 

tions in law were sort of a matter of common sense. And over the 

last 6 months I’ve reached out to our colleagues on both sides of 

the aisle, to privacy experts at firms, in academia and to the advocacy community with one simple goal—to figure out why we 

haven’t reached a consensus on a national standard for the treatment of people’s information and what we can do to establish one. 

And let me just say thank you to many of the people here today. 

There’s been a very positive reaction to this, a concerted effort. The 

Obama Administration, the Commerce Department, others are 

working diligently to try to help mold this, shape it. And I’ve been 

impressed by the cooperative atmosphere within which everybody 

is working. 

Many of the companies that have rejected legislation in the past 

have made massive investments in privacy protection for their own 

customers and at their own firms. A fair share of them now have 

Chief Privacy Officers, who care deeply about the issue. And 

they’ve spent a lot of time thinking about it. 

These are serious people. Many of them here. Some of them will 

testify today. And they believe people’s information is deserving of 

respect and protection not just because it makes good business 

sense to protect your customers but also because I believe they 

think it’s the right thing to do. And it’s in keeping with a sort of 

value system and ethic that we share here in America about individuality and privacy. 

The entire goal of the drafting process that we’re using to write 

a commercial privacy bill of rights is to win pro-privacy, pro-innovation experts over to the side of establishing a common code of 

conduct so that their customers are not just protected when working with them, but generally protected in the course of commerce. 

And I think we all benefit by that. I believe that gaining these allies will depend on our willingness to recognize and respect the obvious good that can come from appropriate collection and the use 

of data while also allowing for experimentation and flexibility in 

the implementation of privacy practices through the establishment 

of safe harbor programs. 

So we approach this with a real open mind. And I think people 

will acknowledge a fair amount of reasonableness and flexibility. 

But we can’t let the status quo stand. We can’t continue to allow 

the collectors of people’s information to dictate the level of privacy 

protection that Americans will get when they engage in commerce. 

And we can’t continue to let the firms that provide no protections, 

provide misleading statements in some cases, about protection, 

about a protection that they can change at will, at whim, at fancy 

or allow them just to send the information along to others without 

regard to where it goes or under what conditions that it goes there. 

So my—Mr. Chairman, I hope we’re going to establish clear and 

flexible rules for behavior in our legislation. And if not, I think everybody understands that enforcement agencies are going to step 

up and react against unfair and/or deceptive practices with cases 

that will be built sort of individually as you go along with less clear 

direction than we could provide if we do this in a sensible, legislative way. If we don’t act, the world’s largest markets will continue 

to impose on our innovators their own rules for private e-protecVerDate Nov 24 2008 06:38 Mar 19, 2012 Jkt 073308 PO 00000 Frm 00009 Fmt 6633 Sfmt 6601 S:\GPO\DOCS\73308.TXT SCOM1 PsN: JACKIE
6 

tion. And I believe those rules could well wind up being less flexible and less innovative than what I will be proposing. 

So I look forward to working with the witnesses here today. And 

I thank you very much, Mr. Chairman, for allowing me to make 

that statement. 

Senator PRYOR. Thank you. 

Senator Isakson? 

STATEMENT OF HON. JOHNNY ISAKSON, 

U.S. SENATOR FROM GEORGIA 

Senator ISAKSON. Thank you, Mr. Chairman. I’ll be brief but I 

can’t help but think as I was listening to Senator Kerry speak, I 

ran a company for 22 years and we did about $1.2 million in advertising in various mediums to sell our product. And we would always pick the medium whether it was TV or radio or classified 

newspaper or display in a magazine by trying to pick the medium 

we thought the most people would be potential customers for our 

product would actually go to. And that provided anonymity for the 

potential customer and made me do a lot of thinking. 

What the Internet has done and technology has done it’s allowed 

that anonymous information that was subject to analysts and 

guesses to become a potential commodity that could actually be 

sold for purposes other than that determination. So I think it’s at 

a very appropriate time that the Commerce Committee look at this, 

because of the expanse of the Internet, the expanse of the information and what is taking place in the revolution that it’s brought to 

American marketing. 

So I look forward to being a part of the Committee, a part of the 

work. And look forward to working with Senator Kerry, Senator 

Pryor and the others on the Committee to find the right message 

to send and the right road to go down. 

Thank you, Mr. Chairman. 

Senator PRYOR. Thank you. 

Now our first panel here both of these witnesses we have extraordinary bios and lists of accomplishments that we could discuss 

and we will submit for the record. 

But what I’d like to do is just simply introduce them as the Honorable Jon D. Leibowitz, Chairman of the Federal Trade Commission. 

And the Honorable Lawrence E. Strickling, the Administrator of 

the National Telecommunications and Information Administration. 

Chairman Leibowitz? 

STATEMENT OF HON. JON D. LEIBOWITZ, CHAIRMAN, 

FEDERAL TRADE COMMISSION 

Mr. LEIBOWITZ. Thank you, Chairman Pryor. And Senator Kerry, 

Senator Isakson and let me also mention Senator Rockefeller, 

thank you for your leadership on privacy issues as well as for giving me the opportunity to be here with Larry Strickling from the 

Department of Commerce. Our two agencies have a very long history of cooperation, and we are eager to build on that as we work 

together to protect consumer privacy while ensuring business 

growth and innovation. 

7 

As you know, over the past several decades the FTC has protected privacy through law enforcement, through education and 

through policy efforts. Just this week we announced our first major 

enforcement effort aimed at abusive behavioral marketing practices. We charged the online advertising network Chitika with violating the FTC Act by offering consumers the ability to opt-out of 

targeted advertising but without telling them that the opt-out vanished in 10 days. 

That vanishing opt-out, a 10-day vanishing opt-out, is not only 

wrong, it is unacceptable. Consumers deserve meaningful and not 

illusory control over what companies do with their personal information. Chitika has agreed to an order that requires it to destroy 

personal data it collected and provide an opt-out on all ads that’s 

effective for at least 5 years. 

This case, and it is the first of many more privacy enforcement 

cases you’ll see from us, should send a strong signal to the online 

ad industry. The FTC will not tolerate attempts to subvert consumer choice. And overall we have brought well over 100 spam and 

spyware cases and 30 data security cases over the last 10 years. 

Turning to the policy front. As I heard in your opening statements recognizing the real benefits of information collection, the 

status quo, as you said, Senator Kerry, isn’t acceptable. We released a report on consumer privacy in December designed to reduce privacy burdens on both businesses and consumers alike 

while ensuring business growth and continuing Internet innovation. The report made three primary recommendations. 

First, companies need to bake in privacy protections like data security and accuracy into all of their activities. We call that privacy 

by design. 

Second, choices about privacy of personal data should be presented to consumers in a simple way, and at the time they are 

making decisions about that data. 

And third, transparency needs to be improved. Privacy notices 

must be clearer, shorter and more standardized, otherwise no one 

will read them. And indeed very few people actually do. 

The comment period on the proposed new framework just closed 

and we received 446 comments, which may be a record for us. And 

we expect to issue a final report later this year. 

To further the idea of simplifying choices for consumers, the report recommended a Do Not Track mechanism. Now while that 

name sounds similar to our Do Not Call registry, which the government runs, we’re looking instead to the private sector to create a 

way for consumers to choose whether to allow their Internet surfing to be monitored. Simply put you should have a choice, all of us 

should have a choice about whether third parties, all invisible to 

us, can trail us around the Internet as we shop or search for information about say, a medical diagnosis. 

This goes back to your point about the deanonymization of information here and over the last 10 years when you’re thinking about 

the Internet. Do Not Track will give all Americans a choice about 

whether to be followed online. More than that, when data is protected consumers will more readily trust companies in the marketplace and that encourages business growth and business innovation. 

8 

Now stakeholders have responded very, very positively to our call 

for Do Not Track. Two of the largest browser companies, Microsoft 

and Mozilla, rolled out new mechanisms to allow consumers control 

over the use of their personal information for online behavioral advertising. The industry has now demonstrated that Do Not Track 

is feasible so the discussion turns to which approach is best. 

One promising effort involves an industry coalition comprised of 

media and ad marketing companies in an association known as the 

Digital Advertising Alliance. The Alliance has developed an icon 

which they hope will be deployed industry wide that will display 

in targeted advertisements and link to more information and 

choices. For my part, I still remain concerned that the current proposal won’t result in a permanent opt-out for all ad networks. And 

it doesn’t allow consumers to control collection of their personal 

data just the blocking of ads that go back to them. 

But many of the Alliance’s members want to go further to protect 

consumers. My understanding—and actually it’s in today’s Wall 

Street Journal as well—is that there’s a sort of insurgent group of 

more than 30 companies that wants to prohibit most types of tracking and embrace the Mozilla header. And so we’re cautiously optimistic that the Alliance is moving in the right direction. 

Mr. Chairman, I ask for unanimous consent for an additional 

minute. 

Senator PRYOR. Sure. Absolutely. 

Mr. LEIBOWITZ. So from my perspective I’m sort of agnostic as to 

whether the private sector should implement Do Not Track or if 

Congress should require it. I think sometimes it’s easier for the private sector to do it. But we do need to make sure that Do Not 

Track isn’t just an empty slogan but that it really works for the 

American people. 

There are five critical principles that we believe should be included in any robust, effective Do Not Track mechanism. 

One, Do Not Track should be universal so the consumers don’t 

have to repeatedly make choices on a company by company basis. 

Two, Do Not Track should be easy to find and easy to use. 

Three, any choices offered should be persistent and should not be 

deleted if for example, a consumer clears his or her ‘‘cookies’’ or 

turns off a computer. 

Four, Do Not Track should not only allow consumers to opt-out 

of advertising, it should allow them to opt-out of tracking all together. And personally, from my perspective, I don’t mind getting 

targeted ads. I think there’s a real benefit to that. But people ought 

to be given a choice about whether or not they want to be tracked. 

And finally, it should be effective and enforceable without technical loopholes. 

We hope to continue to see the private sector develop tools that 

meet these standards more broadly. We’re hopeful that American 

businesses will step up their efforts. And we’ve started to see them 

protect consumer privacy by applying the consensus principles from 

our report: privacy by design, transparency and consumer choice. 

Working together with this Committee, and with the Department 

of Commerce, we believe we can make that happen. 

So I thank you for this hearing. 

[The prepared statement of Mr. Leibowitz follows:] 

9 

1This written statement represents the views of the Federal Trade Commission. Commissioner Kovacic dissents. His concerns about the Commission’s testimony, and the report by its 

staff, are set forth in his statement on the latter. In particular, he believes that the endorsement 

of a Do Not Track mechanism by staff (in the report) and the Commission (in this testimony) 

is premature. My oral presentation and responses are my own and do not necessarily reflect 

the views of the Commission or of any other Commissioner. 2 Information on the FTC’s privacy initiatives generally may be found at http://business.ftc.gov/privacy-and-security. 3 15 U.S.C. §§ 1681e–i. 4 15 U.S.C. §§ 7701–7713. 5 Chitika, Inc., FTC File No. 102 3087 (Mar. 14, 2011) (consent order accepted for public comment). 

PREPARED STATEMENT OF THE FEDERAL TRADE COMMISSION

Chairman Rockefeller, Ranking Member Hutchison, and members of the Committee, I am Jon Leibowitz, Chairman of the Federal Trade Commission (‘‘FTC’’ or 

‘‘Commission’’). I appreciate the opportunity to present the Commission’s testimony 

on privacy.1

Privacy has been an important component of the Commission’s consumer protection mission for 40 years. During this time, the Commission has employed a variety 

of strategies to protect consumer privacy, including law enforcement, regulation, 

outreach to consumers and businesses, and policy initiatives.2

Over the years, the Commission’s goal in the privacy arena has remained constant: to protect consumers’ personal information and ensure that they have the 

confidence to take advantage of the many benefits offered by the dynamic and everchanging marketplace. To meet this objective, the Commission has periodically reexamined its approach to privacy to ensure that it keeps pace with advances in technology and changing business practices as well as to ensure that incentives for 

American innovation are maintained. The latest effort in this process is a Preliminary FTC Staff Report, released in December, which proposes a framework for protecting consumer privacy in this era of rapid technological change. This proposed 

framework is intended to inform policymakers, including Congress, as they develop 

solutions, policies, and potential laws governing privacy, and guide and motivate industry as it develops more robust and effective best practices and self-regulatory 

guidelines. 

This testimony begins by describing the Commission’s recent efforts to protect 

consumer privacy through law enforcement, education, and policy initiatives. It then 

sets forth some highlights from the Staff Report on consumer privacy, and concludes 

with a discussion of issues related to a universal choice mechanism for behavioral 

tracking, commonly referred to as ‘‘Do Not Track’’. 

I. The FTC’s Efforts to Protect Consumer Privacy 

A. Enforcement 

The Commission continues to pursue an aggressive and bipartisan privacy enforcement agenda. In the last 15 years, it has brought 32 data security cases; 64 

cases against companies for improperly calling consumers on the Do Not Call registry; 86 cases against companies for violating the Fair Credit Reporting Act 

(‘‘FCRA’’); 3 97 spam cases; 15 spyware (or nuisance adware) cases; and 15 cases 

against companies for violating the Children’s Online Privacy Protection Act 

(‘‘COPPA’’). Where the FTC has authority to seek civil penalties, it has aggressively 

done so. It has obtained $60 million in civil penalties in Do Not Call cases, $21 million in civil penalties under the FCRA, $5.7 million under the CAN–SPAM Act,4 and 

$3.2 million under COPPA. Where the Commission does not have authority to seek 

civil penalties, as in the data security and spyware areas, it has sought such authority from Congress. In addition, the Commission has brought numerous cases against 

companies for violating the FTC Act by making deceptive claims about the privacy 

protection they afford to the information they collect, which has the effect of undermining consumer choices on privacy. This testimony describes four such cases that 

the Commission has brought within the past several months. 

Just this week, the Commission announced its first online behavioral advertising 

case against an online network advertiser, Chitika, that acts as an intermediary between website publishers and advertisers. The Commission alleged that Chitika violated the FTC Act by offering consumers the ability to opt-out of the collection of 

information to be used for targeted advertising—without telling them that the optout lasted only 10 days.5 The Commission’s order prohibits Chitika from making future privacy misrepresentations. It also requires Chitika to provide consumers with 

an effective opt-out mechanism, link to this opt-out mechanism in its advertisements, and provide a notice on its website for consumers who may have opted out 

10 

6Twitter, Inc., FTC File No. 092 3093 (Mar. 11, 2011) (consent order) (resolving allegations 

that Twitter deceived its customers by failing to honor their choices to designate certain ‘‘tweets’’ 

as private). 7Many of the Commission’s earliest consumer privacy cases similarly held companies accountable for their privacy statements and practices. See, e.g., GeoCities, Inc., FTC Docket No. C– 

3850 (Feb. 5, 1999) (consent order) (alleging that company misrepresented the purposes for 

which it was collecting personal information from both children and adults); Liberty Fin. Cos., 

FTC Docket No. C–3891 (Aug. 12, 1999) (consent order) (alleging that site falsely represented 

that personal information collected from children, including information about family finances, 

would be maintained anonymously); FTC v. ReverseAuction.com, Inc., No. 00–0032 (D.D.C. Jan. 

10, 2000) (consent order) (alleging that online auctionsite obtained consumer data from competitor site and then sent deceptive, unsolicited e-mail messages to those consumers seeking their 

business); FTC v. Toysmart.com LLC, 00–CV–11341–RGS (D. Mass. filed July 10, 2000) (alleging site attempted to sell personal customer information, despite the representation in its privacy policy that such information would never be disclosed to a third party); FTC v. Rennert, 

No. CV–S–00–0861–JBR (D. Nev. July 24, 2000) (consent order) (alleging that defendants misrepresented their security practices and how they would use consumer information); Educ. Research Ctr. of Am., Inc.; Student Marketing Grp., Inc., FTC Docket No. C–4079 (May 6, 2003) 

(consent order) (alleging that personal data collected from students for educational purposes was 

sold to commercial marketers); The Nat’l Research Ctr. for College & Univ. Admissions, FTC 

Docket No. C–4071 (Jun. 28, 2003) (consent order) (same); Gateway Learning Corp., FTC Docket 

No. C–4120 (Sept. 10, 2004) (consent order) (alleging that company rented customer information 

to list brokers in violation of its privacy policy); Vision I Props., LLC, FTC Docket No. C–4135 

(Apr. 19, 2005) (consent order) (alleging that a service provider disclosed customer information 

in violation of merchant privacy policies). Sears Holdings Mgmt. Corp., FTC Docket No. C–4264 

(Aug. 31, 2009) (consent order). 8FTC v. Echometrix, Inc., No. CV10–5516 (E.D.N.Y. Nov. 30, 2010) (consent order). 9 US Search, Inc., FTC File No. 102 3131 (Sept. 22, 2010) (consent order accepted for public 

comment). 

when Chitika’s opt-out mechanism was ineffective. Finally, the order requires 

Chitika to destroy any data that can be associated with a consumer that it collected 

during the time its opt-out mechanism was ineffective. 

Second, earlier this month, the Commission approved a final consent order in a 

case involving the social networking service Twitter.6 On one level, Twitter is a traditional data security case—the FTC charged that serious lapses in the company’s 

data security allowed hackers to obtain unauthorized administrative control of Twitter. As a result, hackers had access to private ‘‘tweets’’ and non-public user information and took over user accounts, including among others, those of President Obama 

and Rupert Murdoch. On another level, the case stands for the proposition that social networking services must honor the commitments they make to keep their 

users’ communications private. The order prohibits misrepresentations about the extent to which Twitter protects the privacy of communications, requires Twitter to 

maintain reasonable security, and mandates independent, comprehensive audits of 

Twitter’s security practices.7

Third, in December, the Commission announced a case against EchoMetrix, a 

company selling a software program called Sentry Parental Controls that enables 

parents to monitor their children’s activities online. The Commission alleged that 

EchoMetrix sold certain information that it collected from children via this software 

to third parties for marketing purposes, without telling parents. The Commission’s 

order prohibits the company from sharing information gathered from its monitoring 

software and requires the company to destroy any such information in its database 

of marketing information.8

Finally, in September, the Commission settled a case against U.S. Search, a data 

broker that maintained an online service, which allowed consumers to search for information about others. The company allowed consumers to opt-out of having their 

information appear in search results, for a fee of $10. Although 4,000 consumers 

paid the fee and opted out, their personal information still appeared in search results. The Commission’s settlement requires U.S. Search to disclose limitations on 

its opt-out offer, and to provide refunds to consumers who had previously opted out.9

In addition to these privacy enforcement actions, the Commission has been aggressive on the data security front to ensure that companies protect the sensitive 

data they collect about consumers. In February 2011, three companies that resell 

consumers’ credit reports agreed to settle FTC charges that they did not take reasonable steps to protect consumers’ personal information, which allowed computer 

hackers to access more than 1,800 credit reports via their clients’ computer networks. These are the first cases the FTC has brought against credit report resellers 

for their failure to ensure that the companies to whom they provide consumer reVerDate Nov 24 2008 06:38 Mar 19, 2012 Jkt 073308 PO 00000 Frm 00014 Fmt 6633 Sfmt 6621 S:\GPO\DOCS\73308.TXT SCOM1 PsN: JACKIE
11 

10SettlementOne Credit Corp., File No. 082 3208; ACRAnet, Inc., File No. 092 3088; and 

Fajilan and Associates, Inc., File No. 092 3089 (Feb. 3, 2011) (consent orders accepted for public 

comment). 11See http://www.onguardonline.gov/topics/social-networking-sites.aspx. Since its launch in 

2005, OnGuard Online and its Spanish-language counterpart Alertaena Lı ́nea have attracted 

nearly 12 million unique visits. 12See Press Release, FTC, OnGuardOnline.gov Off to a Fast Start with Online Child Safety 

Campaign (Mar. 31, 2010), available at http://www.ftc.gov/opa/2010/03/netcetera.shtm. 13See http://www.onguardonline.gov/topics/social-networking-sites.aspx; http://www.on 

guardonline.gov/topics/net-cetera-mobile-phones.aspx. 14See http://www.onguardonline.gov/topics/hotspots.aspx. 15See Protecting Personal Information: A Guide For Business, available at http://www.ftc 

.gov/infosecurity. 16See generally http://business.ftc.gov/privacy-and-security. 17FTC Town Hall, Ehavioral Advertising: Tracking, Targeting, & Technology (Nov.1–2, 2007), 

available at http://www.ftc.gov/bcp/workshops/ehavioral/index.shtml. 18See FTC Staff, Online Behavioral Advertising: Moving the Discussion Forward to Possible 

Self-Regulatory Principles (Dec. 20, 2007), available at http://www.ftc.gov/os/2007/12/ 

P859900stmt.pdf. 19See FTC Staff Report: Self-Regulatory Principles For Online Behavioral Advertising (Feb. 

2009), available at http://www.ftc.gov/os/2009/02/P085400behavadreport.pdf, at 33–37, 46. 

Continued 

ports maintain reasonable security.10 The Commission alleged that the resellers violated the FCRA, the Gramm-Leach-Bliley Safeguards Rule, and Section 5 of the 

FTC Act. The consent orders bar the companies from violating these laws, require 

them to implement comprehensive information security programs, and require them 

to obtain independent audits, every other year for 20 years. 

B. Consumer and Business Education 

The FTC has done groundbreaking outreach to businesses and consumers in the 

area of consumer privacy. For example, the Commission’s well-known OnGuard Online website educates consumers about spam, spyware, phishing, peer-to-peer 

(‘‘P2P’’) file sharing, social networking, laptop security, and identity theft.11 The 

FTC has developed additional resources specifically for children, parents, and teachers to help children stay safe online. In response to the Broadband Data Improvement Act of 2008, the FTC produced the brochure Net Cetera: Chatting with Kids 

About Being Online to give adults practical tips to help children navigate the online 

world.12 The publication includes information about how parents should talk to children about online privacy, sexting, and cyberbullying. In less than 1 year, the Commission already has distributed more than 7 million copies of Net Cetera to schools 

and communities nationwide. The Commission also offers specific guidance to young 

people concerning certain types of Internet services, including, for example, social 

networking and video and photo sharing.13

Most recently, the FTC released a consumer education publication on the safe use 

of wi-fi hot spots.14 The publication, available on the FTC and Onguard Online 

websites, explains that when using wireless networks, consumers should convey personal information only if it is encrypted—either through an encrypted website or a 

secure network. The piece notes that an encrypted website is one whose URL begins 

with ‘‘https’’, rather than ‘‘http’’; it further notes that in order to be secure, a WiFi network must be password-protected. 

Business education is also an important priority for the FTC. For example, the 

Commission developed a widely-distributed guide to help small and medium-sized 

businesses implement appropriate data security for the personal information they 

collect and maintain.15 The FTC also develops business education materials to respond to specific emerging issues, such as a recent brochure on security risks associated with P2P file-sharing software.16

C. Policy and Rulemaking Initiatives 

The Commission’s efforts with respect to privacy include public workshops and reports to examine the implications of new technologies on consumer privacy. For example, in November 2007, the Commission held a two-day Town Hall event to discuss the privacy implications of online behavioral advertising.17 Based upon the 

Town Hall discussions, staff released for public comment a set of proposed principles 

to encourage industry members to improve their behavioral advertising practices.18

Thereafter, in February 2009, staff released a report (‘‘OBA Report’’) setting forth 

the following revised principles based on the comments received: (1) transparency 

and consumer control; (2) reasonable security and limited retention for consumer 

data; (3) affirmative express consent for material retroactive changes to privacy policies; and (4) affirmative express consent for the use of sensitive data.19

12 

The revisions primarily concerned the principles’ scope and application to specific business models. Id. at 20–30. 20See http://business.ftc.gov/documents/coppa-rulemaking-and-rule-reviews; Request for Public Comment on the Federal Trade Commission’s Implementation of the Children’s Online Privacy Protection Rule, 17 Fed. Reg. 17089 (Apr. 5, 2010), available at http://www.ftc.gov/os/ 

fedreg/2010/april/P104503coppa-rule.pdf. 21See Press Release, FTC, FTC to Host Public Roundtables to Address Evolving Privacy 

Issues (Sept. 15, 2009), available at http://www.ftc.gov/opa/2009/09/privacyrt.shtm. 22See A Preliminary FTC Staff Report on Protecting Consumer Privacy in an Era of Rapid 

Change: A Proposed Framework for Businesses and Policymakers (Dec. 1, 2010), available at 

http://www.ftc.gov/os/2010/12/101201privacyreport.pdf. Commissioners Kovacic and Rosch 

issued concurring statements available at http://www.ftc.gov/os/2010/12/101201privacy 

report.pdf at Appendix D and Appendix E, respectively. 23 Id. at 22–38. 

The Commission also reviews its rules periodically to ensure that they are appropriately updated in light of changes in the marketplace. For example, the Commission is currently reviewing its rule implementing the COPPA and anticipates completing that review in the coming months.20

II. Privacy Roundtables and Report 

The Commission also recently conducted a series of public roundtables on consumer privacy,21 which took place in December 2009, and January and March 2010. 

The roundtables served to explore the effectiveness of current privacy approaches 

in addressing the challenges of the rapidly evolving market for consumer information, including consideration of the risks and benefits of consumer information collection and use; consumer expectations surrounding various information management practices; and the adequacy of existing legal and self-regulatory regimes to address privacy interests. Staff issued a preliminary privacy report in December 

2010,22 which discusses the major themes that emerged from these roundtables, including the ubiquitous collection and use of consumer data; consumers’ lack of understanding and ability to make informed choices about the collection and use of 

their data; the importance of privacy to many consumers; the significant benefits enabled by the increasing flow of information; and the blurring of the distinction between personally identifiable information and supposedly anonymous or de-identified information.23

At the roundtables, stakeholders across the board emphasized the need to improve 

the transparency of businesses’ data practices, simplify the ability of consumers to 

exercise choices about how their information is collected and used, and ensure that 

businesses take privacy-protective measures as they develop and implement systems 

that involve consumer information. At the same time, the roundtable commenters 

and participants urged regulators to be cautious about restricting the exchange and 

use of consumer data in order to preserve the substantial consumer benefits made 

possible through the flow of information. Based on these comments, the preliminary 

staff privacy report proposed a new framework to guide policymakers and industry 

as they consider further steps to improve consumer privacy protection. 

A. The Proposed Framework 

The proposed framework included three main concepts. First, FTC staff proposed 

that companies should adopt a ‘‘privacy by design’’ approach by building privacy protections into their everyday business practices. Such protections include providing 

reasonable security for consumer data, collecting only the data needed for a specific 

business purpose, retaining data only as long as necessary to fulfill that purpose, 

safely disposing of data no longer in use, and implementing reasonable procedures 

to promote data accuracy. Companies also should implement and enforce procedurally sound privacy practices throughout their organizations, including, for example, assigning personnel to oversee privacy issues, training employees on privacy 

issues, and conducting privacy reviews when developing new products and services. 

Such concepts are not new, but the time has come for industry to implement them 

systematically. Implementation can be scaled, however, to each company’s business 

operations. For example, the Staff Report recommended that companies that collect 

and use small amounts of nonsensitive consumer data should not have to devote the 

same level of resources to implementing privacy programs as companies that collect 

vast amounts of consumer data or data of a sensitive nature. 

Second, the Commission staff proposed that companies provide simpler and more 

streamlined choices to consumers about their data practices. Under this approach, 

consumer choice would not be necessary for a limited set of ‘‘commonly accepted’’ 

data practices, thus allowing clearer, more meaningful choice with respect to practices of greater concern. This component of the proposed framework reflects the concept that consumers reasonably expect companies to engage in certain practices 

13 

24See FTC Staff Report, supra note 22. See also Rosch concurring statement, id., in which 

Commissioner Rosch supported a Do Not Track mechanism only if it were ‘‘technically feasible’’ 

and implemented in a fashion that provides informed consumer choice regarding all the attributes of such a mechanism. To clarify, Commissioner Rosch continues to believe that a variety 

of questions need to be answered prior to the endorsement of any particular Do Not Track mechanism. 25 Consumer survey evidence, by itself, has limitations. For instance, the way questions are 

presented may affect survey results. Also, while survey evidence may reveal a consumer’s stated 

attitudes about privacy, survey evidence does not necessarily reveal what actions a consumer 

will take in real-world situations. The Commission does not endorse the reliability or methodology of any surveys discussed herein. 26See, e.g., Transcript of December 7, 2009, FTC Privacy Roundtable, Remarks of Alan Westin 

of Columbia University, at 93–94, available at http://www.ftc.gov/bcp/workshops/privacy 

roundtables/PrivacyRoundtablelDec2009lTranscript.pdf; Written Comment of Berkeley Center 

for Law & Technology, Americans Reject Tailored Advertising and Three Activities that Enable 

Continued 

namely, product and service fulfillment, internal operations such as assessing the 

quality of services offered, fraud prevention, legal compliance, and first-party marketing. Some of these practices, such as a retailer’s collection of a consumer’s address solely to deliver a product the consumer ordered, are obvious from the context 

of the transaction, and therefore, consumers’ consent to them can be inferred. Others are sufficiently accepted or necessary for public policy reasons that companies 

need not request consent to engage in them. The Staff Report suggested that by 

clarifying those practices for which consumer consent is unnecessary, companies will 

be able to streamline their communications with consumers, which will reduce the 

burden and confusion on consumers and businesses alike. 

For data practices that are not ‘‘commonly accepted,’’ consumers should have the 

ability to make informed and meaningful choices. To be most effective, choices 

should be clearly and concisely described and offered at a time and in a context in 

which the consumer is making a decision about his or her data. Depending upon 

the particular business model, this may entail a ‘‘just-in-time’’ approach, in which 

the company seeks consent at the point a consumer enters his personal data or before he accepts a product or service. One way to facilitate consumer choice is to provide it in a uniform and comprehensive way. Such an approach has been proposed 

for behavioral advertising, whereby consumers would be able to choose whether to 

allow the collection and use of data regarding their online searching and browsing 

activities. This idea is discussed further below. 

Third, the Staff Report proposed a number of measures that companies should 

take to make their data practices more transparent to consumers. For instance, in 

addition to providing the contextual disclosures described above, companies should 

improve their privacy notices so that consumers, advocacy groups, regulators, and 

others can compare data practices and choices across companies, thus promoting 

competition among companies. The staff also proposed providing consumers with 

reasonable access to the data that companies maintain about them, particularly for 

non-consumer-facing entities such as data brokers. Because of the significant costs 

associated with access, the Staff Report noted that the extent of access should be 

proportional to both the sensitivity of the data and its intended use. In addition, 

the Staff Report stated that companies must provide prominent disclosures and obtain affirmative consent before using data in a materially different manner than 

claimed when the data was collected. 

Finally, the Staff Report proposed that stakeholders undertake a broad effort to 

educate consumers about commercial data practices and the choices available to 

them. Increasing consumer understanding of the commercial collection and use of 

their information is important to both empowering consumers to make informed 

choices regarding their privacy and facilitating competition on privacy across companies. In addition to proposing these broad principles, the staff sought comment from 

all interested parties to help guide further development and refinement of the proposed framework through February 18, 2011. Close to 450 comments were received 

and staff expects to issue a final report this year. 

B. Do Not Track 

As noted above, the Staff Report included a recommendation to implement a universal choice mechanism for behavioral tracking, including behavioral advertising, 

often referred to as ‘‘Do Not Track.’’ 24 Although behavioral tracking benefits consumers by helping support online content and services and allowing personalized 

advertising that many consumers value, the practice remains largely invisible to 

most consumers. Some surveys 25 show that certain consumers who are aware of the 

practice are uncomfortable with it.26 A recent USA Today/Gallup poll found that 47 

14 

It, cmt. #544506–00113, available at http://www.ftc.gov/os/comments/privacyroundtable/ 

544506–00113.pdf; Written Comment of Craig Wills, Personalized Approach to Web Privacy 

Awareness, Attitudes and Actions, cmt. #544506–00119, available at http://www.ftc.gov/os/comments/privacyroundtable/544506-00119.pdf; Written Comment of Alan Westin, How Online 

Users Feel About Behavioral Marketing and How Adoption of Privacy and Security Policies 

Could Affect Their Feelings, cmt. #544506–00052, available at http://www.ftc.gov/os/comments/privacyroundtable/544506-00052.pdf; see also Poll: Consumers Concerned About Internet 

Privacy, Consumers Union, available at http://www.consumersunion.org/pub/coreltele comlandlutilities/006189.html. 27See U.S. Internet Users Ready to Limit Online Tracking for Ads (Dec. 21, 2010), available 

at http://www.gallup.com/poll/145337/internet-users-ready-limit-online-tracking-ads.aspx. 28See News Release, Consumer Watchdog, Americans Favor Broad Range Of Online Privacy 

Protections for Consumers (Jul. 27, 2010), available at http://www.consumerwatchdog.org/ 

newsrelease/consumer-watchdog-poll-finds-concern-about-g oogles-wi-spy-snooping. 29 Jessica Vascellaro, Websites Rein in Tracking Tools, WALL ST. J., Nov. 9, 2010, available 

at http://online.wsj.com/article/SB10001424052748703957804575602730678670278.html. 30See e.g., Do Not Track: Hearing before the Subcomm. On Commerce, Trade and Consumer 

Prot. of the H. Comm. On Energy and Commerce, 111th Cong. (Dec. 2, 2010), available at 

http://www.ftc.gov/os/testimony/101202donottrack.pdf (prepared statement of the FTC, Commissioner Kovacic dissenting). 31See Press Release, Microsoft, Providing Windows Customers with More Choice and Control 

of Their Privacy Online with Internet Explorer 9 (Dec. 7, 2010), available at http://www 

.microsoft.com/presspass/features/2010/dec10/12-07ie9privacyqa.mspx; Mozilla Blog, Mozilla 

Firefox 4 Beta, now including ‘‘Do Not Track’’ capabilities, http://blog.mozilla.com/blog/2011/ 

02/08/mozilla-firefox–4-beta-now-including-do-not-track-cap abilities/ (Feb. 8, 2011). 32See W3C Blog, Do Not Track at W3C, http://www.w3.org/QA/2011/02/dolnotl tracklatlw3c.html (Feb. 24, 2011). 33See Do Not Track: A Universal Third-Party Web Tracking Opt Out (Mar. 7, 2011), available 

at http://tools.ietf.org/html/draft-mayer-do-not-track–00; see also http://firstpersoncookie.word 

press.com/2011/03/09/mozilla-makes-joint-submission-to-ietf-on-d nt/. 34See Press Release, Interactive Advertising Bureau, Major Marketing Media Trade Groups 

Launch Program to Give Consumers Enhanced Control over Collection and Use of Web Viewing 

Data for Online Behavioral Advertising (Oct. 4, 2010), available at http://www.iab.net/ 

aboutltheliab/recentlpresslreleases/presslreleaselarchive/presslrelease/pr–100410; 

Tony Romm and Kim Hart, Political Intel: FTC Chairman on Self-Regulatory Ad Effort, POLITICO Forums, http://dyn.politico.com/members/forums/thread.cfm?catid=24&subcatid=78& 

threadid=4611665 (Oct. 11, 2010). 

percent of consumers would like to choose which advertisers may deliver them targeted advertisements and 37 percent would like to receive no targeted advertisements at all.27 In another poll, 80 percent of consumers supported a Do Not Track 

option.28 In addition, according to a recent Wall Street Journal article, because of 

concerns that third-party tracking may be intrusive, some websites are increasing 

their scrutiny of such third-party tracking on their sites.29

In light of the concerns expressed about online tracking, the Staff Report recommended a Do Not Track mechanism. A robust, effective Do Not Track system 

would ensure that consumers can opt-out once, rather than having to exercise 

choices on a company-by-company or transaction-by-transaction basis. Such a universal mechanism could be accomplished through legislation or potentially through 

robust, enforceable self-regulation. 

The FTC repeatedly has called on stakeholders to develop and implement better 

tools to allow consumers to control the collection and use of their online browsing 

data.30 Industry participants have begun to respond to this call. Two major browser 

vendors, Microsoft and Mozilla, have recently announced the development of new 

choice mechanisms for online behavioral advertising that seek to provide increased 

transparency, greater consumer control, and improved ease of use.31 Just as important, the World Wide Web Consortium (W3C) has accepted a submission by Microsoft to consider a technical standard for a universal choice mechanism.The W3C announced an April 2011 workshop to begin the public dialogue with relevant stakeholders regarding how to incorporate do not track preferences into Internet browsing so websites can respect a user’s preference not to be tracked.32 Finally, just last 

week, Stanford’s Center for Internet and Society and Mozilla jointly submitted a 

proposal to the Internet Engineering Task Force outlining a header-based Do Not 

Track mechanism and discussing how web services should respond to such a mechanism.33

The online advertising industry has also made progress in this area. For example, 

an industry coalition comprised of media and marketing associations, known as the 

Digital Advertising Alliance, has developed self-regulatory guidelines and an opt-out 

mechanism for behavioral advertising.34 The coalition has developed an icon to display in or near targeted advertisements that links to more information and choices 

15 

35The coalition has stated that providing consumers with choices about online advertising is 

essential to building the trust necessary for the marketplace to grow. See Interactive Advertising 

Bureau, supra note 34. 36See Written Comment of the Direct Marketing Assoc. Responding to Preliminary Staff Report, cmt. #00449, at 21. 37See Google Chrome Web Store, Keep My Opt-Outs, available at https://chrome.google.com/ 

webstore/detail/hhnjdplhmcnkiecampfdgfjilccfpfoe; see also Google Public Policy Blog, Keep your 

opt-outs http://googlepublicpolicy.blogspot.com/2011/01/keep-your-opt-outs.html (Jan. 24, 

2011). 38For example, consumers may believe they have opted out of tracking if they block thirdparty cookies on their browsers; yet they may still be tracked through Flash cookies or other 

mechanisms. 

A Flash cookie, or a Flash local shared object, is a data file that is stored on a consumer’s 

computer by a website that uses Adobe’s Flash player technology. Like a regular http cookie, 

a Flash cookie can store information about a consumer’s online activities. Unlike regular cookies, Flash cookies are stored in an area not controlled by the browser. Thus, when a consumer 

deletes or clears the cookies from his browser using tools provided through the browser, this 

may not delete Flash cookies stored on his computer. 

Recently, a researcher released a software tool that demonstrates several technical mechanisms in addition to Flash cookies that websites can use to persistently track consumers, even 

if they have attempted to prevent such tracking through existing tools. See http://samy.pl/ 

evercookie; see also Tanzina Vega, New Web Code Draws Concerns Over Privacy Risks, THE NEW

YORK TIMES, Oct. 10, 2010, available at http://www.nytimes.com/2010/10/11/business/media/ 

11privacy.html. 

and has pledged to implement this effort industry-wide.35 The coalition reports that 

adoption of the icon and simplified disclosures grew dramatically at the end of last 

year.36 In addition, Google has developed a browser add-on that can be used to block 

targeted advertisements from companies that participate in the Digital Advertising 

Alliance.37

These recent industry efforts to improve consumer control are promising, but they 

are still in the embryonic stage, and their effectiveness remains to be seen. As industry continues to explore technical options and implement self-regulatory programs, and Congress continues to examine Do Not Track, several issues should be 

considered. First, any Do Not Track system should be implemented universally, so 

that consumers do not have to repeatedly opt-out of tracking on different sites. Second, the choice mechanism should be easy to find, easy to understand, and easy to 

use. Third, any choices offered should be persistent and should not be deleted if, 

for example, consumers clear their cookies or update their browsers. Fourth, a Do 

Not Track system should be comprehensive, effective, and enforceable. It should opt 

consumers out of behavioral tracking through any means and not permit technical 

loopholes.38

Finally, it is important to emphasize what is meant by ‘‘tracking’’ as stakeholders 

continue to consider ‘‘Do Not Track’’ approaches. Consumers certainly may want to 

opt-out of more than targeted advertising—they may want to opt-out of the creation 

and use of behavioral profiles for any secondary purposes. For example, they may 

want to be sure that their browsing behavior is not used to make employment or 

insurance decisions about them. They may also want to opt-out of having their 

browsing behavior sold to data brokers for unspecified future uses. At the same 

time, no system that allows for unrestricted web browsing can or should prohibit 

information collection entirely. As noted the Staff Report, information collection is 

necessary for fraud prevention and other commonly accepted practices, such as capping the number of times a consumer sees a particular advertisement. The limited 

nature of that collection, however, is qualitatively different from the collection of information to track and profile consumers as they browse the web. Given these considerations, an effective Do Not Track system would go beyond simply opting consumers out of receiving targeted advertisements; it would opt them out of collection 

of behavioral data for all purposes that are not commonly accepted. 

Commission staff will monitor further industry innovation in this area, which may 

build upon existing industry initiatives and incorporate elements of the different 

mechanisms being proposed today. 

III. Conclusion 

Thank you for the opportunity to provide the Commission’s views. We look forward to continuing this important dialogue with Congress and this Committee. 

Senator PRYOR. Mr. Strickling? 

16 

STATEMENT OF HON. LAWRENCE E. STRICKLING, ASSISTANT 

SECRETARY FOR COMMUNICATIONS AND INFORMATION, 

NATIONAL TELECOMMUNICATIONS AND INFORMATION 

ADMINISTRATION, U.S. DEPARTMENT OF COMMERCE 

Mr. STRICKLING. Thank you, Chairman Pryor, Senators Kerry 

and Isakson. It’s a pleasure to be here today to testify on behalf 

of the Department of Commerce to discuss the state of online consumer privacy. And I welcome the opportunity to discuss how we 

can better protect consumer data privacy in this rapidly evolving 

Internet economy. And in doing so I’m quite pleased to testify here 

today with Chairman Jon Leibowitz of the Federal Trade Commission. 

As the principal advisor to the President on communications and 

information policy, the NTIA has been hard at work over the last 

2 years with Secretary Locke’s Internet Policy Task Force, Department of Commerce General Counsel Cam Kerry, and colleagues 

throughout the Executive Branch, to conduct a broad assessment 

of how well our current policy framework for consumer data is 

serving consumers, businesses and other participants in the Internet economy. 

I would also like to thank, in particular, the Federal Trade Commission for its collaboration with us and its leadership over the 

years in addressing this important issue. 

To guide the overall agenda of the Internet Policy Task Force, 

which includes issues in addition to privacy, we have focused on 

two key principles. 

The first is the idea of trust. It’s imperative for the sustainability 

and continued growth of the Internet that we preserve the trust of 

all actors on the Internet. And nowhere is this clearer than in the 

context of consumer privacy. If users do not trust that their personal information is safe on the Internet they’ll be reluctant to 

adopt new services. 

Our second principle is that we want to encourage multi-stakeholder processes to address key Internet issues. We want stakeholders to come together to deal with these issues in ways that display the flexibility, speed and efficiency that often are lacking with 

more traditional regulatory responses. 

These two principles inform the new framework for addressing 

online privacy that the Department proposed in its privacy ‘‘Green 

Paper’’ last December. The key elements of this framework include 

the following: 

First, we recommended the establishment of a set of Fair Information Practice Principles as the foundation for the protection of 

consumer privacy in the Internet economy. These principles will set 

a baseline of consistent, comprehensible data privacy protection in 

new and established commercial contexts. 

Second, to promote flexibility and speed to address privacy issues 

as they arise, the ‘‘Green Paper’’ recommended that the Department engage actively with industry and consumer groups to develop enforceable codes of conduct. 

And third, consistent with the FTC’s existing enforcement role in 

the protection of privacy, the ‘‘Green Paper’’ recommends strengthening the Commission’s authority to enforce these baseline privacy 

principles. 

17 

We received roughly 100 comments on the ‘‘Green Paper’’ and we 

are working hard to prepare a final document later this spring as 

a statement of Administration policy in this area. But, as we have 

reviewed the comments and we continued our discussions, I can report today that the Administration now recommends that Congress 

enact legislation to provide a firm legal foundation supporting specific aspects of this new policy. 

We specifically recommend that any legislation to provide a 

stronger statutory framework to protect consumer privacy should 

contain three key elements. 

First, it should create baseline consumer data privacy protections—as Senator Kerry referred to it, a consumer bill of rights— 

that are enforceable at law. Specifically, we support making a comprehensive set of FIPPs the basis of this law. This set of agreedupon principles would provide clear privacy protections for personal 

data in the commercial context in which existing privacy laws do 

not apply or offer adequate protection. 

Second, legislation should provide the FTC with the authority to 

enforce any baseline protections. Granting the FTC explicit authority to enforce baseline privacy principles will strengthen its role in 

consumer data privacy protection and enforcement, resulting in 

better protection for consumers. 

Third, legislation should create a framework that provides incentives for the development of enforceable codes of conduct as well as 

continued innovation around privacy protections. These codes can 

allow industry and government to adapt rapidly to a fast evolving 

online marketplace. And one incentive we urge Congress to consider is to give the FTC the authority to offer a safe harbor for 

companies that implement codes of conduct that are consistent 

with the baseline protections. 

This statutory framework is designed to be flexible, to keep its 

requirements well-tailored, and to provide a basis for greater interoperability with other countries’ privacy laws. 

Working together with Congress, the FTC, the Executive Office 

of the President and other stakeholders, I am confident in our ability to provide consumers with meaningful privacy protections in the 

Internet economy, backed by effective enforcement that could adapt 

to changes in technology, market conditions, and consumer expectations. Establishing and maintaining this dynamic consumer data 

privacy framework is not a one shot game, and it will require the 

ongoing engagement of all stakeholders. The Department and the 

Administration are firmly committed to that engagement. 

With or without legislation, the Department and NTIA will continue to make consumer data privacy a top priority. We will convene Internet stakeholders to discuss how best to encourage the development of privacy codes of conduct. The Department will support the Administration’s efforts to encourage global interoperability by stepping up our engagement in international policymaking bodies. And we will continue to work with Congress and all 

other stakeholders to develop consensus on reforms to our consumer data privacy policy framework. 

I look forward to working with this Committee on this important 

issue, starting with answering any questions you have for me 

today. Thank you. 

18 

1 U.S. Census Bureau, Commerce Department, ‘‘E-Stats,’’ May 27, 2010, available at http:// 

www.census.gov/econ/estats/2008/2008reportfinal.pdf. 2 Commerce Secretary Gary Locke, Remarks on Cybersecurity and Innovation, Georgetown 

University, Washington, D.C. (September 23, 2010). 3 Id. 

4 According to a recent survey, 83 percent of adults say they are ‘‘more concerned about online 

privacy than they were 5 years ago.’’ Common Sense Media, Online Privacy: What Does It Mean 

[The prepared statement of Mr. Strickling follows:] 

PREPARED STATEMENT OF HON. LAWRENCE E. STRICKLING, ASSISTANT SECRETARY

FOR COMMUNICATIONS AND INFORMATION, NATIONAL TELECOMMUNICATIONS AND

INFORMATION ADMINISTRATION, U.S. DEPARTMENT OF COMMERCE

I. Introduction 

Chairman Rockefeller, Ranking Member Hutchison, distinguished Committee 

Members, thank you for the opportunity to testify on behalf of the Department of 

Commerce (‘‘Department’’) to discuss Internet privacy policy reform. I welcome the 

opportunity to discuss how we can better protect consumer data privacy in the rapidly evolving Internet Age. In doing so, I am pleased to testify here today with Jonathan Leibowitz, the Chairman of the Federal Trade Commission (FTC). 

As the principal advisor to the President on communications and information policy, the National Telecommunications and Information Administration (NTIA) has 

been hard at work over the last 2 years with Secretary Locke’s Internet Policy Task 

Force and colleagues throughout the Executive Branch to conduct a broad assessment of how well our current consumer data privacy policy framework serves consumers, businesses, and other participants in the Internet economy. Over the same 

period of time, the Internet Policy Task Force has engaged, formally and informally, 

with a broad array of stakeholders, including companies, consumer advocates, academic privacy experts, and other government agencies. We identified privacy as a 

key issue in strengthening consumer trust, which, in turn, is critical to realizing the 

full potential for innovation and growth of the Internet. Our work culminated in the 

release of the Task Force’s ‘‘Green Paper’’ on consumer data privacy in the Internet 

economy on December 16, 2010. The Green Paper made ten separate recommendations about how to strengthen consumer data privacy protections in ways that also 

promote innovation, but it also brought to light many additional questions. 

We sought public comment on these recommendations, and we have been busy 

considering the roughly 100 written responses that were filed. One general conclusion to be drawn from the comments is that the commenters believe that American 

consumers should have stronger privacy protections, and the companies that run 

our Internet economy should have clearer rules of the road to guide their uses of 

data about consumers. 

II. Stakeholders’ Perspectives on Our Current Consumer Data Privacy 

Framework 

The Internet economy is sparking tremendous innovation. During the past fifteen 

years, networked information technologies—personal computers, mobile phones, 

wireless connections and other devices—have been transforming our social, political 

and economic landscape. A decade ago, going online meant accessing the Internet 

on a computer in your home. Today,‘‘going online’’ includes smartphones, portable 

games, and interactive TVs, with numerous companies developing global computing 

platforms in the ‘‘cloud.’’ 

The Internet is also an essential platform for economic growth, both domestically 

and globally. Almost any transaction you can think of is being conducted online— 

from consumers paying their utility bills and people purchasing books, movies and 

clothes, to major corporations paying their vendors and selling to their customers. 

According to the U.S. Census Bureau, domestic online transactions currently total 

about $3.7 trillion annually.1 Internet commerce is a leading source of job growth 

as well, with the number of domestic IT jobs growing by 26 percent from 1998 to 

2008, four times faster than U.S. employment as a whole.2 By 2018, IT employment 

is expected to grow by another 22 percent.3

As powerful and exciting as these developments are, they also raise new privacy 

issues. The large-scale collection, analysis, and storage of personal information is becoming more central to the Internet economy. These activities help to make the online economy more efficient and companies more responsive to their customer needs. 

Yet these same practices also give rise to growing unease among consumers, who 

are unsure about how data about their activities and transactions are collected, 

used, and stored.4 A basic element of our current consumer data privacy framework 

19 

to Parents and Kids (2010), available at http://www.commonsensemedia.org/sites/default/files/ 

privacypoll.pdf (last visited March 5, 2011). 5 Joseph Turow, Chris Jay Hoofnagle, Deirdre K. Mulligan, Nathaniel Good & Jens 

Grossklags, The Federal Trade Commission and Consumer Privacy in the Coming Decade, 3 I/ 

S: JOURNAL OF LAW & POLICY 723 (2007), available at http://www.is-journal.org/. 6 Chris Jay Hoofnagle & Jennifer King, Research Report: What Californians Understand 

About Privacy Offline (2008), available at http://papers.ssrn.com/sol3/papers.cfm?abstract lid=1133075. 7 Joshua Gomez, Travis Pinnick, and Ashkan Soltani, Know Privacy, at 27, June 1, 2009, 

available at http://knowprivacy.org/report/KnowPrivacylFinallReport.pdf. 8 Id. at 26. 9 Id. 

10See, e.g., Frank Groeneveld, Barry Borsboom, and Boy van Amstel, Over-sharing and Location Awareness, Feb. 24, 2010, http://www.cdt.org/blogs/cdt/over-sharing-and-location-awareness (discussing, in the context of their project called ‘‘Please Rob Me,’’ how adding location information to information posted on social networking sites can have unintended consequences). 11 All comments that the Department received in response to the Green Paper are available 

at http://www.ntia.doc.gov/comments/101214614–0614–01/. 12 Consumers Union, Comment on Department of Commerce Privacy Green Paper, Jan. 28, 

2011, at 2. 

is the privacy policy. As we mentioned in the Green Paper, these lengthy, dense, 

and legalistic documents do not appear to be effective in informing consumers of 

their online privacy choices. Surveys show that most Americans incorrectly believe 

that a website that has an online privacy policy is prohibited from selling personal 

information it collects from customers.5 In addition, many consumers believe that 

having a privacy policy guarantees strong privacy rights, which is not necessarily 

the case.6

The difficulty of understanding a single privacy policy, however, is modest when 

compared to the problem of comprehending how personal data flows in today’s online environment. A recent study found that 36 of the 50 most-visited websites state 

in their privacy policies that they allow third-party tracking.7 This same study 

found that a few prominent sites allow more than 20 different third-party tracking 

mechanisms in the course of a month. One site even allowed 100 such mechanisms.8

As the study points out, the privacy policy of the site that an individual actually 

visits typically does not apply to these third parties.9 In other words, to fully understand the privacy implications of using a particular site, individuals will often have 

to begin by considering the privacy policies of many other entities that could gain 

access to data about them. 

As Americans begin using smartphones and other mobile Internet devices in addition to, or instead of, laptop and desktop computers, the difficulties of understanding personal data flow become even more acute. The small screens that enable 

us to carry blogs, social networks, and video around in our pockets pose a new challenge to presenting consumers with information about personal data collection and 

use. These devices may also make location information available, which opens the 

door to an amazing array of new applications and services, but also adds further 

complexity to consumer data privacy issues.10 Assuring consumers that their privacy interests will be protected in this rapidly changing environment is our core 

challenge. 

During the Department’s outreach to stakeholders, we received comments from 

consumer groups, industry, and leading privacy scholars, all of whom agreed that 

large proportions of Americans do not fully understand and appreciate what information is being collected about them, and how they are able to stop certain practices 

from taking place.11 Several consumer advocacy and civil liberties groups expressed 

these concerns. These groups supported the Department’s overall recommendation 

to develop stronger privacy protections for personal data in the commercial setting. 

One group expressed this shared view about a basic lack of transparency particularly well: 

[C]onsumers face a continuum of risk to personal privacy, ranging from minor 

nuisances to improper disclosures of sensitive information and identity theft. 

Such unscrupulous practices, carried out without the consumers’ knowledge or 

consent, lead to diminished consumer trust in Internet data practices, thus 

stunting growth and innovation.12

Moreover, many consumer groups made a strong economic case for consumer data 

privacy reform. Simply put, the inability to distinguish among companies’ privacy 

practices may lead consumers to conclude that all companies engage in equally 

invasive practices. As one group noted, ‘‘even companies willing to adopt the most 

20 

13 Center for Democracy and Technology, Comment on Department of Commerce Privacy 

Green Paper, Jan. 28, 2011, at 3. 14 Intel, Comment on Department of Commerce Privacy Green Paper, Jan. 28, 2011, at 3. 15Microsoft, Comment on Department of Commerce Privacy Green Paper, Jan. 28, 2011, at 

1. 16Google, Comment on Department of Commerce Privacy Green Paper, Jan. 28, 2011, at 2. 17 Id. 18Financial Services Forum, Comment on Department of Commerce Privacy Green Paper, 

Jan. 28, 2011, at 8. 19 American Association of Advertising Agencies et al., Comment on Department of Commerce 

Privacy Green Paper, Jan. 28, 2011, at 1. 20Direct Marketing Ass’n, Comment on Department of Commerce Privacy Green Paper, Jan. 

28, 2011, at 4; see also American Business Media, Comment on Department of Commerce Privacy Green Paper, Jan. 28, 2011, at 4; Computer & Communications Industry Association, Comment on Department of Commerce Privacy Green Paper, Jan. 28, 2011, at 18; Keller & Heckman, Comment on Department of Commerce Privacy Green Paper, Jan. 28, 2011 at 1. 21 Business Software Alliance, Comment on Department of Commerce Privacy Green Paper, 

Jan. 28, 2011, at 4. 

stringent privacy policies find that overseas customers are skeptical of those assurances because of the lack of U.S. privacy laws to back them up.’’ 13

Interestingly, industry shares these views in many respects. Some of the leading 

innovators in the Internet economy see things the same way. In comments, a leading IT company refuted the argument that baseline consumer data privacy protections would slow innovation: ‘‘We disagree with the arguments some have advocated 

against the adoption of legislation, particularly that privacy legislation would stifle 

innovation and would hinder the growth of new technologies by small businesses. 

Instead, we believe that well-crafted legislation can actually enable small business 

e-commerce growth.’’ 14 Other companies reiterated the call for Federal privacy legislation; one argued that ‘‘dramatic and rapid technological advances are testing how 

the fundamental principles that underpin consumer privacy and data protection 

law—such as notice, consent, reasonable security, and data retention—should 

apply.’’ 15 Another stressed that ‘‘consumer-facing companies . . . have powerful 

market incentives to protect user privacy, and must respond to user demands in 

order to remain competitive.’’ 16 To ensure continued consumer trust, this company 

‘‘strongly supports the development of a comprehensive privacy framework for commercial actors . . . that create[s] a baseline for privacy regulation that is flexible, 

scalable, and proportional.’’ 17 In short, uncertainty over keeping the trust of consumers online is as unsettling for some businesses as it is for consumers. 

Commenters were not unanimous in their support for legislation, and some expressed opposition to enacting baseline consumer data privacy legislation. Some 

commenters asserted that legislation is appropriate only where ‘‘particularly sensitive privacy interests’’ are concerned.18 Others argued that a legislative framework 

would be ‘‘too inflexible,’’ 19 a ‘‘one size fits all’’ 20 collection of rules that will become 

‘‘static.’’ 21 The Department took these concerns seriously when developing the 

Green Paper’s Dynamic Privacy Framework for consumer data. A central feature of 

the Framework is an emphasis on developing industry-specific, enforceable codes of 

conduct that establish how Fair Information Practice Principles (FIPPs) apply in a 

given commercial context. And these concerns are reflected in the contours of the 

recommendations in this testimony. 

Thus, based on an initial review of comments, the Department sees a shared set 

of principles that could help to inform our efforts to reform consumer data privacy 

in the Internet economy. The general agreement of commenters appears to rest on 

two tenets. First, to harness the full power of the Internet age, we need to establish 

norms and ground rules that promote innovative uses of information while respecting consumers’ legitimate privacy interests. Second, as we go about establishing 

these privacy guidelines, we also need to be careful to avoid creating an overly complicated regulatory environment. 

III. Strengthening Our Consumer Data Privacy Framework Through 

Baseline Protections 

Exactly three months ago, the Department published its Green Paper, which contained a set of preliminary policy recommendations to enhance consumer protection, 

strengthen online trust, and bolster the Internet economy. The paper made ten recommendations and sought comment on a set of additional questions. In response to 

the paper, the Department received thoughtful and well-researched comments from 

over a hundred stakeholders representing industry, consumer groups, and academia. 

Having carefully reviewed all stakeholder comments to the Green Paper, the Department has concluded that the U.S. consumer data privacy framework will benefit 

from legislation to establish a clearer set of rules for the road for businesses and 

21 

22See Comment of Hewlett-Packard Co. on Notice of Inquiry, at 2, June 14, 2010, available 

at http://www.ntia.doc.gov/comments/100402174–0175–01/attachments/HP%20Comments%2E 

pdf. 

23Professors Ira Rubinstein and Dennis Hirsch, Comment to the Department Privacy Green 

Paper, January 28, 2011, available at http://www.ntia.doc.gov/comments/101214614–0614–01/ 

comment.cfm?e=D120453B-FB2B–4034–962C-C0A352328531. 24 Yahoo!, Comment to the Department Privacy Green Paper, January 28, 2011, available at 

http://www.ntia.doc.gov/comments/101214614-0614-01/comment.cfm?e=F6A50C0B–00CC44A6-B475-FE218170CA02. 25World Wide Web Consortium, Comment to the Department Privacy Green Paper, January 

28, 2011, available at http://www.ntia.doc.gov/comments/101214614-0614-01/attachments/ 

ResponseW3C.pdf. 26See, e.g., Professors Ira Rubinstein and Dennis Hirsch, Comment to the Department Privacy 

Green Paper, January 28, 2011, available at http://www.ntia.doc.gov/comments/101214614- 

0614-01/comment.cfm?e=D120453B-FB2B-4034-962C-C0A352328531; Intel, Comment to DepartContinued 

consumers, while preserving the innovation and free flow of information that are 

hallmarks of the Internet. The Department’s privacy Green Paper—much like the 

staff report of the Federal Trade Commission (FTC)—highlights the need for stronger privacy protections for American consumers. As pointed out in the Commerce report, the United States has a range of data privacy laws that apply to individual 

sectors of the economy, such as health care, consumer credit, and personal finance. 

But these laws may not offer protection to some of the data uses associated with 

consumers’ activities in the Internet economy. An overarching set of privacy principles on which consumers and businesses can rely could create a stronger foundation for consumer trust in the Internet by providing this broadly applicable framework. 

Legislation to provide a stronger statutory framework to protect consumers’ online 

privacy interests should contain three key elements. First, the Administration recommends that legislation set forth baseline consumer data privacy protections—that 

is, a ‘‘consumer privacy bill of rights.’’ Second, legislation should provide the FTC 

with the authority to enforce any baseline protections. Third, legislation should create a framework that provides incentives for the development of codes of conduct 

as well as continued innovation around privacy protections, which could include providing the FTC with the authority to offer a safe harbor for companies that implement codes of conduct that are consistent with the baseline protections. This statutory framework is designed to be flexible, to keep its requirements well-tailored, and 

to provide a basis for greater interoperability with other countries’ privacy laws. 

A. Enacting a Consumer Privacy Bill of Rights 

The Administration urges Congress to enact a ‘‘consumer privacy bill of rights’’ 

to provide baseline consumer data privacy protections. Legislation should consider 

statutory baseline protections for consumer data privacy that are enforceable at law 

and are based on a comprehensive set of FIPPs. Comprehensive FIPPs, a collection 

of agreed-upon principles for the handling of consumer information, would provide 

clear privacy protections for personal data in commercial contexts that are not covered by existing Federal privacy laws or otherwise require additional protection. To 

borrow from one of the responses we received, baseline FIPPs are something that 

consumers want, companies need, and the economy will appreciate.22

The Administration recommends that the baseline should be broad and flexible 

enough to allow consumer privacy protection and business practices to adapt as new 

technologies and services emerge. As noted by two privacy scholars, ‘‘[b]roadly worded legislation . . . motivates firms to produce an industry code of conduct as a way 

to construe and clarify the statutory scheme. Thus, baseline privacy legislation and 

incentives for industry to develop codes of conduct can go hand-in-hand.’’ 23

Finally, a baseline law holds the promise of making our consumer data privacy 

framework more interoperable with international frameworks. Again, leading Internet innovators support baseline legislation as a means of achieving this objective. 

For example, a leading online company noted that ‘‘FIPPs is a common language 

used by many governments worldwide, so use of similar terminology will enhance 

opportunities for agreement and practical approaches to data policy.’’ 24 A Web 

standards organization stated that ‘‘[e]stablishing baseline commercial data privacy 

principles contribute[s] to the further harmonization of the global e-commerce market at least for the countries attached to the OECD, and improve[s] the transatlantic relations on online services of all sorts.’’ 25 Other comments, which represent a wide variety of American companies, consumer advocates, and academic 

scholars, also supported this position, often noting that improving global interoperability could benefit companies by reducing their compliance burdens overseas.26

22 

ment Privacy Green Paper, January 28, 2011, available at http://www.ntia.doc.gov/comments/ 

101214614-0614-01/attachments/Intel%20Corp%20Dept%20Commerce%20green%20paper%20 

comment.pdf (‘‘Intel supports Federal legislation based on the Fair Information Practices (FIPs) 

as described in the 1980 Organization for Economic Co-Operation and Development (OECD) Privacy Guidelines.’’) 27 Verizon, Comment to the Department Privacy Green Paper, January 28, 2011, available at 

http://www.ntia.doc.gov/comments/101214614–0614–01/comment.cfm?e=6BFB924F-75DD-4472 

-94F3-F76DB8EE0376. 28 Intel, Comment to Department Privacy Green Paper, January 28, 2011, available at http:// 

www.ntia.doc.gov/comments/101214614-0614-01/attachments/Intel%20Corp%20Dept%20Comm 

erce%20green%20paper%20comment.pdf. 

The Green Paper suggested that comprehensive FIPPs can serve as a basis for 

stronger consumer trust while also providing the flexibility necessary to define more 

detailed rules that are appropriate for the relationships and personal data exchanges that arise in a specific commercial context. The FIPPs that the Green Paper 

presented for discussion were transparency, individual participation, purpose specification, data minimization, use limitation, data quality and integrity, security, and 

accountability and auditing. We received many thoughtful comments on how each 

of these principles might apply to the commercial context, and we are continuing 

to assess whether these principles provide the right framework for online consumer 

data privacy. The Administration looks forward to working further with Congress 

and stakeholders to define these baseline protections. 

B. Implementing Enforceable Codes of Conduct Developed Through Multi-Stakeholder Processes 

To encourage specific but adaptable rules for businesses and consumers in the implementation of baseline privacy principles, the Administration recommends a 

framework that can promptly address specific privacy issues as they emerge. In this 

framework, stakeholders from the commercial, consumer advocacy and academic 

sectors, as well as the FTC and other government agencies would come together to 

develop enforceable best practices or codes of conduct based on the principles in 

baseline legislation. This process would allow stakeholders to develop codes of conduct that address privacy issues in emerging technologies and business practices, 

without the need for additional legislation. In this framework, the FTC could have 

the authority to provide appropriate incentives, such as a safe harbor, for business 

to develop and adopt codes of conduct. Compliance with an approved code of conduct 

might be deemed compliance with the statutory FIPPs. Of those stakeholders that 

supported legislation, most one telecommunication company’s conclusions that ‘‘[a]s 

the Green Paper observes, such a safe harbor provision will reinforce the industry’s 

incentives to develop self-governance practices that address emerging issues, and to 

follow such practices.’’ 27 In addition, legislation should ensure that stakeholders 

have appropriate incentives to revise enforceable codes of conduct as changes in 

technology, market conditions, and consumer expectations warrant. 

This recommendation reflects the Department’s view that government must support policy development processes that are nimble enough to respond quickly to consumer data privacy issues as they emerge and that incorporate the perspectives of 

all stakeholders. Industry, consumer groups, and civil society, as well as the government, all have vital roles to play in putting baseline privacy protections into practice 

in the United States. A leading IT company captured this multi-stakeholder perspective well, commenting that ‘‘no single entity can achieve the goal of building 

trust . . . as it is clearly a shared responsibility. There is a role for governments, 

industry, and Non-Governmental Organizations/advocacy groups (NGO’s) working 

together to form a ‘triangle of trust.’ ’’ 28 A multi-stakeholder strategy for implementation ensures that government establishes the base of this trust triangle. Such a 

strategy will be critical to ensure that we end up with a framework that is rational, 

that provides businesses with better information about what consumers expect (and 

vice versa), but that is also dynamic. Below, I explain in greater detail the leading 

role that the Department of Commerce could play in putting this multi-stakeholder 

model into practice. 

C. Strengthening the FTC’s Authority 

The independent expertise of the FTC is another key element of this framework. 

In addition to its leadership in developing consumer data privacy policy, the FTC 

plays a vital role as the Nation’s independent consumer privacy enforcement authority. Granting the FTC explicit authority to enforce baseline privacy principles would 

strengthen its role in consumer data privacy policy and enforcement, resulting in 

better protection for consumers and evolving standards that can adapt to a rapidly 

evolving online marketplace. 

23 

29See, e.g., Comments of Center for Democracy and Technology; Comments of Consumers 

Union; Comments of Microsoft; Comments of Walmart; Comments of Intel; Comments of Google; 

Comments of Facebook; Comments of Interactive Advertising Bureau; and Comments of Yahoo! 30For further information, see NIST, About NSTIC, http://www.nist.gov/nstic/ (last visited 

Mar. 14, 2011). 

D. Establishing Limiting Principles on Consumer Data Privacy Legislation 

As the Committee considers these recommendations, we would also like to provide 

our thoughts on limitations that Congress should observe in crafting consumer data 

that strengthens consumer privacy protections and encourages continuing innovation. Legislation should not add duplicative or overly burdensome regulatory requirements to businesses that are already adhering to the principles in baseline consumer data privacy legislation. Legislation should be technology-neutral, so that it 

allows firms flexibility in deciding how to comply with its requirements and encourages business models that are consistent with baseline principles but use personal 

data in ways that we have not yet contemplated. And, domestic privacy legislation 

should provide a basis for greater transnational cooperation on consumer privacy 

enforcement issues, as well as more streamlined cross-border data flows and reduced compliance burdens for U.S. businesses facing numerous foreign privacy laws. 

IV. The Department’s and NTIA’s Next Steps on Internet Privacy Policy 

With or without legislation, the Department and NTIA will continue to make consumer data privacy on the Internet a top priority. We will convene Internet stakeholders to discuss how best to encourage the development of privacy codes of conduct. And, the Department will support the Administration’s efforts to encourage 

global interoperability by stepping up our engagement in international policymaking 

bodies. Finally, we will continue to work with Congress and all stakeholders to develop consensus on reforms to our consumer data privacy policy framework. 

A. Convening Voluntary Efforts to Define Baseline Privacy Protections 

The Department of Commerce can play a leading role in bringing stakeholders together rapidly to develop enforceable codes of conduct, in order to provide greater 

certainty for businesses and necessary protections for consumers. The Green Paper 

notes that the Department—and particularly NTIA—has the necessary expertise 

and can work with others in government to convene companies, consumer groups, 

academics, and Federal and State government agencies. It will be important to 

bring NTIA’s experience to bear in these activities, since NTIA can work with other 

agencies and provide a center of consumer data privacy policy expertise. The Department received significant stakeholder support for the recommendation that it 

play a central role in convening stakeholders. A broad array of organizations, including consumer groups, companies, and industry groups announced their support 

for the Department to help coordinate outreach to stakeholders to work together on 

enforceable codes of conduct.29

Indeed, the Department is pleased to be part of an Administration effort in which 

this approach to protecting consumer data privacy may be immediately useful: The 

National Strategy for Trusted Identities in Cyberspace (NSTIC).30 The NSTIC, 

which is a separate Administration initiative being developed in close consultation 

with the private sector, and is not part of the legislative proposal discussed in this 

testimony, envisions enhancing online privacy and security through services that 

provide credentials that improve upon the username and password schemes that are 

common online. The NSTIC proposes a system that would provide individuals the 

option of obtaining a strong credential to use in sensitive online transactions. The 

NSTIC calls for the participants in this digital identity marketplace to implement 

privacy protections that are based on the FIPPs. Developing enforceable codes of 

conduct through multi-stakeholder processes is one way that the Department can 

work with the private sector to implement these protections. 

We thank you, Chairman Rockefeller, for supporting the announcement that the 

Department of Commerce will host the National Program Office to coordinate the 

Federal activities to implement NSTIC. With the leadership of the private sector, 

the Department is ready and willing to support the implementation of NSTIC by 

leveraging the tremendous resources of NTIA and the National Institute of Standards and Technology. 

B. Encouraging Global Interoperability 

Consistent with the general goal of decreasing regulatory barriers to trade and 

commerce, the Department will work with our allies and trading partners to reduce 

barriers to cross-border data flow by increasing the global interoperability of privacy 

frameworks. While the privacy laws across the globe have substantive differences, 

24 

these laws are frequently based on similar fundamental values. The Department 

will work with our allies to find practical means of bridging differences, especially 

those that are often more a matter of form than substance. 

The Department will work with other agencies to ensure that global privacy interoperability builds on accountability, mutual recognition and reciprocity, and enforcement cooperation principles pioneered in the Organisation for Economic Cooperation 

and Development (OECD) and Asia-Pacific Economic Cooperation (APEC). Agreements with other privacy authorities around the world (coordinated by key actors 

in the Federal Government) could reduce significant business global compliance 

costs. 

C. Developing Further Administration Views on U.S. Internet Policy 

Finally, we are working to ensure that our work on consumer data privacy policy 

complements and informs other Internet policy development efforts that are underway in the Department and throughout the Administration. An invaluable mechanism for making this happen is the Privacy and Internet Policy Subcommittee of 

the National Science and Technology Council. The Subcommittee, which the White 

House announced last fall, is chaired by Commerce Department General Counsel 

Cameron Kerry and Justice Department’s Assistant Attorney General Christopher 

Schroeder. The Subcommittee provides a forum for Federal agencies and key White 

House offices to coordinate and exchange ideas on how to promote a broad, visible, 

forward-looking commitment to a consistent set of Internet policy principles. These 

core principles—all of which apply to the consumer data privacy context—include 

facilitating transparency, promoting cooperation, strengthening multi-stakeholder 

governance models, and building trust in online environments. 

The Subcommittee has already provided the substantive policy discussions that 

led to the legislative reform recommendations that I am presenting today. The Department of Commerce looks forward to continuing to work with this Committee. 

V. Conclusion 

In the end, the Obama Administration’s goal is to advance the domestic and global dialogues in ways that will protect consumers and innovation, and to provide 

leadership on information privacy policy, regulation, and legislation. 

Working together with Congress, the FTC, the Executive Office of the President, 

and other stakeholders, I am confident in our ability to provide consumers with 

meaningful privacy protections in the Internet economy, backed by effective enforcement, that can adapt to changes in technology, market conditions, and consumer expectations. Establishing and maintaining this dynamic consumer data privacy 

framework is not a one-shot game; it will require the ongoing engagement of all 

stakeholders. The Department and the Administration are firmly committed to that 

engagement. The legislative approach that I have outlined today would lend extremely valuable support to the dynamic framework that we envision. I welcome 

any questions you have for me. Thank you. 

Senator PRYOR. Thank you. 

Chairman Leibowitz, let me start with you if I may. And that is 

in your opening statement you mention this new icon that online 

advertisers are using. My understanding is that just came online 

just, you know, last several weeks at some point. Are you encouraged by what you see or is it too early to know if that’s going to 

work? 

Mr. LEIBOWITZ. Well I would say we are encouraged by what we 

are seeing. I would say the industry has been working in good faith 

on this icon notion probably for the last 2 years. I think you’ll have 

someone testifying on the next panel about that. 

I would say that the pace of moving forward has become far more 

rapid since the summer hearings this Committee held and the 

House Energy and Commerce Committee held in the fall and since 

we released our report in December. So it is promising from our 

perspective. The majority of Commissioners would like to see a Do 

Not Track mechanism that includes a prohibition on tracking, not 

just sending ads back to consumers. 

25 

But there are important developments really just in the last few 

days, including a number of members of that Digital Advertising 

Alliance who would like to see restrictions on tracking except for 

fraud purposes. So, yes. 

Senator PRYOR. Thank you. 

Mr. Strickling, I think I saw yesterday, maybe last night, a story 

that the White House is talking about a privacy bill of rights or— 

do you anticipate that they’ll come forward with a proposal, with 

a bill or is this more just general concepts that, you know, we can 

expect to see from the White House? 

Mr. STRICKLING. Yes, sir. The ‘‘Green Paper’’ was put out in December. And we are currently working to develop a more complete 

and what we hope will be an Administration statement of policy 

later this spring. What I testified to this morning is that the Administration is now at the point of recommending that this be dealt 

with in legislation. 

We will continue to flesh out the particulars as we complete our 

overall policy paper. But we’re prepared to start working with this 

Committee and other Members of Congress on those specifics now. 

Senator PRYOR. Thank you. 

Mr. Leibowitz, I have some questions for you about Do Not 

Track, but I think what I’d like to do is go to Senator Isakson since 

the vote just started and allow Senator Isakson to ask and then 

Senator Kerry. 

Go ahead. 

Senator ISAKSON. Thank you, Mr. Chairman. 

Mr. Leibowitz, in your—on page two of your prepared testimony 

you have the number of cases you brought over the last 15 years 

in various categories, spam, fair credit reporting act, etcetera, children’s protection. Is that volume by category proportionate to the 

number of complaints that you get or is it just? 

Mr. LEIBOWITZ. Well, we keep a complaint database, Consumer 

Sentinel, and that’s one way and a very important way in which 

we develop cases. There are other ways as well. It’s not a perfect 

symmetry, but we like to think it’s in proportion to the need to 

bring cases. As you know we’re a very small agency. So we try to 

leverage our limited resources. 

But we think we try to go where the harm is or is going to be. 

And so we think it’s reflective of that. But let me—I’ll get you some 

consumer complaints. 

[The Federal Trade Commission submitted to the Committee, after this hearing, 

the Federal Trade Commission Consumer Sentinel Network Data Book, January–December 2010, published March 2011. It is available at http://www.ftc.gov/sentinel/ 

reports/sentinel-annual-reports/sentinel-cy2010.pdf. The executive summary follows.] 

Executive Summary 

Consumer Sentinel Network Data Book 

January–December 2010 

• The Consumer Sentinel Network (CSN) contains over 6.1 million complaints 

dating from calendar year 2006 through calendar year 2010. There are over 7.8 

million do-not-call complaints from this same time period. 

• The CSN received over 1.3 million complaints during calendar year 2010: 54 

percent fraud complaints; 19 percent identity theft complaints; and 27 percent 

other types of complaints. 

26 

• Identity theft was the number one complaint category in the CSN for calendar 

year 2010 with 19 percent of the overall complaints, followed by Debt Collection 

(11 percent); Internet Services (5 percent); Prizes, Sweepstakes and Lotteries (5 

percent); Shop-at-Home and Catalog Sales (4 percent); Impostor Scams (4 percent); Internet Auction (4 percent); Foreign Money Offers and Counterfeit Check 

Scams (3 percent); Telephone and Mobile Services (3 percent); and Credit Cards 

(2 percent). The complete ranking of all thirty complaint categories is listed on 

page six of this report. 

Fraud 

• A total of 725,087 CSN 2010 complaints were fraud-related. Consumers reported paying over $1.7 billion in those fraud complaints; the median amount 

paid was $594. Eighty-six percent of the consumers who reported a fraud-related complaint also reported an amount paid. 

• Sixty percent of all fraud-related complaints reported the method of initial contact. Of those complaints, 45 percent said e-mail, while another 11 percent said 

an Internet website. Only 10 percent of those consumers reported mail as the 

initial point of contact. 

• Colorado is the state with the highest per capita rate of reported fraud and 

other types of complaints, followed by Maryland and Nevada. 

Identity Theft 

• Government documents/benefits fraud (19 percent) was the most common form 

of reported identity theft, followed by credit card fraud (15 percent), phone or 

utilities fraud (14 percent), and employment fraud (11 percent). Other significant categories of identity theft reported by victims were bank fraud (10 percent) and loan fraud (4 percent). 

• Government documents/benefits fraud increased 4 percentage points since calendar year 2008; identity theft-related credit card fraud, on the other hand, declined 5 percentage points since calendar year 2008. 

• Forty-two percent of identity theft complainants reported whether they contacted law enforcement. Of those victims, 72 percent notified a police department. Sixty-two percent indicated a report was taken. 

• Florida is the state with the highest per capita rate of reported identity theft 

complaints, followed by Arizona and California. 

Mr. LEIBOWITZ. As you know being a member of this Committee, 

sometimes you’ll see something you’ll read about or a Commissioner will and that will go into the investigative process. So there 

are all different ways we bring cases. 

Senator ISAKSON. That is exactly where I was going with my follow up question. In most federal enforcement agencies the cases 

they pursue are in response to complaints from citizens. But you 

also—do you also monitor news media and reports and then follow 

up based on whether or not it appears to fall under your responsibility? 

Mr. LEIBOWITZ. Sure, we do. And in fact we brought a very important antitrust case because Senator Klobuchar raised it at a 

hearing maybe a year ago. This was on a merger involving a drug 

used for children with heart defects. And so it comes from a lot of 

places. 

You know, we’re a very bipartisan agency. All the Commissioners 

have ideas of about what we should be doing and it all is channeled 

into our investigative and our enforcement efforts. 

Senator ISAKSON. Where does the volume of penalties, I mean, 

$60 million in civil penalties, $21 million in civil penalties and five. 

It looks like to me it’s about $80 million in civil penalties you collect over the year. Where does that money go? Back into the agency 

or back to the general treasury? 

Mr. LEIBOWITZ. It goes back to Treasury. And then more often 

we will try to get redress for consumers. One of the things that we 

27 

try to obtain in the financial reform legislation was the ability to 

get civil penalties for violations of our standard unfair and deceptive acts or practices authority. And it didn’t make it into the final 

legislation. 

It was something that Caspar Weinberger actually supported 

when he was the FTC Chair back in the early 1970s. And we hope 

to come back and revisit that going forward. But as a result, we 

have limited fining authority. It usually goes back to Treasury. 

Senator ISAKSON. I’m assuming based on what I’ve heard in the 

testimony that probably the most effective way to protect the consumer would be give them a mechanism to protect themselves. You 

talked about the icon where you can just elect—— 

Mr. LEIBOWITZ. Yes. 

Senator ISAKSON.—whether or not your information can be 

shared or not. Do we know if technologically that—I think technologically anything can be done now, but is that doable? 

Mr. LEIBOWITZ. Yes, that is doable. And the only question is 

about exactly which way to do it. 

Senator ISAKSON. Thank you, Mr. Chairman. 

Senator PRYOR. Thank you. 

Senator Kerry? 

Senator KERRY. Thank you, Mr. Chairman. 

Chairman Leibowitz, I want to try—a lot has been discussed 

about the Do Not Track proposal. And I want to try to hone in on 

it a little bit. Is it your judgment that if a company comes up with 

a pretty strict policy which has broad privacy protections and adequate opt in, et cetera, et cetera, and opt-out or out, do you think 

then that the Do Not Track is still necessary? 

Mr. LEIBOWITZ. At this point I think we do, because if individual 

companies have individual practices that may support a baseline 

consumer or commercial bill of rights here, I think that is a great 

idea it may not mean that every company has that. And I think 

what we’re trying to do, like you, is develop a baseline for privacy 

protection for consumers. 

So from my perspective a Do Not Track mechanism that’s easy 

to implement, going back to Senator Isakson’s point, could be an 

important choice mechanism for consumers and an important way 

to protect privacy for consumers who want to limit tracking. 

Senator KERRY. So in terms of the potential harm or protection 

depending on which way you look at it, that you’re trying to provide the consumer if you had a Do Not Track it doesn’t mean that 

they’re going to get no advertising like a Do Not Call means you’re 

not going to get any calls. It simply means you’re not going to get 

customized advertising. But you’ll still get bombarded by advertising. 

Mr. LEIBOWITZ. You will still get advertising. It may not be targeted. But again, from our perspective—— 

Senator KERRY. So the analogy to Do Not Call is not an appropriate one. Would you—— 

Mr. LEIBOWITZ. Yes, it’s very different than Do Not Call. 

Senator KERRY. OK. 

Mr. LEIBOWITZ. It’s very different from Do Not Call. It’s also not 

government run as we run the Do Not Call list. 

Senator KERRY. OK. 

28 

So then is there an assumption therefore that if you had a standard and you had a code and you had a strong privacy offering that 

the tracking is per se bad? 

Mr. LEIBOWITZ. No, we don’t think tracking is per se bad at all. 

We think most consumers won’t mind being tracked. They get more 

personalized advertising. 

We just think consumers ought to have the ability to opt out of 

that kind of tracking. I mean, the analogy we sometimes use is if 

you’re walking around a mall, someone shouldn’t be sort of tracking—following you around even if they don’t know who you are and 

sending e-mails off to the stores in front of you saying well, that’s 

Jon Leibowitz. He’s interested in buying a Madras jacket in his 

usual green and red colors. 

You know, you should have the right not to be followed around 

if you don’t want to be followed around. 

Senator KERRY. So if a firm has a very strong policy, a privacy 

policy and then you have another firm that doesn’t have a very 

strong kind of policy. 

Mr. LEIBOWITZ. Right. 

Senator KERRY. You’re going to treat them both the same in the 

context of the Do Not Track. 

Mr. LEIBOWITZ. Well. 

Senator KERRY. There’s no virtue to having the stronger policy 

and therefore allowing the tracking to take place in the context of 

that stronger policy. 

Mr. LEIBOWITZ. Well, stronger policy outside of Do Not Track 

may have many virtues, right? It will include privacy by design. It 

will include readable privacy notices. They’ll be transparency. 

They’ll be more choice. 

But my sense is that a lot of the most responsible companies support a Do Not Track notion for third party cookies. And so I think 

there’s an enormous benefit to having a baseline FIPPs privacy 

protection and then negotiated industry codes. We’re working with 

the Commerce Department on that. 

But we also think there’s a value in having the ability to opt-out 

of targeted advertising or maybe targeted advertising for just sensitive information like medical searches or financial information. 

Senator KERRY. With respect to the Wall Street Journal series on 

the issue of what they know. I assume you followed that? 

What did you draw from that? What came out of that in your 

judgment? 

Mr. LEIBOWITZ. So let me say a few general things and some specific things. 

So generally, what came out of that—and it was a series of stories, as you know, last summer, and then many follow-ups. 

One is that some companies have very good privacy practices, 

but many of them do not. And it results in an enormous amount 

of information being collected about consumers that’s invisible to 

consumers and not on the sites that they’re on, but by cookies and 

software embedded in consumer’s computers. And so it really was 

a motivation for us to step up our enforcement efforts and to write 

our privacy report. 

And then more specifically, we’re having a debate about whether 

to propose a Do Not Track mechanism. And one of the issues we 

29 

had internally in the Commission was: is it technologically feasible? And of course, one of the stories, as you know, was about 

Microsoft having developed this and the balancing act they did between their privacy advocates and engineers on the one hand and 

their marketers. And how they resolved it was they sort of split the 

difference. 

And so we knew then that Do Not Track was technologically feasible. And Microsoft to its credit has stepped up and endorsed the 

concept since our report. 

Senator KERRY. Thank you. 

[Laughter.] 

STATEMENT OF HON. CLAIRE MCCASKILL, 

U.S. SENATOR FROM MISSOURI 

Senator MCCASKILL. Thank you, Mr. Chairman. 

I—you know when you talk about privacy it’s in the same category as motherhood and apple pie in this country. And I think 

we’ve got a real problem here because what most Americans don’t 

understand and frankly, what maybe, unfortunately, two Members 

of Congress don’t understand is we have monetized the Internet 

with behavior marketing. It is an amazing amount of free information that is immediately accessible because of behaviorally marketing. So I guess, you know, it equals money. 

And so I guess my first question is have—does anybody know? 

Do either of you know what the cost is going to be in terms of the 

economic vibrancy of the Internet for some of the things that are 

being considered? And isn’t it fair to envision that a Do Not Track 

in fairness since behavioral marketing is money, isn’t it fair to 

think that some of these companies are going to charge for that? 

Mr. LEIBOWITZ. For opting out of tracking? 

Senator MCCASKILL. Yes. 

Mr. LEIBOWITZ. We have not seen that yet even in the—— 

Senator MCCASKILL. But we haven’t passed any laws yet. 

Mr. LEIBOWITZ. No, but to their credit, there is a major group of 

companies, called the Digital Advertising Alliance, that’s in the 

process of offering some sort of free opt-out. Now we think it should 

go a little further. But no one has talked about monetizing that. 

And I think that’s a good thing. And I think it’s a recognition 

also that businesses understand that if you put some limits on 

tracking or you have some privacy protections as the Commerce 

Department envisions—and I’m supportive of that though you don’t 

necessarily need to be—the sky won’t fall down on Internet commerce. It’s going to continue. And indeed if consumers have more 

trust in the Internet, they’re going to do more business on the 

Internet too. 

Senator MCCASKILL. Do you think that there is envisioned where 

we draw the line? For example, we would never dream of telling 

Slim Fast they couldn’t advertise on Oprah, right? Behavioral marketing. They know that there are mostly women that are watching 

that show. And they know that most of their product is consumed 

by women. And so they are behaviorally marketing to that segment. 

30 

How will we draw the line between what kind of behavioral marketing is fair and what kind of behavioral marketing invades privacy? 

Mr. LEIBOWITZ. Well, I think you’ve raised a really important 

point. And I don’t know if you were here when Senator Isakson was 

speaking. He used to run a company. They advertised. And he 

pointed out that there’s a difference between advertising on the 

Internet where you can figure out things about people, not from 

classic PI, personal information, but from the aggregated enormous 

amounts of information. 

And so it’s different than advertising on Oprah or advertising on 

TV. And that seems to me, that’s a point where we want to ensure 

privacy protections for consumers. And I think that the Department—I don’t speak for the Department of Commerce, but I assume that you do. 

Mr. STRICKLING. And I would just add to the comments the 

Chairman has made that in our discussions we find a very strong 

level of support among industry to create this baseline of protections. The baseline though, it’s fair to call it a bill of rights. I mean 

what we have in mind is not unlike the Bill of Rights, a concise 

statement of the right that the consumer has, and then relying on 

industry, working with consumer groups, working with other experts in the field, to come up with these codes of conduct that provide more specificity. 

We think, in that regard, we don’t have to see the government 

drawing some of these very difficult lines and imposing them as 

regulation as long as we’re providing adequate oversight of this 

process by which industry, working with all stakeholders, develops 

appropriate codes. We think we can get to a regime that will greatly improve privacy for consumers and still meet the needs of businesses who want to continue to see the growth of the Internet. 

Mr. LEIBOWITZ. If I can just follow up briefly. And you’re right. 

I don’t think most American consumers understand where their information is going, how it’s been monetized, how it’s been traded. 

But in another sort of bedrock level, I think they get the issues of 

Internet privacy. 

There was a poll by a group called Consumer Watchdog that 

found 80 percent of Americans wanted to see a Do Not Track option. I think Common Sense Media had a poll that you mentioned, 

talking about greater concern that parents had over their kids. 

Senator MCCASKILL. Right. 

Mr. LEIBOWITZ. About Internet privacy and safety. Gallup had a 

poll that also reflected this. So I think at some level Americans understand. 

Senator MCCASKILL. I agree. And I don’t mean to cut you off. But 

I don’t want to miss this vote and while I’m going to try to come 

back—I just think we’ve got to be very careful about the unintended consequences. 

We know the good guys are going to try to do this right. We 

know the bad guys, it’s going to be very hard to regulate them in 

a way that makes sense. So what I don’t want to do is handcuff 

the good guys because with all due respect, I mean, you know, if 

we think we’re doing a really good job in consumer oversight of the 

commerce in this country right now. You know, I mean, don’t get 

31 

me started on the ads I see on cable TV that I just need to get my 

government benefit and all of the things that are out there that are 

not being adequately policed. 

So I just want to make sure that we don’t kill the goose that laid 

the golden egg here under the rubric of the very laudable notion 

of privacy. I just think that we’ve got to go very carefully, make 

sure that we think about the unintended consequences and most 

importantly, think about the bad guys that aren’t going to pay any 

attention to your code of conduct. 

And consumers are going to continue to not have confidence in 

the Internet as long as those bad guys are out there. So I just— 

I think we’ve got to be very careful and not go too fast, too far, 

without thinking about what may be down the line. 

Mr. STRICKLING. If I could respond quickly to that. I think the 

proposal that we’ve made answers your concern. It would have legislation that would create a baseline of these fair information practice principles. And those are some of the things that the Chairman 

mentioned earlier, things like transparency and disclosure, what 

level of consent. 

I’m confident that if, in doing so, the Congress also gives the FTC 

the enforcement authority to enforce that they’re going to be able 

to go after the bad guys based on that baseline. But what the baseline allows though is the flexibility to the good guys, as you call 

them, to craft the more specific protections that they need to have 

to allow them to run their businesses. 

Senator MCCASKILL. I agree. I will just tell you that I have a 

feeling that, Mr. Leibowitz, that your budget is not going to grow 

enormously over the next decade. And you’ve got plenty of work to 

do over there. 

And frankly a lot of work that needs to be done that you can’t 

do now. And if we’re going to add to your work load and at the 

same time do something that is going to minimize the amazing 

things we’ve done on the Internet, I just think we’ve got to make 

sure America buys into that agreement. 

Mr. LEIBOWITZ. Yes, I agree with that. 

Senator PRYOR. Let me interrupt here just for a second because 

this vote is about to close. And Senator, we need to run over there 

and vote. So what I’ll do is recess this for just a few moments. Let 

us go do these two votes. And then we’ll reconvene in just a few 

minutes. 

Thank you. 

[Recess.] 

Senator PRYOR. I’ll reconvene the hearing. I want to thank everyone for being patient with us and we had those two votes. And my 

understanding is we have a few Senators on the way back over. 

But I know that Senator Klobuchar wanted to ask questions of this 

first panel. 

So Senator Klobuchar? 

STATEMENT OF HON. AMY KLOBUCHAR, 

U.S. SENATOR FROM MINNESOTA 

Senator KLOBUCHAR. Well, thank you very much, Chairman. 

Thank you for holding this hearing. And thank you to our two witnesses and as well as the second panel. 

32 

But thank you, Chairman Leibowitz and Administrator 

Strickling. It is great to be here with you on an important topic. 

And I wanted to focus a little bit on websites with teens and children maybe because I walked into my daughter’s room last night 

and she was webcasting with her friend. And luckily they were 

working on their homework. And the interview she’s doing with 

Senator Murkowski which will be I’m sure, devastating to Senator 

Murkowski. 

But I wanted to ask you a few questions on this. A recent Wall 

Street Journal article examined 50 websites popular with teens and 

children to see what tracking tools they installed on a test computer. As a group the sites used over 4,000 cookies, beacons and 

other pieces of tracking technology. That it actually 30 percent 

more than were found in a similar analysis of adult websites which 

is rather disturbing I think that there were more of these being 

used on children’s websites. 

Can you describe your agency’s experiences dealing with tracking 

of children and teens online? And what do you think needs to be 

done here? 

Mr. LEIBOWITZ. Well, I think there’s no doubt that there’s an extraordinary amount of monetizing of teen information. As you 

know, from your daughter, who I believe is a very responsible 15 

year old. And I know from my children that they spend a lot of 

time online. 

And so one of the recommendations in our report discusses the 

need for a kind of enhanced consent for children. We’re taking comments on that. 

But of course one of the other issues with teens is often, they act 

impulsively. They put things online that they never expect will remain there. When a privacy policy of a social network switches 

from something that protects privacy to something that has less 

privacy protections sometimes kids don’t realize or teens don’t realize that a lot of information that they thought was private will be 

put online. 

So it’s a very important issue for us. And we are studying it. 

Senator KLOBUCHAR. OK. Anything you would like to add, Administrator? 

Mr. STRICKLING. No. 

Senator KLOBUCHAR. As we talk about privacy I wondered Chairman Leibowitz, if the FTC has looked into the issue of privacy notifications on smartphones. As you can imagine those are smaller letters and harder to read, yet they access the same type of information and also have the same kind of privacy concerns as other larger computer screens. 

Mr. LEIBOWITZ. Well, I believe in our report we looked at mobile 

phones. We’ve done a number of hearings on mobile issues because, 

you’re right. In terms of privacy policies they’re much harder to 

read. In terms of applications for children, of course, you wrote to 

us about a particular application. And we were glad to see that the 

alleged malefactors have improved their app standards. 

These are all very, very important issues and particularly in the 

mobile space. We’re going to try to see how we can encourage more 

consumer choice and more transparency. So few people and certainly so few children understand the terms of service. You need 

33 

to have easy-to-understand terms of service for children or parents 

who have a lot of information that’s taken from kids and that’s 

placed online—information that perhaps parents wouldn’t want 

their kids to share, and kids or teens may not want to share themselves. 

Senator KLOBUCHAR. Administrator? 

Mr. STRICKLING. I think what I’d like to say in response to both 

of the examples you’ve given is the fact that it’s impossible for us 

to predict today what the privacy issue is going to be 6 months or 

12 months from now. And that’s why the framework that the Administration is proposing for legislation to use codes of conduct that 

will be prepared by this multi-stakeholder group of industry is very 

important because it gives you the speed and the flexibility to respond to these types of issues when they arise. If we’re chasing 

after these issues and trying to write regulations in a more formal 

way that perhaps take a year to write, we can’t possibly stay up 

on the issues that arise. 

Senator KLOBUCHAR. So the argument—yes. 

Mr. STRICKLING. And so overall I think this again is further demonstration of the need to have an industry-based, actually a full 

multi-stakeholder process to work on these codes of conduct and to 

deal with these issues when they arise. And indeed that in effect 

is what, you know, Chairman Leibowitz and the FTC are doing on 

an individual issue basis, is assembling the parties to get them to 

talk about these issues and nudging them in the right direction. 

And I think that’s the appropriate model we want going forward. 

Senator KLOBUCHAR. I think that’s the name of Cass Sunstein’s 

book—Nudge. Mr. LEIBOWITZ. Nudge. 

Senator KLOBUCHAR. So that’s all—— 

Mr. LEIBOWITZ. Not noodge, not noodge. Nudge. Senator KLOBUCHAR. It looks like you want to add something. 

But I just want—Chairman Leibowitz, but I wanted to follow up 

on that. It would seem to me just one of the problems is, as we all 

know under the best circumstance it takes so long for us to get 

these laws done. So clearly if we can get these voluntary codes of 

conduct that would respect the development of the technology and 

also not interfere with the development of the technology would be 

key as long as we actually get these voluntary codes of conduct. 

Mr. Chairman? 

Mr. LEIBOWITZ. Yes. And I wanted to check to our Bureau Director to make sure I could say this. We have multiple investigations 

going on of inadequate notice on mobile and to kids. And apparently in one of the investigations we’re doing, the privacy notice on 

mobile was 151 or 152 clicks or screens away. 

[Laughter.] 

Mr. LEIBOWITZ. So I think the reasonable consumer will not—— 

Senator KLOBUCHAR. You’re kidding. So you mean if they wanted 

to find the privacy notice they had to click 152 times to get to the 

window that—— 

Mr. LEIBOWITZ. 106 or 107 because the first time you may not 

have to click. But yes. 

Senator KLOBUCHAR. OK. Well I get it. Well, thank you for clarifying that for the record. 

34 

[Laughter.] 

Senator KLOBUCHAR. Alright. Thank you to both of you. And I 

appreciate the way that this is moving. I think it’s the right way. 

Thank you. 

Senator PRYOR. Thank you both for joining us today. There are 

several Senators who either had to come and go or expressed an 

interest in being here. And probably we’ll leave the record open for 

a couple weeks to allow Senators to ask questions. We’d appreciate 

a quick response. 

But thank you all for being here today. And I’ll go ahead and introduce our second panel. 

Mr. LEIBOWITZ. Thank you, Mr. Chairman. 

Senator PRYOR. Oh, thank you very much. Thank you. 

We’ll go ahead and bring up our second panel. And the staff as 

always will do a quick switch, switcheroo here. And bring the second panel forward with their name tags. 

And as they are doing this what I’ll do is I’ll go ahead and introduce the members of the second panel. And then once they get situated I’ll just call on them as we go down the row. 

First would be Erich Andersen, Vice President and Deputy General Counsel of Microsoft. 

Second will be John Montgomery, Chief Operating Officer of 

GroupM Interaction. 

Third will be Ashkan Soltani, Researcher and Consultant. 

Fourth will be Barbara Lawler, Chief Privacy Officer for Intuit. 

And the fifth, last but certainly not least, will be Chris 

Calabrese, Legislative Counsel with the American Civil Liberties 

Union. 

So as we’re getting set up here. And I see water is getting poured 

and charts are getting established. Just one moment we will go 

ahead and call on Mr. Andersen whenever we are ready. So, Mr. 

Andersen, go ahead. 

STATEMENT OF ERICH D. ANDERSEN, 

DEPUTY GENERAL COUNSEL, MICROSOFT CORPORATION 

Mr. ANDERSEN. OK. Thank you, Mr. Chairman. 

Mr. Chairman and honorable members of the Committee, my 

name is Erich Andersen and I’m the Deputy General Counsel of 

Microsoft’s Windows Division. Thank you for inviting me to testify 

today about the state of online privacy. We applaud the leadership 

that the Committee has shown on this issue. 

I also want to endorse Assistant Secretary Strickling’s call for 

federal privacy legislation. 

Legislation can be an important component of a multipronged approach to privacy but also includes technology tools, industry initiatives and consumer education. At Microsoft consumer trust is vital 

to our business. And privacy is a critical component to earning and 

maintaining that trust. In all our service offerings we strive to be 

transparent about our privacy practices, offer meaningful privacy 

choices and protect the security of the data that we store. 

In my role for the Windows Division, I’ve worked with our software team to develop privacy enhancing features for Windows and 

Internet Explorer. We have groups working on similar efforts 

throughout Microsoft including for our Bing search engine, Xbox 

35 

gaming platform and our advertising services. The different ways 

that we engage with consumers give us a unique perspective on the 

privacy discussion. In light of our experience we believe that a combination of technology tools, industry initiatives, consumer education and legislation is needed to protect privacy and promote innovation. 

Let me briefly explain the importance of technology. At Microsoft 

we have implemented privacy by design. We engineer privacy into 

our products and services from the outset. And we consider privacy 

throughout the product life cycle. 

One example of where we put this principle into practice is the 

privacy features we’ve developed for Internet Explorer. The most 

recent version of Internet Explorer, IE 9 was released this week. 

And it offers a ground breaking new tool called tracking protection. 

This Do Not Track feature allows consumers to decide which 

sites can receive their data and blocks content from sites that they 

view as engaged in tracking providing consumers with greater control over their online experiences. We’re very proud that Internet 

Explorer was the first major browser to respond to the FTC’s recent call for a Do Not Track mechanism. We look forward to working with all stakeholders to implement Do Not Track tools in a 

meaningful way for consumers and businesses alike. 

Industry initiatives can be effective in complementing technology 

tools. For instance, we’ve long partnered with the Network Advertising Initiative to develop principles governing online behavioral 

advertising. We’re continuing to collaborate with members of the 

Digital Advertising Alliance and others in the advertising industry 

to implement guidelines and best practices to help ensure that consumers understand and can easily opt-out of behavioral advertising. 

The third element of a comprehensive approach to privacy is consumer education. We agree with the FTC and the Commerce Department that consumers need a better understanding of data practices. That’s why we provide consumers with clear information 

about our own practices and offer choices about what data will be 

collected and how it will be used. We’ve also partnered with consumer advocates and government agencies to develop educational 

materials on consumer privacy and data security. 

The last critical element is federal privacy legislation. Legislation 

is needed because the current sectoral approach to privacy regulation is confusing to consumers and it’s costly for businesses. We believe that legislation should establish a common set of privacy and 

security requirements that are not specific to any one technology, 

industry or business model. 

For particular industries or business models industry initiatives 

should co-exist with or should build on top of the baseline obligations of the law. Online advertising is a perfect example. Baseline 

federal privacy requirements around user notice, control and security can complement industry initiatives and innovative technology 

tools. 

In conclusion, Microsoft is committed to working with you to protect consumer privacy in a way that complements technical and industry based measures and promotes continued innovation. Thank 

36 

1Kristen Schweizer, U.S. Web Advertising Exceeds Newspaper Print Ads in 2010, eMarketer 

Says, BLOOMBERG (Dec. 20, 2010), http://www.bloomberg.com/news/2010-12-20/u-s-web-ads-exceed-newspaper-print-ads-in-2010-emarketer-says.html. 2 Hamilton Consultants, Inc., Economic Value of the Advertising-Supported Internet Ecosystem 

4 (June 20, 2009), http://www.iab.net/media/file/Economic-Value-Report.pdf. 

you for giving us this opportunity to testify today. I look forward 

to answering any questions you may have. 

[The prepared statement of Mr. Andersen follows:] 

PREPARED STATEMENT OF ERICH ANDERSEN, DEPUTY GENERAL COUNSEL, 

MICROSOFT CORPORATION

Chairman Rockefeller, Ranking Member Hutchison, and honorable Members of 

the Committee, my name is Erich Andersen, and I am Deputy General Counsel of 

Microsoft’s Windows Division. Thank you for the opportunity to share Microsoft’s 

views on an issue that needs the attention of Congress and the work of this Committee: the adoption of meaningful privacy legislation that protects individuals’ privacy while complementing technological and industry-based measures and promoting continued innovation. We appreciate the leadership that the Committee has 

shown on this issue, and we are committed to working collaboratively with you, the 

Federal Trade Commission, the Department of Commerce, consumer groups, and 

other stakeholders to achieve this important balance. 

In my role for the Windows Division, I have worked with our software team to 

develop privacy-enhancing features and tools for Windows and Internet Explorer. 

We have teams working on similar efforts throughout Microsoft—for instance, in the 

Bing search team, the online advertising division, the Xbox group, and our cloud 

computing group. Our goal across Microsoft is to build trust with consumers by giving them the tools they want to make them productive and enrich their computing 

experience. Privacy is a critical component of earning and maintaining that trust. 

In all of our service offerings, we strive to be transparent about our privacy practices, offer meaningful privacy choices, and protect the security of the data we store. 

The multiple contexts in which we engage with consumers give us a unique perspective on the privacy discussion. For example, as a website operator, an ad network, and a browser manufacturer, we have a deep understanding of the roles that 

different participants in the digital ecosystem play in safeguarding consumer privacy. Also, based on our longstanding involvement in the privacy debate, we recognize that the combined efforts of industry and government are required to effectively 

balance the need to protect consumers’ privacy interests and promote innovation. In 

light of our experience, we recommend a multi-pronged approach that includes legislation, industry self-regulation, technology tools, and consumer education. 

Today, I will explain why we believe that each of these four elements is important 

for protecting consumer privacy, and I will highlight steps that Microsoft has taken 

in each area. But first I would like to start with a discussion of how technology has 

reshaped consumers’ engagement online and their privacy expectations. 

I. Protecting Privacy While Enabling Innovation 

The explosive growth of the Internet, cloud computing, the proliferation of computers and handheld mobile devices, and the expansion of e-commerce, e-government, e-health, and other web-based services have brought tremendous social and 

economic benefits. At the same time, however, technology has fundamentally redefined how, where, and by whom data is collected, used, and shared. The challenge 

that industry and government must address together is how to best protect consumers’ privacy while enabling businesses to develop a wide range of innovative 

products and services. 

Consider, for example, online advertising. Online advertising is the fuel that powers the Internet and drives the digital economy. Over $25 billion was spent on online advertising in 2010.1 Millions of websites are able to offer their content and 

services for free because of the revenue they derive from advertising online. For 

small and medium-sized businesses in particular, online advertising has created 

new opportunities to inform consumers about their products and services. One study 

estimates that the advertising-supported Internet ecosystem is responsible for creating 3.1 million American jobs, and that the dollar value of these wages totals approximately $300 billion.2 Consumers also benefit—not only because online advertising enables the free services and content they enjoy, but because the ads they 

see are more likely to be relevant. Simply put, the richness and vibrancy of the modern Internet experience is due in large part to the success of online advertising. 

37 

3Samuel D. Warren & Louis D. Brandeis, The Right to Privacy, 4 HARV. L. REV. 193, 193 

(1890). 4See Emily Steel, Microsoft Executive Urges Online Ad Industry to Police Itself, WALL ST. J. 

DIGITS BLOG (Feb. 28, 2011, 6:28 PM), http://blogs.wsj.com/digits/2011/02/28/microsoft-executive-urges-online-ad-industry-to-police-itself/ (referencing comments by Rik van der Kooi, corporate vice president of Microsoft’s Advertiser & Publisher Solutions group, at the annual leadership meeting of the Interactive Advertising Bureau). 5See generally Fed. Trade Comm’n, Preliminary Staff Report, Protecting Consumer Privacy in 

an Era of Rapid Change: A Proposed Framework for Businesses and Policymakers (Dec. 1, 2010) 

[hereinafter FTC Staff Report]; Internet Policy Task Force, Dep’t of Commerce, Commercial 

Data Privacy and Innovation in the Internet Economy: A Dynamic Policy Framework (Dec. 16, 

2010) [hereinafter Commerce Report]. As we noted in comments filed with the FTC and the 

Commerce Department, we applaud the Commission’s and Department’s efforts to develop a robust privacy framework that will withstand rapid technological advances while fostering innovation. 6Lee Gomes, The Hidden Cost of Privacy, FORBES, June 8, 2009, available at http:// 

www.forbes.com/forbes/2009/0608/034-privacy-research-hidden-cost-of-privacy.html. 

The collection of data to serve ads on the Internet also has important privacy implications. When Justice Louis Brandeis famously defined privacy as ‘‘the right to 

be let alone’’ in 1890,3 he could not have foreseen how technology would revolutionize our world. An individual planning a trip to Boston can now go online to compare airfares, book a hotel room, map out restaurant recommendations that are convenient to her itinerary, and poll her network of friends for suggestions about things 

to do during her trip. Every day, people generate billions of page views, transactions, downloads, and search queries—a mountain of data, across a myriad of different devices, that reveals valuable information about users’ interests. As one of 

Microsoft’s senior executives recently recognized, industry can and must do better 

in addressing the fact that consumers often do not understand the ways in which 

their data is bought, sold, bartered, exchanged, traded, and used.4

In the digital era, privacy is no longer about being ‘‘let alone.’’ Privacy is about 

knowing what data is being collected and what is happening to it, having choices 

about how it is collected and used, and being confident that it is secure. These three 

principles—transparency, control, and security—underpin Microsoft’s approach to 

privacy. They are also essential components of the thoughtful privacy frameworks 

recently advanced by the Federal Trade Commission (FTC) and the Department of 

Commerce.5 We believe that the principles of transparency, control, and security 

should inform legislative, self-regulatory, technological, and educational initiatives 

to safeguard consumer privacy. 

II. A Role for Congress and Comprehensive Privacy Legislation 

As we focus on what can be improved, it is important to note that in the past 

year, significant progress has been made toward protecting individuals’ privacy: 

technological solutions to empower consumers to control their personal information 

are now widely available, consumers are much more educated about the nature and 

scope of privacy risks, enforcement actions have been taken by the FTC, and legitimate industry practices are becoming better and more consistent. Federal legislation 

can be an effective complement to this strategy, providing an additional layer of protection for consumers and another tool for enforcement officials. 

Historically, Congress has played an active role in protecting consumers online. 

Beginning in the late 1990s, Congress passed laws aimed at specific online harms 

and revised existing laws to account for the evolving ways in which technology was 

being used to collect, use, and share personal information. Examples include the 

Children’s Online Privacy Protection Act of 1998, the privacy and security provisions 

for financial information in 1999’s Gramm-Leach-Bliley Act, the CAN–SPAM Act of 

2003, and the breach notification provisions for protected health information that 

were included in 2009’s Health Information Technology for Economic and Clinical 

Health Act. Congress (and this Committee in particular) has also scrutinized important privacy-related issues such as online advertising, data security and breach notification, privacy in connection with broadband providers, spyware, and children’s online safety. 

Although the progress that has been made is notable and should not be overlooked, our view since 2005 has been that Congress should take the next step and 

enact comprehensive Federal privacy legislation. One of the key problems with the 

current sectoral approach to privacy regulations is that it makes compliance a complex and costly task for many organizations. According to one estimate, by 2009 

there were over 300 Federal and state laws relating to privacy.6 The sector-specific 

approach also creates confusion among consumers, and can result in gaps in the law 

for emerging sectors or business models. 

38 

What industry needs is Federal privacy legislation that sets forth baseline privacy 

protections for transparency, consumer control, and security that are not specific to 

any one technology, industry, or business model. Privacy protections that apply 

across sectors would provide consistent baseline protections for consumers, and simplify compliance for businesses that increasingly operate across those sectors. Baseline privacy protections would also promote accountability by ensuring that all businesses use, store, and share commercial data in responsible ways, while still encouraging companies to compete on the basis of more robust privacy practices. In addition, legislation would create legal certainty by preempting state laws that are inconsistent with Federal policy. 

Microsoft is pleased to see that members in both chambers of Congress are taking 

up the issue of comprehensive privacy legislation in the current congressional session, and we also find it encouraging that some of these initiatives appear to have 

early bipartisan support. As these proposals advance through the legislative process, 

we note that any privacy legislation should be crafted with two goals in mind. First, 

the legislation must protect consumers’ privacy and data security while enabling innovation and facilitating the productivity and cost-efficiency offered by new business 

models and computing paradigms. Second, the legislation should create privacy protections that can withstand the rapid pace of technological change so that consumer 

data is protected not only today, but also in the decades to come. 

To achieve these two ends, any proposed legislation should be tested against certain fundamental criteria, among them: 

• Flexibility. The legislation should permit businesses to adapt their policies and 

practices to match the contexts in which consumer data is used and shared and 

be sufficiently flexible to allow technological innovation to flourish. 

• Certainty. The legislation should provide businesses with certainty about 

whether their privacy policies and practices comply with legal requirements. 

• Simplified data flows. The legislation should seek to facilitate the interstate 

and international data flows that are necessary to enable more efficient, reliable, and secure delivery of services, including through harmonizing international privacy regimes and preempting a patchwork of state privacy laws. 

• Technology neutrality. The legislation should avoid preferences for particular 

services, solutions, or mechanisms to provide notice, obtain choice, or protect 

consumer data. 

• Focus on substantive outcomes. Instead of imposing prescriptive rules that may 

be of limited effect or that may burden businesses without yielding commensurate privacy benefits, the legislation should set privacy goals based on criteria 

established in current public policy, then permit businesses to adopt methods 

and practices to reach those goals in a manner that best serves their business 

models, technologies, and the demands of their customers. 

We look forward to continuing to work with this Committee to craft legislation 

that meets these criteria. 

III. A Role for Industry Self-Regulation and Best Practices 

Legislation, while important, is only part of the solution. Legislation is an appropriate vehicle for setting baseline standards, but it must work in conjunction with 

industry self-regulation and best practices, technology solutions, and consumer education. 

Industry self-regulation is a useful complement to legislation for two reasons. 

First, self-regulatory efforts can easily be tailored to the particular context in which 

data about individuals is collected and used. Consumers have different privacy expectations depending on whether they are interacting with retailers, application developers, social media platforms, search engines, Internet service providers, publishers, advertisers, ad networks, or data exchanges. Effective privacy protections 

should take into account consumers’ reasonable expectations of privacy, and industry self-regulation offers a flexible tool for doing so. Second, self-regulatory efforts 

are generally well-positioned to keep pace with evolving technologies and business 

models. There is no question that technology, business models, and consumer adoption of online services will continue to change—and change rapidly. A decade ago, 

few consumers were publicly sharing their personal photographs and home videos, 

but today consumers regularly post these materials on social networking and online 

video websites without hesitation because they believe such services are valuable. 

In 2003 Facebook was just an idea in the mind of a Harvard undergraduate, but 

today there are companies whose entire business model is built around developing 

applications for Facebook and other social media platforms. 

39 

7 Both the FTC’s proposed framework and legislation currently moving through Congress recognize the importance of a robust privacy by design program. We support these efforts to encourage industry to incorporate privacy protections into their data practices and to develop comprehensive privacy programs. 8See FTC Staff Report 66 (‘‘Commission staff supports a more uniform and comprehensive 

consumer choice mechanism for online behavioral advertising, sometimes referred to as ‘Do Not 

Track.’ . . . 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.’’) 

Given the complex and dynamic nature of the online ecosystem, crafting workable 

solutions requires engagement from multiple stakeholders. Microsoft has a history 

of working collaboratively with other companies to develop appropriate solutions 

that build on the principles of transparency, control, and security. For example, 

Microsoft is a strong supporter of the Self-Regulatory Program for Online Behavioral Advertising, which includes an educational website where consumers can learn 

about online advertising and choose not to have their information used for behavioral advertising. Additionally, data security is one of the focal points of the Program: participating organizations must agree to provide appropriate security for, 

and limit their retention of, data collected and used for behavioral advertising. In 

our multiple roles as a browser manufacturer, ad network, and website operator, we 

are coordinating with the Interactive Advertising Bureau and other participants in 

the Self-Regulatory Program to ensure that this important initiative is effective, enforceable, and broadly accepted. Consistent with our commitment to responsible industry leadership, we are also working at the World Wide Web Consortium, the 

standards-setting body for the Web, to develop an industry consensus about technical standards that can implemented across browsers to enable common tools for 

consumers to block tracking activities by third parties. 

Transparency, control, and security are also essential concepts in Microsoft’s Privacy Guidelines for Developing Software Products and Services, which are based on 

our internal privacy standards. We make these standards publicly available at 

http://www.microsoft.com/privacy for other organizations to use when developing 

and guiding their own product development processes. To encourage industry to 

adopt these guidelines, we have taught courses for others in industry to educate 

them on the standards. 

IV. A Role for Technology Solutions 

As a technology company, we naturally believe that technology has a key role to 

play in protecting consumer privacy. To ensure that we engineer privacy into our 

products from the outset and consider privacy issues throughout the project 

lifecycle, we have implemented internal policies and procedures that advance key 

principles such as transparency, control, and security.7 For example, in individual 

business groups such as Windows, Office, and Xbox, we have a three-tier system of 

privacy managers, privacy leads, and privacy champs who help make sure that our 

products and services comply with our standards and applicable privacy laws. We 

also have a dedicated Trustworthy Computing team that works with business 

groups across the company to ensure that their products and services adhere to 

Microsoft’s security and privacy policies. Although my colleagues in other divisions 

would be delighted to provide you with details about our initiatives for Bing, Kinect, 

and other products and services, I want to focus on our industry-leading browser, 

Microsoft’s Internet Explorer. 

Internet Explorer has really been a pioneering technology for protecting consumer 

privacy online. It was the first browser to introduce InPrivate Browsing, a feature 

that prevents a consumer’s browsing history, temporary Internet files, form data, 

cookies, and usernames and passwords from being retained by the browser, thereby 

leaving virtually no evidence of the consumer’s browsing history. Another feature in 

Internet Explorer 8, InPrivate Filtering, watches for third-party content that appears with high frequency across websites from companies that may be engaged in 

tracking activities, while still allowing consumers to view the content on the sites 

they’ve chosen to visit. 

The InPrivate features were breakthroughs, but what I would like to highlight 

today is that Microsoft was the first of the major browser manufacturers to respond 

to the FTC’s recent call for a persistent, browser-based ‘‘Do Not Track’’ mechanism.8

The version of our browser that is being released this week, Internet Explorer 9, 

will offer an innovative new feature, ‘‘Tracking Protection,’’ that allows consumers 

to decide which sites can receive their data and filters content from sites identified 

as privacy threats. Users will be able to create or download Tracking Protection 

Lists that identify websites which are, in the view of the list creator, trustworthy 

40 

9See FTC Staff Report 78–79; Commerce Report 31–36. 

or untrustworthy. If a site is listed as a ‘‘do not track’’ site on a Tracking Protection 

List, Internet Explorer 9 will block third-party content from that site, unless the 

user visits the site directly by clicking on a link or typing its web address. By limiting ‘‘calls’’ to third-party websites, Internet Explorer 9 limits the information these 

third-party sites can collect—without relying on the third-party sites to read, interpret, and honor a do-not-track signal. At the same time, Tracking Protection Lists 

can include ‘‘OK to call’’ entries that permit calls to specific sites, which allows consumers to create exceptions in a given list. 

The Tracking Protection feature is highly customizable and can be adapted to specific user preferences because anyone on the Web (including consumer groups and 

privacy advocates, enterprises, security firms, and consumers) will be able to create 

and publish Tracking Protection Lists—they are simply files that can be uploaded 

to a website and made available to others via a link. Tracking Protection also supports user control: consumers can create or subscribe to more than one list if they 

wish, they can subscribe and unsubscribe to lists as they see fit, and a decision to 

subscribe to a list or lists will enable Tracking Protection across all browsing sessions until the consumer chooses to turn it off. Finally, Tracking Protection was designed with security in mind: because the Web evolves over time and third parties 

might migrate to new domain names, Internet Explorer 9 will automatically check 

for updates to a consumer’s lists on a regular basis, helping ensure that the lists 

address the latest privacy and security threats. 

V. A Role for Consumer Education 

We agree with the FTC and the Commerce Department that there is a need for 

greater consumer education to increase consumer understanding of data practices 

and their privacy implications.9 At Microsoft, we recognize that it is crucial to engage and educate consumers, to give them a voice and build a bridge to mutual understanding and benefit. That is why we provide consumers with clear information 

about our own practices and, where appropriate, offer choices about what data will 

be collected and how it will be used. 

Microsoft was one of the first companies to adopt ‘‘layered’’ privacy notices. The 

Microsoft Online Privacy Statement provides consumers with the most important information about our privacy practices in a concise, one-page upfront summary with 

links to additional layers that describe in more detail our data collection and use 

practices, including the concepts of purpose specification and use limitation. Moreover, as noted above, we offer consumers easy ways to learn about online behavioral 

advertising and the privacy practices associated with the particular advertisements 

they receive, and to opt-out of behavioral advertising if they so choose. 

We have also partnered with consumer advocates and government agencies to develop educational materials on consumer privacy and data security, such as: 

• National Cyber Security Alliance (NCSA). Microsoft is part of this nonprofit 

public-private partnership that offers online safety and security information to 

the public on the http://www.staysafeonline.org website and through educational efforts such as National Cyber Security Awareness Month. 

• GetNetWise. Microsoft supports this public education organization and website 

(www.getnetwise.org), which offers Internet users resources for making informed 

decisions about safer Internet use. 

• Internet Keep Safe Coalition (www.ikeepsafe.org). Microsoft is a part of this 

partnership of Governors, attorneys general, public health and educational professionals, law enforcement, and industry leaders working together for the 

health and safety of youth online. 

• Stop. Think. Connect (http://safetyandsecuritymessaging.org). Microsoft and a 

host of other organizations support this online safety campaign that promotes 

greater awareness and safer behavior on the Web. 

We believe that such initiatives are important for ensuring that consumers understand the importance of protecting their privacy and security online, and are 

equipped with the tools to do so. 

VI. Conclusion 

Thank you for extending us an invitation to share our experience and recommendations with you. We commend the Committee for holding this hearing 

today, and we look forward to working with you to craft meaningful privacy protections that provide transparency, control, and security in a way that honors individVerDate Nov 24 2008 06:38 Mar 19, 2012 Jkt 073308 PO 00000 Frm 00044 Fmt 6633 Sfmt 6621 S:\GPO\DOCS\73308.TXT SCOM1 PsN: JACKIE
41 

uals’ privacy expectations, complements existing technological and industry-based 

solutions, and promotes innovation. 

Senator PRYOR. Thank you. 

Mr. Montgomery? 

STATEMENT OF JOHN MONTGOMERY, 

CHIEF OPERATING OFFICER, GROUPM INTERACTION 

Mr. MONTGOMERY. Senator Pryor, members of the Committee, 

good morning and thank you for the opportunity to testify. 

My name is John Montgomery. I’m the Chief Operating Officer 

of the North American operations of GroupM Interaction. GroupM 

is the world’s leading, full service media investment operation employing over 17,000 employees in 81 countries. Our clients are 

some of the biggest brand advertisers in the world who we advise 

on where to place advertisements most effectively. 

I begin my remarks where I believe the Committee’s examination 

should begin with a review of the tremendous benefits provided by 

online advertising. While the Internet has revolutionized our lives 

in extraordinary and exciting ways and advertising is the fuel for 

the Internet economic engine. Behavioral advertising, also called 

interest based advertising, is an essential practice that delivers advertising based on consumer preferences or interests as inferred 

from data about online activities. 

For example if a browser’s activity suggested the user has a new 

baby we can show offers for baby products rather than retirement 

homes or sports cars. Consumers find such advertisements more 

relevant than random messages and advertisers are more likely to 

attract consumers that are interested in their products and services. 

We at GroupM and our clients strongly believe in protecting consumer privacy. It’s not only the right thing to do, but it’s good for 

business. And I’m excited to share with the Committee the work 

that we’ve done to make sure that the consumers have both transparency and control to exercise their preferences in regard to online 

behavioral advertising. 

GroupM has participated in an unprecedented cross industry effort by leading trade associations and companies that responds to 

the FTC’s report that calls for self regulation on online behavioral 

advertising. This effort is being spearheaded by the leading associations that collectively represent the key elements of the Internet 

ecosystem, more than 5,000 companies in all. The FTC report set 

out a roadmap of key elements that should be included in self-regulation including transparency, consumer control and data security. 

And the major component of the program is the use of an icon that 

informs consumers that interest based advertising is occurring. 

And to help create this icon GroupM mobilized our market leading advertising teams to invest the same design, testing, and market research in this icon as we would use for our Fortune 500 clients. Let me briefly show you how the principle works from a consumer’s perspective. If I could refer you to the boards on my right. 

Aboutads.info is a simple and effective ‘‘one stop’’ platform for 

consumers to opt-out of having their information collected and used 

for behavioral advertising purposes. Consumers can opt-out with 

the click of one button with respect to all participating companies. 

42 

And GroupM and hundreds of leading companies are working to 

advance compliance with the program. 

Two other major elements of our implementation effort are education and enforcement. GroupM has partnered with the Interactive Advertising Bureau on a ‘‘Privacy Matters’’ education campaign to inform consumers about how they can manage their online 

experience and to explain how advertising supports the Internet. 

To date more than 600 million impressions are being delivered as 

part of this campaign. 

And finally I want to emphasize that companies will be held accountable for complying with the principles just as the FTC recommended. All of us in advertising have a strong incentive to 

maintain accountability in order to foster consumer trust. The principles are enforceable through programs being administered by the 

Direct Marketing Association and the Council of Better Business 

Bureaus. These organizations have long-standing effective and respected compliance programs that they are leveraging to cover the 

principles. Any company that claims to comply but fails to do so 

could face FTC enforcement for deceptive acts or practices. 

And whilst our program—whilst our progress has been exciting, 

our work continues. One of the major benefits of industry self regulation is the ability to respond quickly to changes to technology and 

business practices. For example recently, some policymakers have 

raised concerns that data collected for advertising purposes could 

be used as a basis for employment, credit or health insurance eligibility decisions. 

I want to emphasize that these are hypothetical concerns that do 

not reflect actual business practice. But nevertheless industry is 

stepping forward to address these concerns. And we’re expanding 

our guidelines to clarify and ensure that such practices are prohibited and will never occur. 

The self regulatory principles owe much to the guidance of federal policymakers which have strengthened our independent commitment to consumer privacy and uniform choice. Now as you proceed in this dialogue it’s vitally important to avoid mixed messages 

to consumers that could inhibit them from exercising their choice 

to the self-regulatory tool that’s already available. We have to ensure that there’s a single standard to make it simple for consumers. We do not want to add confusion to an already complex 

arena. Now I want to make it clear that we are working with a 

browser company such as Microsoft and Firefox and even Chrome, 

who are a part of the coalition to incorporate self-regulation and Do 

Not Track together. 

So in conclusion, we believe that the program creates the right 

framework that encourages both innovation and privacy bringing 

the benefits for online services and privacy protection to consumers. Thank you, and I look forward to any questions. 

[The prepared statement of Mr. Montgomery follows:] 

43 

1Department of Commerce Internet Policy Task Force, Commercial Data Privacy and Innovation in the Internet Economy: A Dynamic Policy Framework at 1 (December 2010) (hereinafter 

‘‘Commerce Policy Framework’’), available at http://www.commerce.gov/sites/default/files/documents/2010/december/iptf-privacy-green-paper.pdf. 2 Hamilton Consultants, Inc. with Professors John Deighton and John Quelch, Economic Value 

of the Advertising-Supported Internet Ecosystem, at 4 (June 10, 2009), available at http:// 

www.iab.net/media/file/Economic-Value-Report.pdf. 

PREPARED STATEMENT OF JOHN MONTGOMERY, CHIEF OPERATING OFFICER, 

NORTH AMERICA, GROUPM INTERACTION

I. Introduction 

Chairman Rockefeller, Ranking Member Hutchison, and members of the Committee, good morning and thank you for the opportunity to speak at this important 

hearing. 

My name is John Montgomery and I am the Chief Operating Officer for the North 

American operations of GroupM Interaction (‘‘GroupM’’). Headquartered in New 

York City, GroupM is the world’s leading full-service media investment management operation, employing over 17,000 employees in 81 countries. GroupM is the 

parent company of WPP’s market-leading media communications agencies, including 

Maxus, MEC, Mindshare and Mediacom. Our clients are major global companies 

with brands that are household names. In the simplest terms, we advise clients on 

how to use advertising and where to place advertisements most effectively. Our 

business is built on the belief that both consumers and companies benefit when advertising provides timely and relevant information to those consumers who are most 

likely to be interested. While this philosophy is not new or unique to the Internet, 

online advertising has given us new tools to help our clients. 

We at GroupM strongly believe in protecting consumer privacy. It is not only the 

right thing to do, but it is also good for business. We want to build consumer trust 

in the online experience, and therefore we believe that consumers should be able 

to choose whether and how their data is collected or used for online behavioral advertising. Our clients also want to provide these choices to maintain the confidence 

of their customers. Global companies work hard every day to protect their brands, 

and they recognize that their customers may have different preferences about online 

advertising. 

My testimony today will describe how we have worked successfully with other industry leaders to give consumers these choices, and to create easy, uniform, and effective tools for them to exercise their choices. Our contributions illustrate the industry-wide collaboration and support behind this self-regulatory effort, which are 

truly impressive given our highly competitive marketplace. 

II. Online Advertising Benefits Consumers and the Economy 

I begin my remarks where I believe the Committee’s examination should begin— 

with a review of the tremendous benefits provided by online advertising, especially 

behavioral advertising. 

It is impossible to overstate the economic importance of the Internet today. Even 

in difficult times, e-commerce has continued to grow, thrive, and employ millions of 

Americans. The Internet is now the focus and a symbol of the United States’ famed 

innovation, ingenuity, inventiveness, and entrepreneurial spirit, as well as the venture funding that follows. The Internet has already revolutionized our lives, and it 

continues to evolve in extraordinary and exciting ways. And as the Department of 

Commerce recently concluded, thus far the United States’ approach to Internet policy has enabled the digital economy to flourish.1

Advertising helps to fuel the Internet economic engine. Revenues from online advertising support and facilitate e-commerce and subsidize the cost of content and 

services that consumers value, such as online newspapers, blogs, social networking 

sites, e-mail, and phone services. Because of advertising support, consumers can access a wealth of online resources for free or at a low cost. These resources have 

transformed our daily lives. Imagine parents who discover their child is sick at two 

o’clock in the morning. They can go online to look up basic medical information or 

find directions to the nearest doctor’s office or emergency room. The Internet is now 

so established that we tend to take these resources for granted, but in fact they are 

largely supported by advertising. 

Online advertising is equally vital to established businesses and new start-up 

companies. A study commissioned by the Interactive Advertising Bureau estimated 

that some three million Americans are employed due to the advertising-supported 

Internet.2 Online advertising also fosters competition by making it easier for emergVerDate Nov 24 2008 06:38 Mar 19, 2012 Jkt 073308 PO 00000 Frm 00047 Fmt 6633 Sfmt 6621 S:\GPO\DOCS\73308.TXT SCOM1 PsN: JACKIE
44 

3Federal Trade Commission Staff Report, Self-Regulatory Principles for Online Behavioral Advertising at 47 (February 2009), available at http://www.ftc.gov/os/2009/02/P085400behav 

adreport.pdf. 4 American Association of Advertising Agencies, Association of National Advertisers, Direct 

Marketing Association, Interactive Advertising Bureau, and Council of Better Business Bureaus, 

Self-Regulatory Principles for Online Behavioral Advertising (July 2009), available at http:// 

www.aboutads.info/resource/download/seven-principles-07-01-09.pdf. 

ing businesses to reach potential customers. In turn, these entrepreneurs spur existing market leaders to continue innovating. 

Behavioral advertising is an essential form of online advertising. As the Committee knows, behavioral advertising, also called interest-based advertising, is delivered based on consumer preferences or interests as inferred from data about online 

activities. Consumers are likely to find behavioral advertisements more relevant 

than random messages, and advertisers are more likely to attract consumers that 

are interested in their products and services. For example, if a browser’s activity 

suggests that the user has a new baby, we can show offers for baby products rather 

than retirement homes or sports cars. Websites also benefit because behavioral advertising garners better responses, allowing websites to earn more revenue—and 

support more content and services—for fewer advertisements. 

At the same time, we recognize and respect that some consumers may prefer not 

to receive behavioral advertising. I am excited to share with the Committee the 

work we have done to make sure that consumers have both transparency and control to exercise their preferences in regard to online behavioral advertising. 

III. Industry Self-Regulatory Principles Follow the Federal Trade 

Commission Roadmap 

In February 2009, after an extended deliberative process, the Federal Trade Commission published a Staff Report that called upon industry to ‘‘redouble its efforts’’ 

to create self-regulation of online behavioral advertising.3 The report set out a roadmap of several key elements that should be included in self-regulation, such as 

transparency, consumer control, and data security. The Commission also made clear 

that consumer tools to exercise choice should be easy to use, effective, uniform, and 

ubiquitous. 

In the two years since the Commission’s Staff Report, GroupM is pleased to have 

participated in an unprecedented cross-industry effort by leading trade associations 

and companies to respond to the Federal Trade Commission’s endorsement of selfregulation. This effort has been spearheaded by the American Association of Advertising Agencies, the Association of National Advertisers, the Interactive Advertising 

Bureau, and the Direct Marketing Association, and also includes the American Advertising Federation, the Network Advertising Initiative, and other leading industry 

associations that represent components of the Internet ecosystem. These associations and the companies participating in the self-regulatory effort collectively account for the vast majority of online behavioral advertising. Following the roadmap 

set out by the Commission, we have worked diligently to develop standards, launch 

innovative tools, and educate consumers to make sure they have the choices they 

deserve. 

In July 2009, just 5 months after the Federal Trade Commission’s guidance, our 

coalition announced a groundbreaking set of Self-Regulatory Principles for Online 

Behavioral Advertising.4 The Principles apply across the entire online advertising 

ecosystem. They address all of the key elements called for in the Federal Trade 

Commission’s 2009 Staff Report, namely: 

• Consumer education, 

• Enhanced notice of data practices, 

• Innovative choice mechanisms, 

• Data security, 

• Sensitive data protection, 

• Consent for retroactive material policy changes, and 

• Enforcement. 

The Self-Regulatory Principles prescribe expectations for companies in each of 

these areas. They provide uniform definitions for key terms and include detailed 

Commentary to aid compliance. 

GroupM believes that the Self-Regulatory Principles are comprehensive yet flexible enough to respond to the complex and rapidly evolving online advertising ecosystem. Most importantly, they are supported by all of the major industry stakeholders. We were pleased, therefore, that the Commerce Department’s recent draft 

45 

5 Commerce Policy Framework at 5, 41–44. 

framework on privacy and innovation also favors voluntary and enforceable industry 

codes like our initiative.5

IV. Implementing Self-Regulation: Uniform Choice, Consumer Education, 

and Enforcement 

Since releasing the Principles in July 2009, GroupM and other industry leaders 

have made significant investments in implementing the Principles across the Internet. A timeline of milestones is attached (Attachment 1). The development and 

launch of our Advertising Option Icon has been a key focus of this implementation 

phase, and I am very proud of GroupM’s important contributions in this area. Advertisers who are adopting this icon for their advertisements are finding that the 

icon enhances a company’s brand relating to its privacy stance. The icon is a winwin for consumers and businesses. 

The Federal Trade Commission made clear, and we agree, that consumers should 

get notice of behavioral advertising practices that is uniform, ubiquitous, and ‘‘just 

in time’’ to make decisions. For uniformity, we also agreed that this notice should 

use a special graphic icon that would be memorable to consumers. To assist in the 

creation of this icon, GroupM mobilized our market-leading advertising teams to invest the same design, testing, and market research in this icon that we would use 

for our Fortune 500 clients. Our work was the basis for the Advertising Option Icon 

(Attachment 2), a simple but attention-grabbing graphic that we hope will become 

as universally familiar and recognizable as the recycling logo. 

To make sure this notice is ubiquitous and ‘‘just in time,’’ as recommended by the 

Federal Trade Commission, we reached the innovative solution of embedding the 

icon where data is collected and used for online behavioral advertising. 

Let me briefly review how the Principles work from a consumer’s perspective: 

• First, an advertisement covered by the Principles is identified with the Advertising Option Icon, which appears in the advertisement right where the consumer will notice it (Attachment 3). The icon launched last December and has 

already been served in billions of advertisements, and we expect to reach the 

milestone of one trillion impressions by the end of this year. 

• Clicking the Advertising Option Icon brings up a brief statement about online 

behavioral advertising, with a link to more information and opt-out choices. 

• Interested consumers can click this link to visit AboutAds.info, an industrysponsored website that provides consumer education (Attachment 4) and, most 

importantly, consumer choice (Attachment 5). 

AboutAds.info is a simple and effective ‘‘one stop’’ platform for consumers to optout of having their information collected and used for behavioral advertising purposes. Consumers can opt-out with respect to all participating companies, or they 

can pick and choose which companies may collect and use their data. 

The Federal Trade Commission has recently referred to this type of process as a 

‘‘Do Not Track’’ system. We believe that our program provides ‘‘uniform notice and 

choice.’’ Regardless of what terminology is used, our self-regulatory tools meet all 

of the policy goals that the Commission has publicly set forth. As implementation 

proceeds, no matter where consumers go online, they will see one memorable icon 

that leads to the same familiar and easy-to-use choice mechanism. 

Companies can easily implement this uniform process and become compliant with 

the Self-Regulatory Principles by working with ‘‘approved providers’’ Evidon, 

TRUSTe, and DoubleVerify, which offer technical solutions for compliance. GroupM 

is working with Evidon to advance compliance in all of our offerings and agencies. 

Hundreds of leading companies are already compliant or in the process of complying. 

Two other major elements of our implementation effort are education and enforcement. GroupM is strongly committed to consumer education and has made significant investments in this area. Our goal is to build consumer trust by helping consumers to understand and exercise their choices. 

First, we have partnered with the Interactive Advertising Bureau on the ‘‘Privacy 

Matters’’ educational campaign to inform consumers about how they can manage 

their online experience and to explain how advertising supports the Internet. For 

this campaign, we used catchy and controversial slogans like ‘‘Advertising Is 

Creepy’’ to appeal to the consumers most interested in learning more. As part of this 

unparalleled effort, the Interactive Advertising Bureau’s online publisher members 

have delivered close to 600 million online public service announcements. These announcements link to the ‘‘Privacy Matters’’ website (http://www.iab.net/ 

46 

6Direct Marketing Association Press Release, ‘‘DMA Launches Enforcement for Online Behavioral Advertising’’ (January 31, 2011); Council of Better Business Bureaus Press Release, ‘‘Council Steps Up Enforcement of Interest-Based Advertising,’’ (March 7, 2011). 7 Representative Jackie Speier, ‘‘Do Not Track Our Online Data,’’ Politico (March 4, 2011), 

available at http://www.politico.com/news/stories/0311/50614.html; Jon Leibowitz, ‘‘FTC 

Chairman: ‘Do Not Track’ Rules Would Help Web Thrive—Online commerce and personal privacy are not incompatible,’’ U.S. News (January 3, 2011), available at http://www.usnews.com/ 

opinion/articles/2011/01/03/ftc-chairman-do-not-track-rules-would-help-web-thrive-jon-leibow 

itz. 

privacymatters/), which features fun educational modules on advertising practices 

and safe Web browsing. Through January 2011, the results of this campaign have 

been excellent, with a click-through-rate that is substantially out-performing the 

standard range for public service campaigns. 

GroupM has also supported the industry coalition effort to publicize the Self-Regulatory Principles and associated tools for businesses and consumers. This multifaceted campaign, which supplements the consumer notice provided by the Advertising Option Icon, has included the launch of the AboutAds.info website, community outreach by the participating trade associations, a series of educational 

webinars to assist businesses with coming into compliance with the Principles, and 

the delivery of additional online public service announcements. 

Finally, I want to emphasize that companies will be held accountable for complying with the Principles, just as the Federal Trade Commission recommended. The 

Principles are enforceable through programs being administered by the Direct Marketing Association and the Council of Better Business Bureaus.6 These organizations have longstanding, effective, and respected compliance programs that they are 

leveraging to cover the Principles. The Council of Better Business Bureaus has created a new program and hired additional employees to administer the Principles. 

All of us in the advertising industry have a strong incentive to maintain accountability in order to foster consumer trust. In addition, any company that claims to 

comply, but fails to do so, could face Federal Trade Commission enforcement for deceptive acts or practices. 

V. The Future of Self-Regulation 

As I explained, the Self-Regulatory Principles include all of the elements set out 

in the Federal Trade Commission’s 2009 roadmap. Less than 2 years after the Principles were announced, and thanks to strong investment by the business community, our implementation phase is gaining strong momentum. Every day, we are 

adding more members to the compliance programs, putting more Advertising Option 

Icons out on the Internet, and reaching more consumers with uniform notice and 

choice. 

While our progress has been exciting, our work continues. One of the major benefits of industry self-regulation is its ability to respond quickly to changes in technology and business practices. For example, some policymakers have raised concerns 

that data collected for advertising purposes could be used as a basis for employment, credit, or health insurance eligibility decisions.7 I want to emphasize that 

these are hypothetical concerns that do not reflect actual business practices. Nevertheless, industry is stepping forward to address these concerns and we are expanding our guidelines to clarify and ensure that such practices are prohibited and will 

never occur. This type of adaptability is essential to avoid stifling innovation in the 

complex and dynamic Internet environment. We welcome additional input from policymakers and we are committed to examining any future concerns that may arise. 

The Self-Regulatory Principles owe much to the guidance of Federal policymakers, 

which has strengthened our independent commitment to consumer privacy and uniform choice. As we proceed in this dialogue, it is vitally important to avoid confusing 

or mixed messages to consumers that could inhibit them from exercising their 

choices through the self-regulatory tool that is already available. It is equally important to maintain incentives for the business community, which has already invested 

so much in self-regulation, to come into compliance with the Principles. GroupM and 

our partners look forward to continuing our efforts and working cooperatively with 

the Committee, the Federal Trade Commission, and the Department of Commerce 

as we move forward with implementing the Self-Regulatory Principles for Online 

Behavioral Advertising and discussing these important issues. We believe that this 

program creates the right framework that encourages both innovation and privacy, 

bringing the benefits of online services and privacy protection to consumers. 

47 

*** 

Thank you for inviting me to share GroupM’s perspective on ‘‘The State of Online 

Consumer Privacy.’’ I look forward to answering any questions that the Committee 

may have. 

Attachment 1: Timeline of Industry Effort to Develop and Implement SelfRegulatory Principles for Online Behavioral Adverting 

December 2007 Federal Trade Commission staff releases proposed principles to guide the 

development of industry self-regulation in the area of online behavioral advertising. 

April 2008 Industry leaders file comments on Federal Trade Commission’s proposals 

and convene task force to examine existing self- regulatory efforts. 

October 2008 Industry coalition begins drafting new self-regulatory guidelines. 

February 2009 Federal Trade Commission releases final Staff Report on Self-Regulatory 

Principles for Online Behavioral Advertising 

July 2009 After building support among industry stakeholders, coalition releases 

cross-industry Self-Regulatory Principles for Online Behavioral Advertising 

(‘‘Principles’’) that correspond to the guidelines in the FTC staff report. 

August 2009 Coalition turns to enforcement, operational implementation, and educational planning. 

November 2009 Interactive Advertising Bureau and Network Advertising Initiative lead effort to develop technical specifications for implementing enhanced notice 

through a link in or around an advertisement. 

December 2009 Coalition launches ‘‘Privacy Matters’’ education campaign, which has been 

designed to educate consumers about how they can manage their online experience and to help consumers better understand and appreciate how online advertising supports the Internet. 

January 2010 Coalition announces intention to provide enhanced notice to consumers 

through a link/icon embedded in online behavioral advertisements (or, if 

such notice is not delivered, on the Web page where the behavioral advertisement occurs). 

March 2010 Coalition commences effort to operationalize the Principles, including providing business education webinars, trademarking distinctive Advertising 

Option Icon, and developing an industry- wide Website to deliver consumer 

education, provide information concerning parties engaged in online behavioral advertising, and offer consumer choice. 

October 2010 AboutAds.info Website launches. Companies may register to use the Advertising Option Icon and acquire specific technical guidance for the icon’s implementation and use. 

Coalition selects the first ‘‘approved provider’’ to offer technical solutions for 

compliance with the Principles. 

November 2010 Coalition launches consumer-facing AboutAds,info Consumer Opt-Out Page, 

where consumers may easily opt-out of some or all of the interest-based advertisements they receive. 

December 2010 Coalition selects two additional ‘‘approved provider’’ vendors. 

January 2011 Direct Marketing Association enforcement program goes into effect. 

February 2011 Principles and Communication Advisory Committee convenes to consider 

application of the Principles to mobile platforms, as well as ways to encourage international adoption of the icon and standards consistent with the 

Principles. 

March 2011 Council of Better Business Bureaus enforcement program goes into effect. 

Accountability program selects vendor to provide technical platform to monitor participating companies’ compliance with the Principles. 

48 

Attachment 2. Advertising Option Icon 

Attachment 3. Sample Advertisement with Embedded Advertising Option 

Icon 


316GRPM1.eps 316GRPM2.eps
49 

Attachment 4. About Ads.info Home Page 


316GRPM3.eps
50 

Attachment 5. AboutAds.info Uniform Consumer Choice Page 

Senator PRYOR. Thank you. 

Mr. Soltani? 

STATEMENT OF ASHKAN SOLTANI, 

INDEPENDENT PRIVACY RESEARCHER AND CONSULTANT 

Mr. SOLTANI. Thank you. Senator Pryor and distinguished members of the Committee, thank you for the opportunity to testify 

about online consumer privacy and the state of web tracking. My 

name is Ashkan Soltani. I’m a technology researcher and consultant specializing in privacy and security on the Internet. 

As background I served for a year as a technologist in the Division of Privacy and Identity Protection at the Federal Trade ComVerDate Nov 24 2008 06:38 Mar 19, 2012 Jkt 073308 PO 00000 Frm 00054 Fmt 6633 Sfmt 6601 S:\GPO\DOCS\73308.TXT SCOM1 PsN: JACKIE

316GRPM4.eps
51 

mission. I was also the primary technical consultant on the Wall 

Street Journal’s ‘‘What they know’’ series. I should note the opinions here are my own and don’t reflect the views of my previous 

employers. 

In my testimony I will describe findings from my research about 

the pervasiveness of online tracking. I will discuss the extent to 

which consumers can control unwanted tracking. I will conclude 

with a description of the proposed Do Not Track mechanisms. 

The practice of using third party services is very common on the 

web today. In 2009 I co-authored a study where we found an average of 12 third party trackers on the top 100 most visited websites. 

One site used roughly 100 different trackers. That means when a 

user visits that website 100 unseen entities are notified of that 

visit. 

The very reason why online tracking is effective and why it 

raises privacy concerns is that the third-party entities can monitor 

user’s behavior across multiple, unrelated websites. In our study 

one advertising service could track a user’s web browsing activity 

down to approximately 90 percent of the websites we’ve examined. 

This company is not alone in its reach. Widgets from a single social 

networking company currently gather data across several million 

websites. These companies that were positioned to infer a great 

deal more than just the user’s interests in automobiles or sporting 

goods. This unique vantage point enables them to collect the vast 

majority of a user’s web browsing activity. 

It’s important to point out that online tracking is not limited to 

desktop computers. Mobile devices and smartphones raise unique 

privacy concerns because people always have them on their persons. Application and services running on these devices may have 

the ability to access precise location information providing third 

parties with intimate details about a user’s habits. 

Every major web browser includes a patchwork of privacy-enhancing technologies that are not enabled by default and that are 

often difficult to configure. Worse yet, even when properly configured online tracking companies have consistently devised ways to 

circumvent their function. As a result browser vendors and thus 

consumers are losing this game of privacy Whack-a-Mole. 

Many ad services seek to temper privacy concerns by offering 

users a way to opt-out of behavioral advertising. However these 

opt-outs typically only allow users to opt out of receiving targeted 

ads not opt out of the underlying tracking fully. I don’t think this 

is what most consumers would expect. 

Finally, not all companies that engage in online tracking offer an 

opt-out. By my count only about a quarter of the online trackers 

I’m aware of have existing opt-out mechanisms. 

Today’s consumer choice mechanisms fail to provide users with 

meaningful control. Advocates and industry have been working to 

establish an easy to use tool to control online tracking commonly 

referred to as Do Not Track. Two separate but complementary approaches have been now advanced. And while I won’t discuss them 

in technical detail here, I’m happy to answer any questions you 

might have about them. 

To conclude, online tracking is pervasive on the Internet and it’s 

an issue that’s often difficult for users to understand. Even when 

52 

1My oral and written testimony here today to the Committee represents my own personal 

views, and does not reflect the views of any of the organizations I have consulted or worked 

for in the past. 

they do realize they are being tracked there’s often very little that 

can be done. Consumers need more transparency into who is tracking them online, what information is being collected and how this 

information is being used, shared and sold. 

There is a clear need for better privacy controls to prevent unwanted tracking. And industry has not delivered. To be effective 

privacy protections online will likely require both technology and 

policy working in tandem. 

Thank you for inviting me today. And I hope that my testimony 

here is helpful. I’m grateful that the Committee has invited a technologist to participate since these issues can be deeply technical in 

nature. I look forward to helping you understand these nuances 

that make online tracking such an interesting and yet complex 

issue. 

I’m happy to answer any questions. 

[The prepared statement of Mr. Soltani follows:] 

PREPARED STATEMENT OF ASHKAN SOLTANI,1

INDEPENDENT PRIVACY RESEARCHER AND CONSULTANT

Chairman Rockefeller, Ranking Member Hutchison, and the distinguished members of the Committee, thank you for the opportunity to testify about online consumer privacy and the state of tracking on the Web today. 

My name is Ashkan Soltani. I am a technology researcher and consultant specializing in consumer privacy and security on the Internet. I have more than 15 years 

of experience as a technical consultant to Internet companies and Federal Government agencies. I received my Master’s degree in Information Science from the University of California at Berkeley, where I conducted extensive research and published two major reports on the extent and means of online tracking. Last year, I 

served as a staff technologist in the Division of Privacy and Identity Protection at 

the Federal Trade Commission on investigations related to Internet technology and 

consumer privacy. I have also worked as the primary technical consultant on the 

Wall Street Journal’s What They Know series investigating Internet privacy issues 

on the ground. 

I have been asked to testify about the current state of online tracking from a technical perspective. I will describe the basics of how online tracking works and discuss 

some of my research that demonstrates how pervasive tracking is online today. I 

will then discuss the extent to which consumers are actually aware that they are 

being tracked online and whether they are able to meaningfully control unwanted 

tracking with existing industry-provided and browser-based mechanisms. Finally, I 

will discuss the Do Not Track proposals in light of these findings. 

A. How Online Tracking Works 

As an illustrative example to explain how consumers are tracked online, we can 

step through a typical Web browsing session. A user wants to look up information 

about cholesterol on WebMD, so he types ‘‘www.webmd.com’’ into his browser’s location bar and navigates to a specific page on WebMD’s site focused on cholesterol. 

The browser contacts the WebMD server to retrieve the contents of the page. Much 

of the page’s content will be provided directly by WebMD itself, but some of the content may originate from other entities, such as an advertisement provided by an online advertising service such as Google’s DoubleClick. As a result, although the 

browser’s location bar will show ‘‘www.webmd.com,’’ many other third party entities 

may have a presence on the website, and often it is unclear to the user which content comes from which provider. 

A useful analogy may be to imagine a picture frame that has slots to display a 

number of different photos. WebMD provides the ‘‘frame’’ and a few of the ‘‘photos,’’ 

while the rest of the ‘‘photos’’ are provided by third parties that WebMD has 

partnered with. This practice of embedding content from third party entities is nearly universal on the Web today. As I will explain below, it is primarily these third 

party entities that are capable of tracking users as they browse the Web. 

53 

2 Cookies are text files that can store various types of information. For the purposes of tracking, they typically contain unique descriptors such as user=1234567890 or e-mail=john.doe 

@host.com. 3Web bugs are sometimes also referred to as tracking pixels or web beacons. Web bugs are 

typically used to provide websites with information that will help them understand and optimize 

web usage, and typically track users. 4Of course, some browsers may be shared by multiple users, but often browsers will be used 

primarily by a single user. This is particularly salient in the case of mobile phones, where the 

sharing of devices is less common. 5 Each data point may also reveal the time of each site access and in many cases the user’s 

approximate geographic location based on his IP address. More advanced tracking techniques 

on a single page may be able to determine exactly how the user moves his mouse on the page 

or what text on the page gets highlighted and copied. 

In this example, the WebMD page on cholesterol includes a third party online advertisement that is displayed at the top of the page. As the web browser fetches the 

ad, two things relevant to tracking typically occur. First, the company providing advertisements can attempt to uniquely identify the browser using a variety of technical mechanisms, which I will discuss below. The simplest and most common technique is to use a browser cookie. In this context, a cookie is a file containing a 

unique identifier that is placed on the user’s computer by the third party ad service 

and is transmitted back to the service upon each subsequent ad request.2 Second, the ad service can record detailed information about this interaction. The ad service 

may log the date and time of the ad request, which ad was displayed, and perhaps 

the details about the content of the WebMD page on which the ad was shown. Most 

importantly, the ad service can link all this information to the unique identifier, and 

collect this information together in a consumer data base. 

Some time later, the user checks the weather by browsing to ‘‘www.weather.com.’’ 

It turns out that the same third party ad service used by WebMD is also providing 

ads for the Weather Channel’s site. As an ad loads in the margins of the Washington, D.C. forecast page, the ad service can again uniquely identify the user’s 

browser, using the same cookie file that was previously stored. The ad service can 

now tie the user’s browsing activity between the two sites together—the same 

browser that previously accessed health information about cholesterol also looked up 

the weather forecast in Washington, D.C. As the user continues to browse, this ad 

service can continue to follow the user’s activity on the websites on which it has 

a presence. These activities are the essence of online tracking. 

Web browsing interactions are generally described as being in one of two categories, first party or third party. A first party is typically defined as an entity 

whose site the user knowingly visits and whose Web address appears in the browser’s location bar—in the scenario above, WebMD and then later, the Weather Channel. Users typically interact with a first party by directly typing its Web address 

into the location bar or by browsing to it from another site, for instance, by following 

a link from a search engine or a social network. 

A third party is an entity that provides content that is included on a first party 

site, like the ad service in our earlier scenario. While some third party interactions 

are visible to the user, such as a displayed ad or an embedded video, it may not 

be clear that this content is being provided by someone other than the site they are 

visiting. However, other third party interactions may be invisible to the user. For 

example, a ‘‘web bug’’ is an imperceptible image placed on first party sites, but operated by third parties, for the express purpose of invisibly tracking users.3 These 

third party tracking objects can only appear on a site with the knowledge and consent of the first party. As an example, ads from Google DoubleClick will only appear 

on Weather Channel pages if the Weather Channel explicitly decides to include 

DoubleClick on its site. 

Note also that the same business entity can be both a first party or a third party, 

depending on the context. For instance, if a user browses directly to 

‘‘www.youtube.com’’ to watch online videos, YouTube is a first party. But, if a first 

party site such as CNN.com embeds a YouTube video into one of its stories, 

YouTube is now a third party. 

In our scenario, the ad service uses a standard browser cookie to link together 

two separate user interactions—one on WebMD and the other on the Weather Channel. Even though the cookie by itself does not usually identify the user by name, 

third party trackers are able to build a ‘‘browsing profile’’ that consists of data from 

numerous Web interactions over time from the same user.4 This browsing profile 

has the potential to reveal quite a bit of information about the user’s real world 

identity.5

Despite some claims that these collected browsing profiles are ‘‘anonymous,’’ recent computer science research suggests that it is often quite easy to re-identify 

54 

6 Narayanan, A., & Shmatikov, V. (2008). How to Break Anonymity of the Netflix Prize 

Dataset. In Proc. of 29th IEEE Symposium on Security and Privacy, Oakland, CA, May 2008, 

pp. 111–125. and Ohm, P. Broken Promises of Privacy: Responding to the Surprising Failure 

of Anonymization (2009, August 13). University of Colorado Law Legal Studies Research Paper 

No. 09–12. Available at SSRN: http://ssrn.com/abstract=1450006. 7Krishnamurthy, B. and Willis, C. (2009). On the leakage of personally identifiable information via online social networks. In Proceedings of the 2nd ACM workshop on Online social networks (WOSN ‘09). ACM, New York, NY, USA, 7–12. DOI=10.1145/1592665.1592668 from 

http://doi.acm.org/10.1145/1592665.1592668. 8Gomez, J., Pinnick, T., and Soltani, A. (2009, June 1). KnowPrivacy available at http:// 

knowprivacy.org/report/KnowPrivacylFinallReport.pdf, p.26. 9 Id. p. 27. 10 Constine, J. (2011, February 27). All of Facebook’s Like Buttons on Third-Party Sites Now 

Publish a Full News Feed Story. Inside Facebook—Tracking Facebook and the Facebook Platform for Developers and Marketers from http://www.insidefacebook.com/2011/02/27/like-button-full-story/. 11Parr, B. (2010, October 26). 10,000 Websites Integrate with Facebook Every Day. Social 

Media News and Web Tips—Mashable—The Social Media Guide. from http://mashable.com/ 

2010/10/26/10000-websites-integrate-with-facebook-every-day/. 12The Wall Street Journal reported that 47 of the 101 third party mobile applications tested 

transmitted location to third parties. 56 of the same apps transmitted unique device identifiers 

(UDIDs) which act similar to permanent cookies, and which users currently have no control 

over. See Thurm, S. (2011, December 17). IPhone and Android Apps Breach Privacy—WSJ.com. 

The Wall Street Journal from http:// online.wsj.com/article/SB1. 13Three in five mobile phone owners say they carry their phones at all times, even inside the 

home. See: Stanton, D. (2008, September 8). New Study Shows Mobile Phones Merging New, 

Established Roles. Knowledge Networks from http://www.knowledgenetworks.com/news/releases/2008/091808lmobilephones.html. 

datasets that contain user information.6 As the number of data points in a browsing 

profile increases, so too does the possibility that it can eventually be re-identified 

to reveal the user’s actual identity, such as a name, e-mail address, or other personally identifiable information. For example, when a user purchases a product online, 

the merchant could decide to share the user’s e-mail address—collected in the billing 

process—with a third-party ad service that is present on the purchase page. This 

issue can also arise with the use of social networks, whereby identifying information 

may leak to third party ad services.7

1. The State of Online Tracking 

The practice of using third party services to add tracking and other functionality 

to a website is quite common. In our Berkeley KnowPrivacy study, we found an average of 12 trackers present on each of the top 100 most popular websites, with one 

having as many as 100 different trackers over the course of a month.8 This means 

that when a user visits that website, potentially 100 entities—nearly all unseen by 

the user—will learn about the visit. 

The very reason why online tracking is both effective and why it raises privacy 

concerns is that third party entities can track consumers across multiple unrelated 

first party websites. In our Berkeley study, we also found that some third party 

trackers have an extensive ‘‘reach’’ across a large number of first party sites. One 

advertising company was able to monitor activity on 91 of the top 100 most popular 

sites, as well as 88 percent of 350,000 sites sampled in our dataset, as of March 

2009.9 In 2010, a leading social network announced that their third party sharing 

widgets were present on 2.5 million websites10 and growing at a rate of 10,000 sites 

per day.11 In both these examples, the presence of third party objects generates a 

steady stream of data that flows to a single entity. These uniquely pervasive positions give these companies the capacity to infer a great deal more than just a user’s 

interest in automobiles or sporting goods. Their tracking technologies reach the vast 

majority of every user’s Web browsing activity. 

It is important to point out that online tracking is not limited to Web browsers. 

Consumers are connecting to the Internet using a variety of devices that extend beyond what we consider a typical PC-and-browser setup. Mobile phones, televisions, 

set top boxes (such as a Tivo or a cable box), video game consoles and even some 

automobiles are now equipped with Internet connectivity and can leverage Web 

services which include online advertisement. Some of these platforms also allow applications written by third parties, the most prominent example being ‘‘app stores’’ 

on mobile smartphones.12 Mobile devices, in particular, raise unique privacy concerns because consumers carry them nearly all of the time.13 As such, applications 

and services running on the phone may have the ability to access precise geolocation 

information, using GPS technology, to learn even more intimate details about a consumer’s physical habits. 

55 

14Soghoian, C. (2010, December 9). Why Private Browsing Modes Do Not Deliver Real Privacy, Internet Architecture Board, Web Privacy Workshop, from http://www.iab.org/about/ 

workshops/privacy/papers/christopherlsoghoian.pdf. 15 Not all browsers implement third party cookie blocking in the same way. Typically browsers 

allow third party cookies by default but if a user elects to configure their browser to block third 

party cookies, 3 of the 4 major browsers allow the third party cookies to be read if they were 

previously set, such as in a first party context. This is a small technical nuance, but it allows 

certain players to proceed as normal with regards to online tracking and potentially cause confusion for consumers as to the degree their privacy is protected. Additionally, it significantly effects whether certain players, i.e., those that consumers have a first party relationship with, receive a competitive advantage over the lesser known websites. 16Soltani, A., Canty, S., Mayo, Q., Thomas, L., and Hoofnagle, C., Flash Cookies and Privacy 

(2009 August 10). Available at SSRN http://ssrn.com/abstract=1446862. 17 Adobe has denounced the use of its Flash technology in order to restore tracking cookies. 

Although not yet widely deployed, the company has recently taken steps to work with major 

browser vendors in order to move Flash cookie privacy controls directly into the browser settings 

and allow users to manage them in a similar way as standard cookies. See Albanesius, C. (2011, 

March 8). Adobe Flash Player 10.3 Beta Adds Greater Control Over’Flash Cookies’ PC Magazine. from http://www.pcmag.com/article2/0,2817,2381650,00.asp. 18 In the past year, I have confirmed tracking by third party companies on widely used 

websites using mechanisms including but not limited to browser fingerprinting (http:// 

radar.oreilly.com/2011/03/device-identification-bluecava.html), cache cookies (http://www. 

wired.com/epicenter/2009/08/flash-cookie≥researchers-spark-quantcast-change/), CSS history 

profiling (http://blogs.forbes.com/kashmirhill/2010/11/30/history-sniffing-how-youporn-checkswhat-other-porn-sites-youve-visited-and-ad-networks-test≥the-quality-of-their-data/), domain masquerading (http://doi.acm.org/10.1145/1592665.1592668), UDIDs (http://online.wsj.com/article/SB10001424052748704694004576020083703574602.html), and HTML5 storage (http:// 

www.wired.com/threatlevel/2010/09/html5-safari-exploit/) to track consumers in ways that are 

difficult or even impossible to control. 

2. Existing Privacy Tools are Easily Circumvented 

Every major Web browser includes privacy enhancing technologies that can be 

used by consumers to limit the extent to which they are tracked online. Unfortunately, these built-in tools, which include ‘‘private browsing modes’’ and cookie controls, only protect users from some tracking technologies, and do not provide consumers with the privacy protections they may reasonably expect.14

As one example, cookie blocking features in the major Web browsers do not always work in the same way, and even sophisticated users do not fully understand 

these intricacies.15 This may cause consumers to have misplaced beliefs about the 

extent browsers are protecting them from tracking. But even when consumers do 

understand how these features work, sites have consistently devised new ways to 

track users and evade the protections of existing privacy tools. 

In a study called KnowPrivacy published by my Berkeley colleagues and I in 

2009,16 we found that several ad services had deployed a new stealthy technique 

to resurrect tracking cookies, even after the user had used the available cookie deletion tools built into his browser. Ad services developed a way to ‘‘remember’’ the 

cookie file using another technology—Adobe’s Flash Player—such that they could restore the cookie later, even after the user deleted it. This tracking technology—commonly called Flash cookies—is even more difficult for users to manage with existing 

privacy tools, when compared to standard cookie controls.17

Further, some ad services have shifted to new, cutting-edge tracking techniques, 

many of which are beyond the control of consumers.18 While these are less well 

known, they are no less powerful—and in some cases more powerful—in their ability to track users’ browsing activities. From a technical perspective, browser vendors—and thus consumers—are losing the game of privacy Whack-a-Mole. The ongoing development of new, hidden tracking techniques is far outpacing the ability of 

browser vendors to develop and deploy adequate defenses. As a result, consumers 

and the privacy controls available to them will likely fail to keep up. 

B. Existing Consumer ‘‘Notice and Choice’’ Mechanisms 

The current system of industry self-regulation stresses two complementary approaches regarding online tracking: notice, though privacy policies and in-ad enhancements, and choice, through ad preference managers and industry-provided optout tools. 

1. Privacy Policies 

For more than a decade, websites have routinely included privacy policies, typically linked to from the bottom of the front page. These documents are often long 

and difficult to read—most likely because they are written by lawyers, for lawyers— 

and have not helped consumers to stay informed about the degree of tracking onVerDate Nov 24 2008 06:38 Mar 19, 2012 Jkt 073308 PO 00000 Frm 00059 Fmt 6633 Sfmt 6621 S:\GPO\DOCS\73308.TXT SCOM1 PsN: JACKIE
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19McDonald, A. and Cranor, L. (2008) The Cost of Reading Privacy Policies. I/S: A Journal 

of Law and Policy for the Information Society 2008 Privacy Year in Review issue. [Paper originally presented at TPRC 2008, Sept 26–28, 2008, Arlington, VA.] and Privacy Leadership Initiative. Privacy Notices Research Final Results. Conducted by Harris Intereactive, (2001 Dec) from 

http://www.ftc.gov/bcp/workshops/glb/supporting/harris%20results.pdf. 20Turow, J., Mulligan, D., and Hoofnagle C. (2007 Oct), Consumers Fundamentally Misunderstand the Online Advertising Marketplace, from http://groups.ischool.berkeley.edu/samuel 

sonclinic/files/annenberglsamuelsonladvertising.pdf. 21Of the top 50 sites, all stated they collect IP address, 48 collect contact information such 

as name and e-mail address, and 39 collect click stream information. Bank of America had over 

2,300 ‘‘affiliates’’. See Gomez et al. p 24 (previously cited) and KnowPrivacy, http:// 

knowprivacy.org/profiles/bankofamerica. 22 Evidon served over 11 billion impressions in their first full scale months. Among those who 

click on the icon (on .004 percent of ads served), about 3 percent of users opt-out of one or more 

provider. See Smith, S. (2011, March 11). MediaPost Publications Browsing Privacy’s Next Steps 

03/11/2011 from http:// www.mediapost.com/publications/?fa=Articles.showArticle&artlaid. 23Similar to sports and shopping habits, a user’s browsing habits could allow an observer to 

make inferences about a users race, sex, sexual orientation, health status, financial health, and 

political affiliation, even though these categories are typically excluded from online preference 

managers. 

line.19 Research has also shown that the majority of Americans incorrectly believe 

that the phrase ‘‘privacy policy′′—and its mere presence on websites—signifies that 

their information will be kept private.20

While there is much data to suggest that consumers do not actually read or understand privacy policies, even if they did, many existing privacy policies often provide confusing or even conflicting information. In our KnowPrivacy study, we found 

that, among the top 50 most popular websites, many sites that claim to not share 

information with ‘‘third parties’’ later disclaim that they do share information with 

‘‘affiliates’’, which sometimes number well over 2000 companies.21

2. Enhanced Notice for Online Ads 

One emerging self-regulatory measure is ‘‘enhanced’’ or ‘‘robust’’ notice for online 

ads. The purpose of enhanced notice is to increase transparency—directly within the 

ad—into why the particular ad was chosen and what the attached terms and policies are. Although this is a commendable step forward, the question is how many 

users will notice. One self-regulatory firm noted that, during the first few months 

of the industry’s initiative, the notice on only 0.004 percent of ‘‘enhanced’’ ads were 

clicked by users actually clicked through to the detailed explanatory text.22 While 

the initiative is in its early days, this calls into question whether enhanced notice 

will be sufficient to deliver meaningful transparency. 

3. Ad Preferences Managers 

The advertising industry has also created online tools that allow users to view 

and modify marketing inferences made about them within ‘‘ad preferences managers.’’ For example, an ad preferences tool may show the inferences made about 

the user’s demographic information (such as age, income range, education, or geographic location), shopping interests (such as sports, technology, or politics), or even 

significant life events (such as ‘‘getting married soon’’ or ‘‘having a baby’’) based on 

the user’s browsing activity. In many cases, these tools also allow consumers to optout of certain consumer marketing sectors from which they do not wish to receive 

targeted ads. 

Like enhanced notice, ad preference managers improve transparency into the online ad serving ecosystem. But, these managers only present a high-level summary 

of the information collected by the ad service. Given their vantage point, third party 

ad services have the capability to make inferences or use the data for other, nonadvertising-related purposes, that are not shown in the ad preference managers.23

I’m not implying that specific companies are engaged in this practice, just that collection, retention, and correlation of this behavioral data provides the capacity for 

this these inferences to be made. More transparency is needed—outside the realm 

of online targeted ads—about the information that is collected by third parties and 

how they are used. 

4. Cookie-based Choice Mechanisms 

In addition to notice and transparency, many ad services provide users with the 

ability to opt-out. Currently, most opt-outs work using special opt-out cookies—one 

for each ad service—stored in the user’s Web browser. The cookie-based opt-outs 

have been plagued by a number of problems, some of which have been addressed 

in recent years and others which persist today. 

Once consumers realize they are being tracked, they must then begin the process 

of obtaining opt-out cookies from each tracking company. One self-regulatory techVerDate Nov 24 2008 06:38 Mar 19, 2012 Jkt 073308 PO 00000 Frm 00060 Fmt 6633 Sfmt 6621 S:\GPO\DOCS\73308.TXT SCOM1 PsN: JACKIE
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24Steel, E. (2011, March 4). Council of Better Business Bureaus to Enforce Online Tracking 

Principles ≥ Digits. WSJ Blogs—WSJ from http://blogs.wsj.com/digits/2011/03/04/council-toenforce-online-tracking-principles/. 25PrivacyChoice Tracker Index (Mar 14 2011) from http://www.privacychoice.org/companies/ 

all. 

26 At the time of this writing, the NAI opt-out (http://www.networkadvertising.org/managing/optout.asp) currently allows consumers to opt-out of behavioral advertising by 68 member 

companies. AboutAds opt-out applies to 61 companies (http://www.aboutads.info/choices/) and 

even the most comprehensive list of trackers, offered by the independent group PrivacyChoice 

only allows opt-out of 160 (http:// www.privacychoice.org/privacymark). 27 Brock, J. (2011, March 16). Mobile Tracking Privacy: Three thoughts. PrivacyChoice Blog. 

from http://blog.privacychoice.org/?p=2882. 28The Do Not Call list is an FTC enforced initiative based on legislation that creates a centralized registry of numbers that telemarketers may not call, under monetary penalty. 29Mozilla’s Firefox 4.0 and Microsoft’s Internet Explorer 9 (MSIE9) have announced support 

for the header mechanism. MSIE9 also supports the blocking method as well via their Tracker 

Protection Lists product. 30 Current proposals involve sending a Do Not Track signal using a browser header within 

the HTTP protocol. 

nology firm has identified 600 companies involved in collecting or using tracking 

data about customers on their sample of 7 million domains.24 Another lists 323 

tracking companies publicly.25 Given the value of this marketplace and the speed 

with which new entrants emerge, I suspect the actual number of companies engaged 

in tracking may be actually be even larger. Even still, identifying 600 hidden trackers and obtaining an opt-out is daunting task for even the most sophisticated privacy-conscious consumer. 

Seeking to ease the process of obtaining opt-out cookies, industry self-regulatory 

groups such as the Network Advertising Initiative (NAI) have created one-stop 

websites where consumers can obtain opt-out cookies for multiple firms. However, 

these opt-out sites do not comprehensively cover all online tracking since only a 

fraction of approximate 600 companies discussed are covered.26 This problem exists 

in the mobile space as well. Currently, nine of the 16 mobile ad companies do not 

offer an opt-out,27 and data collected on mobile phones may be particularly sensitive, since it is often accompanied by hardware identifiers that users cannot 

change or geographic location information. 

Most importantly, even when opt-outs are available, many firms only allow the 

user to opt-out of the receipt of targeted advertising, not the online tracking itself. 

Advertisers continue to collect and retain data in order to build a profile on the user, 

even in the presence of an opt-out cookie. 

Finally, cookie-based opt-out mechanisms are inherently brittle. Users are frequently taught to delete their browser cookies on a periodic basis to better protect 

their online privacy. But, when the user clears her browser cookies, she will also 

inadvertently clear her opt-out cookies, which will—counter-intuitively—opt the user 

back in to tracking. 

C. Do Not Track Proposals 

Last July, this Committee held a hearing on the topic of online privacy during 

which the idea of ‘‘Do Not Track’’ was discussed. Ever since, there has been a significant amount of public discussion and debate regarding the possibility of a Do 

Not Track mechanism. While the name—Do Not Track—sounds much like the highly successful Do Not Call list,28 the only substantive similarity is that they both give 

consumers a single point of control to express their privacy preferences. While consumers can register their phone number in a FTC registry for Do Not Call, the single point of control for Do Not Track is likely to be a preference setting in the consumer’s Web browser or mobile platform. 

Two primary technical approaches to Do Not Track have been proposed and implemented by major Web browser vendors. The first method is called the header approach, and the second is called the blocking approach. Two browser vendors have 

already taken steps to include these mechanisms in upcoming releases of their products.29

1. The Header Approach 

In the header approach, the consumer can toggle a Do Not Track setting in his 

Web browser privacy preferences. When this setting is enabled, the browser transmits a special signal to each remote server that the consumer has expressed his 

preference to not be tracked.30 The idea is to give users the ability to send a clear, 

persistent and technology-neutral signal to websites regarding their tracking prefVerDate Nov 24 2008 06:38 Mar 19, 2012 Jkt 073308 PO 00000 Frm 00061 Fmt 6633 Sfmt 6621 S:\GPO\DOCS\73308.TXT SCOM1 PsN: JACKIE
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31 In particular, domains can ‘‘spoof’’ the first party transactions that are whitelisted in browsers, or effectively act as first parties. This means that they are bypassing any third party-specific controls used in the browser. See Krishnamurthy et. al., (previously cited). 32What Does ‘Do Not Track’ Mean? ‘‘A Scoping Proposal’’ by the Center for Democracy & 

Technology (2011, Jan 31) from http://cdt.org/files/pdfs/CDT-DNT-Report.pdf. 

erence. Of course, in order this mechanism to be effective, it will depend upon a 

clear set of rules defining what websites should do when they receive this signal. 

Under this approach, the onus is on the server to agree to respect the consumer’s 

preference. It is possible that the server could ignore the user’s request and continue 

to engage in tracking anyway, even once best practices are established. Thus, consumers will need a method to verify that servers are complying with the header, 

so they can keep firms honest about their commitment to respect user tracking preferences. Publisher sites and U.S. brands that advertise could choose to favor ad 

services that respect the header preference. 

2. The Blocking Approach 

In the blocking approach, the consumer maintains (perhaps with the help of a 

trusted third party) a list of servers that are known to engage, or are suspected of 

engaging, in unwanted tracking behavior. Once a user has enabled this feature, his 

Web browser will automatically block all connections to the servers on the list which 

could also result in the blocking the display of advertisement. 

As opposed to the header approach, the responsibility to prevent tracking is solely 

on the consumer, that is, to obtain an up-to-date list of suspected tracking servers 

and to block them. Servers are under no express obligation to abstain from tracking, 

so if one is not blocked by a consumer’s browser, it is free to continue tracking as 

usual. 

One concern with this approach is that it is sometimes difficult for consumersat-large to determine whether a domain is engaging in tracking behavior and 

whether to add that domain to the block list. Additionally, there are many technical 

mechanisms that exist today that could be used to circumvent such blocking measures.31

3. Other Considerations 

For any consumer choice mechanism to work, we need to clearing define what 

‘‘tracking’’ means and what obligations are placed on tracking companies when consumers elect to opt-out of tracking. Consumer groups and privacy researchers have 

published proposals that attempt to define ‘‘tracking,’’ 32 but the online advertising 

industry has not yet committed to respect the header nor follow any of the proposed 

definitions. For example, some in the industry have suggested that, like the current 

opt-out system, third parties be allowed permitted to continue to collect information. 

Others have proposed that third party services should refrain from collecting and 

retaining any information about consumers if they elect to not be tracked. This latter approach, while more privacy-preserving, may impact advertisers’ abilities to deliver even non-targeted advertisements and includes numerous exceptions to tracking which may defeat the spirit of a privacy mechanism. 

A potential way forward may be to agree upon a definition of ‘‘tracking’’ that balances these conflicting priorities. One of the key components that enables tracking 

today is the use of unique identifiers. As such, it may be wise to consider a definition of tracking that focuses on these identifiers, in which third party services make 

a good faith effort to strip any unique identifiers associated with the user, browser 

or client device making the Web request once the request has been processed and 

the service delivered. By focusing on the identifiers, these companies would then be 

free to retain the remaining data associated with the user’s request, providing that 

it cannot be re-identified (following current best practices in the space). This approach will likely be good for both business and consumers, since it allows businesses to observe how their websites are being used and secure their servers, while 

preventing the creation of individual profiles. 

Finally, it is important to consider whether creating more effective choice mechanisms for consumers may have perverse effects and ultimately drive websites to 

predicate access to content based on whether or not a consumer has consented to 

tracking. Websites could require that consumers allow tracking by third parties the 

website is affiliated with in order to gain access to it’s content. In our original example, WebMD could require that their affiliates, such as DoubleClick, be allowed to 

track consumers in order to gain access to useful health information on the website. 

This trend could potentially favor large first parties over smaller, independent sites 

or allow companies to engage in even more invasive tracking upon receiving affirmaVerDate Nov 24 2008 06:38 Mar 19, 2012 Jkt 073308 PO 00000 Frm 00062 Fmt 6633 Sfmt 6621 S:\GPO\DOCS\73308.TXT SCOM1 PsN: JACKIE
59 

tive consent. This is not a reason to abandon efforts to improve consumer choice, 

but certainly a reason for Congress to consider the issue carefully. 

D. Conclusion 

My research has shown that online tracking is pervasive. It is likely to be much 

more extensive than users might reasonably expect as they casually browse the 

Web. Many of these third party tracking activities are carefully tucked away from 

the view of the average user, and even in cases where the user realizes he is being 

tracked, the privacy tools he has available are often ineffective at stopping the most 

advanced forms of tracking. 

Consumers need more transparency into who is tracking them online, what data 

is being collected, and how this data is being used, shared or sold. Today’s technical 

defenses to online tracking are not able to stop the leading tracking technologies, 

and consumers often do not have meaningful ways to control them. To be effective, 

privacy protections for consumers online will likely require both a technical and policy component, working in tandem, and I believe these discussions here today are 

a great step in making that union a reality. 

Internet-related debate involves issues that are deeply technical in nature and I 

am grateful that this Congressional committee has allowed technologists to participate. Thank you for inviting me to testify here today, and I look forward to helping 

the committee understand the technical issues that make online tracking such an 

interesting, yet complex, issue. I will be happy to answer any further questions. 

Senator KERRY [presiding]. Thanks. Who’s next? 

Ms. Lawler? 

STATEMENT OF BARBARA LAWLER, 

CHIEF PRIVACY OFFICER, INTUIT INC. 

Ms. LAWLER. Good morning. And thank you to the members of 

the Committee for the opportunity to comment on the state of online privacy. My name is Barbara Lawler and I’m the Chief Privacy 

Officer at Intuit. I ask that my full statement be put into the 

record due to time constraints. 

Senator KERRY. Without objection it will be. 

Ms. LAWLER. Intuit’s mission is to improve people’s financial 

lives so profoundly they cannot imagine going back to the old way 

of doing things. It is through this mission that we approach the 

current privacy debate. Intuit is a unique corporation adhering to 

various regulatory data privacy regimes in the U.S. including financial and health care privacy and the privacy of tax return information. 

Additionally, we touch over 50 million people through our products. These people can trust us with their most sensitive data, their 

Federal and state income tax return information, their individual 

purchase transactions, bill payments and health information, their 

business accounts including employee payroll, accounts receivable, 

vendor lists, inventory and other business data. As more technology 

solutions move to the cloud, customers place more trust in us as 

we handle their sensitive data. 

At Intuit, we developed data stewardship principles that express 

how we think about how we use data, and offer guardrails to guide 

our judgment. The central concept of data stewardship is simple. 

It’s our customer’s data, not ours. We are and will be held accountable for the information entrusted to us. 

As you think about privacy legislation we encourage you to consider four things. 

One, a principles-based approach. 

Two, a focus on customers. 

Three, data-driven innovation. 

60 

And four, global uniformity. 

First, we see the value in comprehensive, principles-based privacy legislation. Because we adhere to various privacy regimes, 

this idea could work in tandem with self-regulatory approaches, 

codes of conduct and best practices. A principles-based approach is 

not prescriptive but enables flexibility to offer data driven solutions 

within existing sector specific privacy laws. A principles-based approach could fill the gaps that exist between different sector approaches while at the same time blending with them. 

It’s also more likely to be received and effectively adapted by all 

businesses of all sizes. It is more likely to be understood by the 

public it seeks to protect. And a principles-based approach is more 

likely to achieve consensus over time in the international context 

which will be essential to global competitiveness in the emerging 

digital economy. 

Such an approach could set forth a minimum set of requirements 

for business and provide a fundamental core level of consistency for 

businesses and consumers. Codes of conduct based on context, industry sector, technology platform and other data use drivers 

would build on top of a privacy baseline. Codes of conduct can serve 

as the framework and support for co-regulatory safe harbor programs. 

Second, any relevant data regime must be focused on the customer. At Intuit, customers are the heart of everything we do. 

What we learn through extensive customer research is that it’s not 

about what we think is best for business or what we think should 

be done. It’s about keeping what’s important to the customer at the 

heart of the principles. 

Third, responsible data use can foster innovation. Consumers’ expectations have changed as people are increasingly conducting 

their lives online. The volume and complexity of data in this new 

connected world presents boundless opportunities to unlock a tremendous amount of data to create better experiences and products 

for customers. Intuit’s approach to data-driven innovation is to responsibly use data entrusted to us by our customers to improve 

their financial lives and the products and services we provide them. 

Last but not least, legislation must take into account the need 

for uniformity among various privacy regimes. In developing privacy principles there needs to be a uniform approach. While so 

many laws and regulations are based on essentially the same principles, multi-state and multinational companies are challenged by 

the differences among them. 

The essence of data stewardship cannot rely on just one element 

of our principles. It must be comprised of all of them combined: 

uniform principles-based legislation, customer driven innovation 

coupled with responsible, innovative and compelling data uses. 

Thank you again for giving Intuit the opportunity to express its 

thoughts on this important subject. We look forward to working 

with you as you evaluate privacy legislation and to answering any 

questions you may have. 

[The prepared statement of Ms. Lawler follows:] 

61 

PREPARED STATEMENT OF BARBARA LAWLER, CHIEF PRIVACY OFFICER, INTUIT INC. 

Good morning and thank you Chairman Rockefeller, Ranking Member Hutchison, 

and members of the Committee for providing Intuit the opportunity to share our 

point of view on the best way to protect consumer privacy in the technology-driven, 

Internet era. We applaud the Committee for its attention to this important issue. 

Today, I’m here to talk to you about how Intuit views online consumer privacy. 

Intuit is in a unique position to comment on the current privacy debate. Not only 

do we have a unique perspective given the nature of our comprehensive business 

portfolio and compliance with privacy regimes, but fifty million people trust us with 

their most sensitive data. I will be talking today about the creation of Intuit’s Data 

Stewardship Principles, the process of how we developed these principles, and what 

we learned from this process, as well as the principles themselves. 

As you think about comprehensive privacy legislation, we encourage you to focus 

on four things: 

1. principles-based privacy 

2. customers 

3. data driven innovation 

4. global uniformity 

About Intuit 

Intuit was founded in Silicon Valley nearly thirty years ago. Our mission is to improve people’s financial lives so profoundly, they cannot imagine going back to the 

old way of doing things. 

We started small with Quicken personal finance software, simplifying the common 

household dilemma of balancing the family checkbook. Today, we are one of the Nation’s leading providers of tax, financial management and online banking solutions 

for consumers and small businesses, and the accountants, financial institutions and 

healthcare providers that serve them. We employ nearly 8,000 people, our revenues 

top $3.5 billion and we’re recognized by Fortune Magazine as one of America’s mostadmired software companies and one of the country’s best places to work. 

We have always believed that with our success comes the responsibility to give 

back. Part of delivering on our mission is serving as an advocate and resource for 

economic empowerment among lower income individuals and entrepreneurs. We 

have a track record of more than a decade of philanthropy that enables eligible 

lower income, disadvantaged and underserved individuals and small businesses to 

benefit from our tools and resources for free. 

Through it all we remain committed to creating new and easier ways for consumers and businesses to tackle life’s financial chores with the help of technology. 

We help our customers make and save money, comply with laws and regulations, 

and give them more time to live their lives and grow their businesses. 

Our flagship products and services, including QuickBooks, Quicken, Mint.com and 

TurboTax, simplify small business management, payment and payroll processing, 

personal finance, and tax preparation and filing. We serve half of the accounting 

firms in the country, helping them be more productive with tax preparation software. And we help community banks and credit unions grow by providing on-demand solutions and services that make it easier for consumers and businesses to 

manage their money. 

The innovation and customer driven focus that inspired these breakthroughs 

leads us to uncover other unmet needs and large problems to solve. For example, 

we are working to simplify the way millions of Americans manage their health and 

medical expenses. Today, doctor’s offices are paper-based, inefficient and need a way 

to reduce costs and delight their patients who are increasingly demanding online solutions. Our Intuit Health Patient Portal offering is a secure, online way for doctors 

and their patients to communicate and complete key tasks. Patients can request appointments and prescription refills, pay bills, complete forms, receive lab results, 

and exchange messages with their doctor. As a result, doctors are able to reduce 

costs, delight patients, and qualify for Meaningful Use stimulus funding. 

With all of these offerings, we help improve the lives of fifty million people, worldwide. 

We’re able to do this because our customers entrust us with their most sensitive 

data—fifty million people trust us with their Federal and state income tax return 

information; their individual purchase transactions, bill payments, and health information; and their business accounts, including employee payroll, accounts receivable, vendor lists, inventory and other business data. 

We are widely recognized and respected for our strong privacy and security practices. Maintaining our customers’ trust is critical to maintaining our business and 

62 

1See Appendix A for a list of our Data Stewardship Principles. 

competitive advantage. We do not view customer privacy and security as an exercise 

in compliance but as part of our value proposition. 

Intuit products span a range of sector-specific regulatory data privacy regimes in 

the US, including Gramm Leach Bliley Act, Fair Credit Reporting Act/Fair and Accurate Credit Transactions Act, IRC 7216—the privacy of individuals’ personal tax 

information, Health Insurance Portability and Accountability Act; and self-regulatory regimes including PCI Data Security Standards, the U.S.-E.U. Safe Harbor 

Program and the TRUSTe Privacy Seal Program. 

Given the nature of our comprehensive business, providing solutions for a range 

of tax, accounting, personal finance and health care needs, Intuit is in a unique position to comment and shape the online privacy debate. 

Intuit’s Data Stewardship Philosophy 

As more solutions move to the cloud, customers place trust in us as we handle 

their most sensitive data. Data Stewardship expresses how we think about the use 

of data, and offers guardrails to guide our judgment. Just as we talk with our customers about product development, we also talk about their expectations around privacy. They’ve told us explicitly that they expect us to be stewards of their data, 

using it responsibly and with integrity, for their benefit, while keeping it private 

and secure. 

The central concept of Data Stewardship is that it is the customers’ data, not 

ours. Because we hold their most sensitive data, customers place a deep trust in 

us. Our customers have told us this directly through our extensive, consumer research. They care deeply how their data is used, they want clear and open explanations and to have contextual, relevant choices about those uses. They expect us 

to be accountable to keep our promises. Ethical data stewardship increases customers’ confidence and trust. 

To ensure that our nearly 8,000 employees are clear about how we manage and 

respect information entrusted to us, we have created a set of company-wide data 

stewardship principles.1 These principles, derived directly from Intuit’s core operating values—especially Integrity without Compromise—are intended to guide our 

mindset and behavior in all that we do. They reflect and reinforce that we’re an organization that is accountable for its actions. 

Intuit’s Data Stewardship Principles 

When we apply our Data Stewardship Principles to leveraging data, they enable 

us to support Intuit’s growth strategies while meeting and exceeding our customers’ 

expectations about how we use their data to benefit them and run our business to 

provide the products and services that serve them. 

We are and will be accountable for the information entrusted to us. By design, 

our Data Stewardship Principles align closely with globally recognized fair information practices, including those for online privacy developed in the late 1990s and to 

their originating concepts, the Organization for Economic Cooperation and Development (OECD) privacy principles. As we have learned, we believe these Principles 

carry the most weight and meaning to actual consumers, based on an extensive research process we will describe below. 

As you think about comprehensive privacy legislation, we encourage you to focus 

on four things: 

1. principles-based privacy 

2. customers 

3. data driven innovation 

4. global uniformity 

First, we see the value in comprehensive principles-based privacy legislation. We 

believe there is value in the idea of baseline, principle-based privacy legislation that 

could work in tandem with self-regulatory approaches and codes of conduct. The Intuit Data Stewardship Principles represent our own internal code of conduct for 

data. A principles-based approach is not prescriptive but enables flexibility to offer 

data driven solutions within existing sector-specific privacy laws and, most importantly, is technology-neutral. 

A principle-based approach could fill the gaps and crevices that exist between the 

differing sector approaches, while at the same time blending with them. It is also 

more likely to be received and effectively adapted by businesses of all sizes, including small businesses not actively engaged in the privacy landscape. It is more likely 

to be understood by the public it seeks to protect. And a principle-based approach 

63 

is more likely to achieve consensus over time in the international context, which will 

be essential to global competitiveness in the emerging digital economy. Such an approach could set forth a minimum set of requirements for business, and provide a 

fundamental, core level of consistency for businesses and consumers. Codes of conduct, based on context, industry/sector, technology platform or other data use drivers would build on top of a privacy baseline. Codes of conduct can serve as the 

framework and support for co-regulatory safe harbor programs. 

Second, any relevant data regime must be focused on the customer. As we enter 

this important discussion, it is necessary to further emphasize the importance of 

both respect for the consumer participation and control of information and the value 

and benefit of continued innovation, in particular where the future of economic 

growth is going—data driven innovation. The key to our success and to ensuring 

balance among these interests is earning the customers’ trust. 

At Intuit, customers are at the heart of everything we do. We were founded on 

the idea of customer driven innovation, a mindset and methodology to uncover important, unsolved problems. Many companies talk about customer focus, customer 

innovation, but the level of commitment to this, and the rigor we put behind it, differentiates us. 

For nearly thirty years, our passion for inventing products to solve important 

problems and perfecting those products to delight our customers, through direct customer feedback and observation, has made Intuit the first choice in financial software for consumers and small businesses. We have an instituted practice within our 

Corporation called ‘‘follow me homes’’ in which representatives from the Corporation 

spend a few hours with our customers to not only receive feedback on our products 

but to also identify key customer needs to amend our product. The Corporation commits to over 10,000 employee hours of ‘‘follow me homes’’ per year—with our CEO 

committing to approximately sixty hours per year himself. We supplement ‘‘followme-homes’’ with direct customer research, and by bringing customers into special 

‘‘labs’’ or focus groups to evaluate and give feedback on the customer experience and 

usability of our products and services. Our respect for the customer is reflected in 

the policies and practices that have driven our business. Trusted data stewardship 

is central to that commitment and to our success. 

The development of our Data Stewardship Principles is kept customers as our 

central focus: as our established practices suggest, we took our customers along with 

us on the journey to define our principles about the use of data in a way that reflects the needs, concerns and values of those customers. We took draft Data Stewardship Principles directly to our customers and asked them for their feedback, on 

both the concepts and words, on intent and practice, with real-world customer experience and expectations. Over the period of the last year alone, we conducted two 

rounds of quantitative, statistically valid surveys that cut across multiple customer 

bases and product lines to get feedback and learn if Data Stewardship and Privacy 

mattered to them, which principles and how much. We conducted four rounds of 

qualitative customer focus group sessions to dive deeper into the subtleties of transparency, choice, data use cases and security. 

Staying true to customer driven innovation, we iterated and refined the Data 

Stewardship Principles over the course of the customer research process. After several rounds of input and iteration, the Principles have been extremely well received. 

Let me share some of the insights from the more than 100 consumers and small 

businesses we talked to in focus groups: 

• Customers may not read privacy policies but care deeply about how their data 

is used. 

• Consumers are smarter than some give them credit for—they are aware of a 

wide range of data uses, to benefit them directly and for necessary internal 

business operations. 

• While a majority of our customers already have a positive impression of Intuit, 

the Data Stewardship Principles further build trust. 

• Across all research studies, the principle around not selling or sharing personal 

data is the most important. 

• The more transparent (meaning open, simple and clear) the company is, the 

more customer trust increases and the customers’ need for detailed and frequent or repetitive choice mechanisms appears to decrease. 

• Training employees to uphold these principles is also important to customers 

and adds an incremental level of trust that we will deliver against our promises. 

Here are a few illustrative verbatim statements from our customers that show 

what Intuit’s Data Stewardship Principles mean to them: 

64 

• ‘‘This is what makes customers trust them. I like that privacy is paramount & 

do believe they’re committed to this.’’—Mike, consumer in San Diego 

• ‘‘Customer focused, protecting my data and interests, holding themselves accountable.’’ ‘‘I like that these principles are very specific. There is no doubt, or 

any way to not understand exactly how Intuit intends to treat my information. 

I like that.’’—Jackie, small business owner in Oakland 

• ‘‘Because of these principles, I will continue to use their products.’’—Darryl, consumer in Denver 

• ‘‘A little safer in an unsafe world.’’—Erica, consumer in Atlanta 

When customers participate directly in the shaping of Data Stewardship Principles, it brings to life the Fair Information Practice concepts of Transparency and 

Individual Participation in profound ways. 

Specifically, we have learned through this process what is substantive and meaningful to consumers. 

Third, responsible data use can foster innovation. The world is quickly shifting 

from a paper-based, human-produced, brick-and-mortar-bound market to one where 

people understand, appreciate and embrace the benefits of truly connected software, 

platforms and services. 

Consumers’ expectations have changed as people are increasingly conducting their 

lives online. ‘Cloud computing’ makes it easier to access and use online sites anytime and anywhere an individual chooses. Consumers expect to interact online in 

an ‘‘always on’’ environment and to have technology make life easier. They demand 

even greater simplicity, such as not having to re-enter their data when they use 

more than one of our products or services. Increasingly, new products and services 

as well as enhancements to existing ones will employ more and more sophisticated, 

rich, real-time interactive use of data, directed and prompted by customer actions 

and expectations of product functionality. 

The volume and complexity of data in this new world present boundless opportunities to unlock a tremendous amount of data to create better experiences and products for customers, all while keeping our customers’ data safe. 

Intuit’s approach to data driven innovation is to responsibly use data entrusted 

to us by our customers to improve their financial lives and the products and services 

we provide them. This data includes information about our customers—who they 

are, where they are and how they use our products. By compiling and interpreting 

this data, we can create innovative, easy-to-use products that delight customers by 

helping them make and save money. We’re also able to provide customers with information that gives them greater insight into their financial lives and helps them 

to achieve their personal and business goals. 

To retain consumer trust in that context, Intuit’s vision is that privacy and security are central to the concept of customer ‘‘delight,’’ and therefore serve as a competitive advantage. 

For innovation to thrive, we must unlock the power of data under a Data Stewardship regime. The essence of Data Stewardship cannot rely on just one element 

of our principles, it must be comprised of all of them combined: customer driven innovation coupled with responsible, innovative, and compelling data uses. Moreover, 

as global competitiveness evolves beyond the bricks-and-mortar economies of the 

past, and international trade takes on an electronic character in the economy of the 

future, sound business practices and wise public policy are critical components of 

innovation, invention, and full, fair and open competition. 

Last but not least, legislation must take into account the need for uniformity 

among various privacy regimes. While so many laws and regulations are based on 

essentially the same principles, multi-state and multi-national companies are challenged by the differences among them. Some regulations in breach notification, for 

example, require notification of some state agencies; others do not. The notification 

triggers and thresholds are different. And the definitions of important terms vary 

across the landscape. 

In a domestic context, we support a uniform Federal breach notification law. 

Aligning practices across states would provide benefits for consumers who purchase 

from merchants in other states. It would also lessen the complexity for merchants, 

a consistent goal in improving the economy. 

In an international context, baseline principles that align with the Asia-Pacific 

Economic Coordination (APEC) Privacy Principles and the E.U. Directive would improve multi-national commerce, allowing the freer-flow of transactions and data 

across borders, in a consistent trusted manner. This, in turn, would improve the 

U.S. economy through vibrant trade. Intuit agrees that the U.S. Government should 

continue to work toward increased cooperation among privacy enforcement authorities around the world and develop a framework for mutual recognition of other 

65 

countries’ frameworks. Intuit agrees that the U.S. should also continue to support 

the APEC Privacy Principles Pathfinder Project, because it is the best framework 

to achieve data privacy interoperability in the 21st century. 

Conclusion 

Once again, Mr. Chairman, Senator Hutchison, members of the Committee, thank 

you again for giving Intuit the opportunity to express its thoughts on this important 

subject. Maintaining customers trust is the foundation to building privacy principles. It is with this trust that we will learn from the customers about what they 

really want and what is important to them when it comes to their data. In the 21st 

century, customers demand more in a connected world. We must work toward the 

shared goal of protecting consumers while maintaining data driven innovation to 

improve our customers’ financial lives, in a trusted, real, and fundamental way. 

We look forward to working with you and the Committee toward this goal. 

APPENDIX A 

Intuit Data Stewardship Principles 

What we stand for: 

• Our customers’ privacy (and their customers’ and employees’) is paramount to 

us. 

• Our customers place a deep trust in Intuit because we hold their most sensitive 

data . . . therefore, we are a trusted steward of their data. 

• Our company values start with Integrity without Compromise, and our privacy 

principles require that we all be accountable. 

How we run our business (what we hold ourselves accountable to): 

We will not: 

• Without explicit permission, sell, publish or share data entrusted to us by a customer that identifies the customer or any person. 

We will: 

• Use customer data to help our customers improve their financial lives. We help 

them make or save money, be more productive, and comply with laws and regulations. 

• Use customer data to operate our business, including helping our customers improve their user experience and understand the products and services that are 

available to help them. 

• Give customers choices about our use of data that identifies them. 

• Give open and clear explanations about how we use data. 

• Publish or share combined, unidentifiable customer data, but only in a way that 

would not allow the customer or any person to be identified. 

• Train our employees about how to keep data safe and secure, and educate our 

customers about how to keep their and their customers’ data safe and secure. 

Senator KERRY. Thank you, Ms. Lawler. 

Mr. Calabrese? 

STATEMENT OF CHRISTOPHER R. CALABRESE, 

LEGISLATIVE COUNSEL, AMERICAN CIVIL LIBERTIES UNION, 

WASHINGTON LEGISLATIVE OFFICE 

Mr. CALABRESE. Thank you, Chairman Kerry, members of the 

Committee. Thank you for the opportunity to testify on behalf of 

the American Civil Liberties Union. We support comprehensive 

protections for American’s personal information including a Do Not 

Track mechanism. 

One of the new models of Internet advertising has been to target 

ads at the specific individual in order to make those ads more relevant. The result has been a system where Americans are routinely 

tracked as they surf the Internet. Americans assume there is no 

66 

central record of what they do and where they go online. However 

in many instances that is no longer the case. 

Behavioral marketers, social networks and other online companies are creating profiles of unprecedented depth and breadth that 

reveal the personal aspects of our lives including our religious and 

political beliefs, medical information, purchases and reading habits. 

These profiles can legally be shared with anyone including offline 

companies, employers and the government. This data collection is 

neither benign nor anonymous. 

Individual profiles identify our mental health, sexual orientation 

or issues with weight. They may indicate particular vulnerabilities. 

Ninety-two-year-old veteran, Richard Guthrie was bilked out of 

more than $100,000 by criminals who identified him from marketing lists. 

Cate Reid, a recent high school graduate has been identified by 

advertisers as concerned about her weight. ‘‘Every time I go on the 

Internet,’’ she says, she sees weight loss ads. ‘‘I’m self-conscious 

about my weight. I try not to think about it. Then the ads start 

me thinking about it.’’ 

Information that can be used for identity theft is online but beyond our control. One reporter asked a company to search out information on her armed only with her name and e-mail address. 

She said. ‘‘Within 30 minutes the company had my social security 

number. In 2 hours they knew where I lived, my body type, my 

hometown, my health status.’’ 

Nor are individual web surfing habits anonymous. Many companies now provide a way to directly link your name and mailing address to your web surfing habits. Companies know who you are online. All of this information is available for sale with no controls. 

Of particular concern, of course to the ACLU, is government access. Many civil liberties benefits of the Internet, ability to read 

provocative materials, associate with non-mainstream groups, voice 

dissenting opinions are based on the assumptions of practical anonymity and freedom from government scrutiny. Because of this information collections these assumptions are rapidly eroding. 

Law enforcement routinely purchases access to offline private 

data bases full of detailed profiles on each of us with no legal process. They could legally do the same with online information. In fact 

online and offline data bases of personal information are increasingly linked. But we have no right to access those same data bases 

or control how they’re used. 

Solutions exist. The technology may be new but the problems are 

not. Congress and the states have passed many laws to protect 

Americans reading habits and viewing habits in the offline world. 

More than 30 years ago the U.S. Department of Health, Education 

and Welfare crafted basic privacy principles. Called the Fair Information Practice Principles they have become the basis for comprehensive privacy laws in many industrialized nations as well as 

sector specific laws in the United States. 

The Department of Commerce recently called for adoption of 

these principles for the Internet. We endorse the use of fair information practices as well. In addition the private sector is developing innovative solutions like a Do Not Track mechanism. 

67 

1Federal Trade Commission (Bureau of Consumer Protection), A Preliminary FTC Staff Report on Protecting Consumer Privacy in an Era of Rapid Change: A Proposed Framework for 

Businesses and Policymakers, December 1, 2010. 

These mechanisms need to be backed by the force of law. We reject any approach that relies solely on self regulation by companies. 

Self regulation by itself is a failed approach. It has allowed the current data collection practices to flourish. 

Consumers want change. Surveys show that 67 percent rejected 

the idea that advertisers should be able to match ads based on specific websites consumers visit. And 61 percent believe these practices were not justified even if they kept costs down and allowed 

consumers to visit websites for free. 

Ultimately if this information collection is allowed to continue 

unchecked then capitalism could build what the government never 

could, a complete surveillance state online. Without government 

intervention we may soon find the Internet has been transformed 

from a library and a playground to a fish bowl. And that we have 

unwittingly seeded core values of privacy and autonomy. 

Thank you. 

[The prepared statement of Mr. Calabrese follows:] 

PREPARED STATEMENT OF CHRISTOPHER R. CALABRESE, LEGISLATIVE COUNSEL, 

AMERICAN CIVIL LIBERTIES UNION, WASHINGTON LEGISLATIVE OFFICE

Good morning Chairman Rockefeller, Ranking Member Hutchison, and members 

of the Committee. Thank you for the opportunity to testify on behalf of the American Civil Liberties Union (ACLU) its more than half a million members, countless 

additional activists and supporters, and fifty-three affiliates nationwide, about the 

importance of online privacy. We support comprehensive protections for Americans’ 

personal information and specifically support a ‘‘Do Not Track’’ option for online consumers. These protections are crucial for preventing harm to consumers and to safeguard Americans’ First and Fourth Amendment rights online. 

I. Introduction 

Rapid technological advances and the lack of an updated privacy law have resulted in a system where Americans are routinely tracked as they surf the Internet. 

The result of this tracking—often performed by online marketers—is the collection 

and sharing of Americans’ personal information with a variety of entities including 

offline companies, employers and the government. As greater portions of our lives 

have moved online, unregulated data collection has become a growing threat to our 

civil liberties. 

As one recent report explains, the Internet has been an engine of radical, positive 

changes in the way we communicate, learn, and transact commerce.1 The Internet 

allows us to connect to one another and share information in ways we never before 

could have imagined. Many of the civil liberties benefits of the Internet—the ability 

to access provocative materials more readily, to associate with non-mainstream 

groups more easily, and to voice opinions more quickly and at lower cost—are enhanced by the assumption of practical anonymity. Similarly, consumers are largely 

unaware of the breadth of information collection and the various uses to which it 

is put. 

In short, Americans assume that there is no central record of what they do and 

where they go online. However in many instances that is no longer the case. Behavioral marketers are creating profiles of unprecedented breadth and depth that reveal 

personal aspects of people’s lives including their religious or political beliefs, medical 

information, and purchase and reading habits. Even as behavioral targeting continues to grow, its practitioners have already demonstrated a disturbing ability to 

track and monitor an individual’s actions online. 

If this collection of data is allowed to continue unchecked, then capitalism will 

build what the government never could—a complete surveillance state online. Without government intervention, we may soon find the Internet has been transformed 

from a library and playground to a fishbowl, and that we have unwittingly ceded 

core values of privacy and autonomy. 

68 

2 Common daily activities include sending or receiving e-mail (40+ percent of all American 

adults do so on a typical day), using a search engine (35+ percent), reading news (25+ percent), 

using a social networking site (10+ percent), banking online (15+ percent), and watching a video 

(10+ percent). Pew Internet & American Life Project, Daily Internet Activities, 2000–2009, 

http://www.pewinternet.org/Trend-Data/Daily-Internet-Activities-20002009.aspx. 3 A ‘‘video-sharing site’’ or ‘‘video hosting site’’ is a website that allow users to upload videos 

for other users to view (and, often, comment on or recommend to others). Wikipedia, Video 

Hosting Service, http://en.wikipedia.org/wiki/Videolsharing (as of January 21, 2011). 

YouTube is the most common video-sharing site today. 4Pew Internet & American Life Project, Your Other Tube: Audience for Video-Sharing Sites 

Soars, July 29, 2009, http://pewresearch.org/pubs/1294/online-video-sharing-sites-use. 5Pew Internet & American Life Project, Social Media & Young Adults, Feb. 3, 2010, http:// 

www.pewinternet.org/Reports/2010/Social-Media-and-Young-Adults.aspx. 6 ‘‘Social networking sites’’ allow users to construct a ‘‘semi-public’’ profile, connect with other 

users of the service, and navigate these connections to view and interact with the profiles of 

other users. Danah M. Boyd & Nicole B. Ellison, Social Networking Sites: Definition, History, 

and Scholarship, 13 J. of Comp.-Mediated Comm. 1 (2007); Pew Internet & American Life 

Project, Adults & Social Network Sites, Jan. 14, 2009, http://www.pewinternet.org/Reports/ 

2009/Adults-and-Social-Network-Websites.aspx. 7Pew Internet & American Life Project, Internet, Broadband, and Cell Phone Statistics, Jan. 

5, 2010, http://www.pewinternet.org/Reports/2010/Internet-broadband-and-cell-phone-statistics.aspx. 8See generally ACLU of Northern California, Digital Books: A New Chapter for Reader Privacy, Mar. 2010, available at http://www.dotrights.org/digital-books-new-chapter-reader-privacy. 9 ‘‘More Americans are watching online video each and every month than watch the Super 

Bowl once a year..’’ Greg Jarboe, ‘‘125.5 Million Americans Watched 10.3 Billion YouTube Videos 

in September,’’ SearchEngineWatch.com, Oct. 31, 2009, http://blog.searchenginewatch.com/ 

091031–110343. 10 ‘‘Location-based services’’ is an information service utilizing the user’s physical location 

(which may be automatically generated or manually defined by the user) to provide services. 

Wikipedia, Location-Based Service, http://en.wikipedia.org/wiki/Location-basedlservice (as of 

January 21, 2011). 11 Recent location-based service Foursquare built a base of 500,000 users in its first year of 

operation. Ben Parr, ‘‘The Rise of Foursquare in Numbers [STATS],’’ Mashable, Mar. 12, 2010, 

http://mashable.com/2010/03/12/foursquare-stats/. 12 Joseph Turow, et al., Americans Reject Tailored Advertising 4 (2009), available at http:// 

papers.ssrn.com/sol3/papers.cfm?abstractlid=1478214. 13 Id. 14Lymari Morale, ‘‘U.S. Internet Users Ready to Limit Online Tracking for Ads,’’ USA 

TODAY, December 21, 2010. 

II. Americans have embraced technology, but they still expect privacy 

Technology has moved rapidly and Americans have adopted these changes into 

their lives: 

• Over 50 percent of American adults use the Internet on a typical day.2

• 62 percent of online adults watch videos on video-sharing sites,3 including 89 

percent of those aged 18–29.4

• Over 70 percent of online teens and young adults5 and 35 percent of online 

adults have a profile on a social networking site.6

• 83 percent of Americans own a cell phone and 35 percent of cell phone owners 

have accessed the Internet via their phone.7

Companies continue to innovate and create new ways for Americans to merge 

technology with daily activities. Google has spent the last 5 years building a new 

online book service and sales of digital books and devices have been climbing.8

Americans increasingly turn to online video sites to learn about everything from 

current news to politics to health.9 Location-based services10 are also a burgeoning 

market.11

However this rapid adoption of new technology has not eliminated Americans’ expectations of privacy. To the contrary, Americans still expect and desire that their 

online activities will remain private, and express a desire for laws that will protect 

that privacy: 

• 69 percent of Internet users want the legal right to know everything that a 

Website knows about them.12

• 92 percent want the right to require websites to delete information about 

them.13

And consumers oppose online tracking: 

• 67 percent rejected the idea that advertisers should be able to match ads based 

on specific websites consumers visit; 14 and 

69 

15 Id. 16 Angin Win, ‘‘The Web’s New Gold Mine: Your Secrets,’’ Wall Street Journal, July 30, 2010. 17 Id. 18Why Comscore?, http://comscore.com/AboutlcomScore/WhylcomScore (last visited January 21, 2011). 

• 61 percent believed these practices were not justified even if they kept costs 

down and allowed consumers to visit websites for free.15

In sum, while Americans make great use of the Internet, they are very concerned 

about their privacy and specifically troubled by the practice of behavioral targeting. 

III. The data collected by behavioral marketers forms a personal profile of 

unprecedented breadth and depth 

Behavioral targeting contravenes many American’s expectation of privacy and 

how they should be treated online. Online advertising is one of the fastest growing 

businesses on the Internet and it is based on collecting a staggering amount of information about people’s online activities. Advertising has always been prevalent online, but instead of targeting websites—such as advertising shoes on a shoe store 

site—advertisers now use personal information to target individuals directly. 

They do this using different surveillance tools. The simplest tools are cookies. A 

cookie is a file that a website can put on a user’s computer when the user visits 

it so that when the user returns, or visits another affiliated site, it remembers certain information about the user. Cookies were initially used to help websites remember user passwords or contents in shopping bags, but as online marketing grew 

more sophisticated, cookies did too. Advertisers and aggregators modified cookies to 

track people’s web page visits, searches, online purchases, videos watched, posts on 

social networking, and so on. 

Another popular and even more invasive tool for tracking is the flash cookie. 

Flash cookies are often used by data aggregators to re-install a regular cookie that 

a user had detected and deleted. The newest and most aggressive form of tracking 

is the beacon. Beacons, also known as web bugs, are often used by sites that hire 

third party services to monitor user actions. These devices can track a user’s movements extremely closely; to the point that they can monitor keystrokes on a page 

or movements by a user’s mouse. The result of these practices is the collection and 

sale of a wealth of consumer data without any legal limits or protections for individuals. 

As targeted ads become increasingly profitable, behavioral marketers are growing 

more ambitious and seeking to form an even more complete picture of unsuspecting 

citizens. The Wall Street Journal recently conducted a comprehensive study on the 

effects of online marketing on individual privacy and the results were alarming. The 

study found that the Nation’s 50 top websites installed an average of 64 pieces of 

tracking technology on user’s computers, usually with no warning. A dozen sites installed over a hundred. For example, the study found that Microsoft’s popular 

website, MSN.com, attached a tracking device that identified and stored user’s detailed personal information. According to the tracking company that created the file, 

it could predict a user’s age, zip code, and gender, as well as an estimate of a user’s 

income, marital status, family status and home ownership status.16 These new technologies allow marketers to combine a vast amount of information gleaned from different websites over time in order to paint an extremely detailed profile of potential 

consumers. Any particular website may have little information and this may not 

alarm some, but when a large number of these data points are aggregated, an extremely detailed picture results. 

In addition, the Wall Street Journal found that tracking technology has become 

so advanced and covert that the website owner is often not even aware of its presence. Microsoft, one of the largest developers of computer software in the world, said 

it did not know about the tracking devices on its site until informed by the Journal.17 If these technologies have become as surreptitious as to slip past sophisticated website owners, it is completely unreasonable to believe that the average user 

would be able to avoid their spying. 

IV. Identifying individuals and the merger of online and offline identity 

Online and offline data companies are combining forces to get an even more detailed profile of consumers and further erode privacy. For example, Comscore, a 

leading provider of website analytic tools, boasts that ‘‘online behavioral data can 

. . . be combined with attitudinal research or linked with offline databases in order 

to diagnose cross-channel behavior and streamline the media planning process.’’ 18

In another example, the data firm Aperture has made the connection between online and offline identities by collecting data from offline data companies like 

70 

19Michael Learmonth, ‘‘Holy Grail of Targeting is Fuel for Privacy Battle,’’ Advertising Age, March 22, 2010. 20 Id. 21 Id. 22See: http://biz.freshaddress.com/RealTimePostalAppend.aspx. For a long list of their clients 

please see: http://biz.freshaddress.com/ClientsByName.aspx. 23Scott Thrum, ‘‘Online Trackers Rake in Funding,’’ Wall Street Journal, February 25, 2011 

at: http://online.wsj.com/article/SB10001424052748704657704576150191661959856.html#ixzz 

1FYWLkEWm. 24The Jordan Edmiston Group, M&A Overview and Outlook, Slide 13, can be found at: http:// 

www.jegi.com/files/docs/IABMIXX.pdf. 25 ‘‘Protecting Online Privacy,’’ New York Times, December 4, 2010. 

Experian or Nielsen’s Claritas and then combining it with a huge database of e-mail 

addresses maintained by its parent company, Datran Media.19 According to media 

reports, many major companies are working with Aperture.20 ‘‘The line between 

merging online and offline data isn’t no-man’s land anymore; it’s becoming more of 

a common practice,’’ said Mike Zaneis, Washington lobbyist for the Interactive Advertising Bureau.’’ 21 A variety of services offer to merge names and postal addresses 

with collected IP and e-mail addresses.22

To be clear: such a merger of data is only possible when consumers are specifically 

identified. As described above, markets are using personal identifiers like e-mail addresses to connect online browsing habits to offline information from other databases. One venture capitalistic described it to the Wall Street Journal: ‘‘They’re trying to find better slices of data on individuals,’’ says Nick Sturiale, a general partner 

at Jafco Ventures, which has largely avoided the sector. ‘‘Advertisers want to buy 

individuals. They don’t want to buy [Web] pages.’’ 23 You can only ‘‘buy individuals’’ 

when you know who they are. 

V. Regulation of behavioral targeting does not threaten the ‘‘Free Internet’’ 

The ACLU believes the Internet is the most advanced marketplace of ideas and 

one of the greatest tools ever created for advancing American’s First Amendment 

rights. We would never endorse any regulation that endangered the robustness and 

variety of this medium. Laws protecting personal information and those that would 

create a ‘‘Do Not Track’’ mechanism would not harm the Internet or end the provision of free products or services. 

Behavioral targeting is different than ‘‘contextual advertising,’’ another type of online ad service which shows ads to users based on the content of the web page they 

are currently viewing or the web search they have just performed. When this pairing of ads to users’ interests is based only on a match between the content of an 

ad and a single page or search term, a website or advertising network requires no 

personal information about a user beyond an IP address. The practice does not raise 

significant privacy concerns. 

Nor would commonsense regulations necessarily foreclose the use of consumer 

data as part of advertising and services. For example, a consumer may want to 

allow significant data collection by websites with whom they already have a relationship. Companies like Google and Amazon gather information that has demonstrable benefit to the consumer—by providing book recommendations or easy-to-use 

maps. Consumers may welcome targeted ads when they feel in control of their own 

information or may consider it a fair tradeoff for other goods or services. 

Content has been supported for years (and in many cases for decades and even 

centuries) through advertising without the need for detailed targeting and tracking 

of consumers. But studies have demonstrated that the vast majority of the revenue 

from tracking consumers online goes not to content providers but rather to the behavioral targeters themselves. Industry sources say that 80 percent of the revenue 

from targeting—4 in 5 dollars—went to create and enhance the targeting system, 

not to publishers.24 Major publishers like the New York Times have endorsed a ‘‘Do 

Not Track’’ mechanism—clearly they are not concerned that such a mechanism will 

harm their ad revenue.25

VI. Access to extensive personal profiles threatens personal privacy and 

the First and Fourth Amendment 

It is no exaggeration to say that data profiles—which may combine records of a 

person’s entire online activity and extensive databases of real-world, personally 

identifiable information—draw a personal portrait unprecedented in scope and detail. Because the Internet has become intertwined with so many personal facets of 

our lives, the same technology that has provided such tremendous advances also 

creates the possibility of tremendous intrusion by companies and the government. 

71 

26See Testimony of Pam Dixon The Modern Permanent Record and Consumer Impacts from 

the Offline and Online Collection of Consumer Information, Before the Subcommittee on Communications, Technology, and the Internet, and the Subcommittee on Commerce, Trade, and 

Consumer Protection of the House Committee on Energy and Commerce November 19, 2009 at 

http://www.worldprivacyforum.org/pdf/TestimonyofPamDixonfs.pdf; Brett Michael Dykes, 

‘‘Latest Facebook privacy outrage: ad data outing gay users,’’ The Upshot, October 22, 2010 at: 

http://news.yahoo.com/s/ybloglupshot/20101022/bslybloglupshot/latest-facebook-privacyoutrage-ad-data-outing-gay-users. 27Win article. 28 Id. 29Lucas Conley, ‘‘How Rapleaf Is Data-Mining Your Friend Lists to Predict Your Credit Risk,’’ 

FAST COMPANY November 16, 2009 at http://www.fastcompany.com/blog/lucas-conley/advertising-branding-and-marketing/company-we-keep. 30Mark Stein, ‘‘Facebook Page? Or Exhibit A in Court?,’’ Portfolio.com, February 5, 2008 

http://www.portfolio.com/views/blogs/daily-brief/2008/02/05/facebook-page-or-exhibit-a-incourt/. 31Matt Liebowitz ‘‘Boss Demands Employee’s Facebook Password,’’ MSNBC.com, March 1, 

2011 http://www.msnbc.msn.com/id/41743732/ns/technologylandlscience-security/. 32 Charles Duhigg, ‘‘Bilking the Elderly, With a Corporate Assist,’’ New York Times. May 20, 

2007 http://www.nytimes.com/2007/05/20/business/20tele.html?lr=2. 33 Id. 

i. Non-governmental actors 

The harms caused by excessive and invasive data collection are real and pressing. 

They begin with straightforward invasions of privacy. Should anyone have the right 

to know and sell to others the fact that you are overweight, or depressed, or gay? 26

These are all commonplace occurrences with marketers and social networking sites 

routinely making and selling these determinations. They have significant consequences for consumers who have no say in the collection and use of their own information. As the Wall Street Journal explains: 

Yahoo’s network knows many things about recent high-school graduate Cate 

Reid. One is that she is a 13- to 18-year-old female interested in weight loss. 

Ms. Reid was able to determine this when a reporter showed her a little-known 

feature on Yahoo’s website, the Ad Interest Manager, that displays some of the 

information Yahoo had collected about her. 

Yahoo’s take on Ms. Reid, who was 17 years old at the time, hit the mark: She 

was, in fact, worried that she may be 15 pounds too heavy for her 5-foot, 6-inch 

frame. She says she often does online research about weight loss. 

‘‘Every time I go on the Internet,’’ she says, she sees weight-loss ads. ‘‘I’m selfconscious about my weight,’’ says Ms. Reid, whose father asked that her hometown not be given. ‘‘I try not to think about it. . . . Then [the ads] make me 

start thinking about it.’’ 27

This tracking is ubiquitous around the Internet with tracking technology on 80 

percent of 1,000 popular sites, up from 40 percent of those sites in 2005.28

In the information age knowledge is power and personal information can be used 

for many other purposes. A data-mining firm called Rapleaf has said it can make 

determinations about creditworthiness and whether someone will be a good customer.29 A defense attorney attempted to access the social networking pages of two 

teens in order to prove they were appropriately denied health care.30 One employer 

demanded access to its employee’s private Facebook account as part of a background 

check.31

When information escapes a consumer’s control, it gives power to others to make 

decisions about them that have real consequences for their lives. In addition, the 

lack of control and transparency surrounding consumer personal information harms 

not just consumers but the Internet as a whole. Uncertainty over the use or misuse 

of information by third parties retards the adoption of new technologies and makes 

consumers more anxious about revealing personal information. 

Personal information can also reveal weaknesses that unscrupulous actors can exploit. Ninety-two year old veteran Richard Guthrie was bilked out of more than 

$100,000 by criminals who identified him from marketing lists.32 InfoUSA routinely 

advertised lists of: 

‘‘Elderly Opportunity Seekers,’’ 3.3 million older people ‘‘looking for ways to 

make money,’’ and ‘‘Suffering Seniors,’’ 4.7 million people with cancer or Alzheimer’s disease. ‘‘Oldies but Goodies’’ contained 500,000 gamblers over 55 

years old, for 8.5 cents apiece. One list said: ‘‘These people are gullible. They 

want to believe that their luck can change.’’ 33

72 

34Federal Trade Commission, ‘‘ChoicePoint Settles Data Security Breach Charges; to Pay $10 

Million in Civil Penalties, $5 Million for Consumer Redress,’’ January 26, 2006. http:// 

www.ftc.gov/opa/2006/01/choicepoint.shtm. 35 Jessica Bennett, ‘‘What the Internet Knows about You,’’ Newsweek, October 22, 2010. 

http://www.newsweek.com/2010/10/22/forget-privacy-what-the-internet-knows-about-you.html. 36O’Harrow Jr Robert, Centers Tap into Personal Databases, Washington Post, April 2, 2008. 37 Noah Shactman, ‘‘U.S. Spies Buy Stake in Firm That Monitors Blogs, Tweets,’’ Wired, October 19, 2009 at http://www.wired.com/dangerroom/2009/10/exclusive-us-spies-buy-stake-intwitter-blog-monitoring-firm. 38Shane Harris, ‘‘FBI, Pentagon Pay For Access to Trove of Public Records,’’ National Journal., Nov. 11, 2005 at http://www.govexec.com/story—page.cfm?articleid=32802; Robert 

O’Harrow Jr., ‘‘In Age of Security, Firm Mines Wealth Of Personal Data,’’ Washington Post, January 20, 2005, at http://www.washingtonpost.com/wp-dyn/articles/A22269–2005Jan19.html. 39 Harris, supra n. 16 (quoting FBI spokesman Ed Cogswell). 40 Hiawatha Bray, ‘‘Google Subpoena Roils the Web, U.S. Effort Raises Privacy Issues,’’ Boston 

Globe, January 21, 2006 at http://www.boston.com/news/nation/articles/2006/01/21/ 

googlelsubpoenalroilslthelweb/. 41Miguel Helft, ‘‘Google Told to Turn Over User Data of Youtube,’’ New York Times, July 4, 

2008 at http://www.nytimes.com/2008/07/04/technology/04youtube.html. 

In other cases thieves purchased access to databases of Americans’ personal information and used that information to commit identity theft.34

Collection of personal information online turbo-charges this process. One reporter 

asked a company to search out information about her online. She disclosed that, 

armed only with her name and e-mail address, ‘‘Within 30 minutes, the company 

had my Social Security number; in 2 hours, they knew where I lived, my body type, 

my hometown, and my health status.’’ 35

ii. Governmental actors 

As their contracts with the data aggregator industry demonstrate, government 

and law enforcement agencies have also found these personal data profiles irresistible. In 2006 the Washington Post reported that the Federal Government and states 

across the country have developed relationships with private companies that collect 

personal information about millions of Americans, including unlisted cell phone 

numbers, insurance claims, driver’s license photographs, and credit reports through 

private data aggregators including Accurint, Entersect and LexisNexis. In fact, 

Entersect boasts that it is ‘‘the silent partner to municipal, county, state, and Federal justice agencies who access our databases every day to locate subjects, develop 

background information, secure information from a cellular or unlisted number, and 

much more.’’ 36

The Central Intelligence Agency (CIA), via its investment arm In-Q-Tel, has invested in a software company that specializes in monitoring blogs and social networks 37 and the Department of Defense, the CIA, and the Federal Bureau of Investigation (FBI) have all purchased use of private databases from Choicepoint, one of 

the largest and most sophisticated aggregators of personal data.38 In the words of 

the FBI, ‘‘We have the legal authority to collect certain types of information’’ because ChoicePoint is ‘‘a commercial database, and we purchase a lot of different 

commercial databases. . . . They have collated information that we legitimately 

have the authority to obtain.’’ 39

The government has demonstrated an increasing interest in online user data in 

other ways as well. In 2006 the Department of Justice (DOJ) subpoenaed search 

records from Google, Yahoo!, and other search providers in order to defend a lawsuit.40 In 2007, Verizon reported receiving 90,000 requests per year and in 2009, 

Facebook told Newsweek it was getting 10 to 20 requests each day. In response to 

increasing privacy concerns, Google started to publish the number of times law enforcement asked for its customers’ information and reported over 4,200 such requests in the first half of 2010 alone. In the words of Chris Hoofnagle, a senior fellow at the Berkeley Center for Law and Technology, ‘‘These very large data bases 

of transactional information become honey pots for law enforcement or for litigants.’’ 41 Given the government’s demonstrated drive to access both online data and 

commercial data bases of personal information, it seems nearly certain that law enforcement and other government actors will purchase or otherwise access the type 

of detailed profiles of online behavior compiled by behavioral marketers. 

Our First Amendment rights to freedom of religion, speech, press, petition, and 

assembly are based on the premise that open and unrestrained public debate empowers democracy by enriching the marketplace with new ideas and enabling political and social change through lawful means. The Fourth Amendment shields private conduct from unwarranted government scrutiny. Together the exercise of these 

rights online has allowed the Internet marketplace of ideas to expand exponentially. 

73 

42 In re Grand Jury Subpoena to Kramerbooks & Afterwords Inc., 26 Med. L. Rptr. 1599, 

1600–01 (D.D.C. 1998) (Dkt. No. 21, Ex. B) (requiring government to show compelling interest 

and a sufficient connection between its investigation and its request for titles of books purchased 

by Monica Lewinsky); Tattered Cover, Inc. v. City of Thornton, 44 P.3d 1044, 1053 (Colo. 2002) 

(holding that search of bookseller’s customer purchase records necessarily intrudes into constitutionally protected areas). 43See, e.g., Va. State Bd. of Pharmacy v. Va. Citizens Consumer Council, 425 U.S. 748, 757 

(1976) (right to receive advertisements); Stanley v. Georgia, 394 U.S. 557, 564 (1969) (films); 

Bantam Books v. Sullivan, 372 U.S. 58, 64 n.6 (1963) (books). 44McIntyre v. Ohio Elections Comm’n, 514 U.S. 334, 357 (1995). 45 Id. at 341–42. 46Lamont v. Postmaster General, 381 U.S. 301, 302 (1965). 47 Id. at 307. 48 Id. (quoting New York Times Co. v. Sullivan, 376 U.S. 254, 270 (1964)). 49 246 F.R.D. at 572–73 50 In re Grand Jury Subpoena to Amazon.com, 246 F.R.D. at 573. 

Courts have uniformly recognized that government requests for records of which 

books, films, or other expressive materials individuals have received implicate the 

First Amendment and trigger exacting scrutiny.42 These cases are grounded in the 

principle that the First Amendment protects not only the right of individuals to 

speak and to express information and ideas, but also the corollary right to receive 

information and ideas through books, films, and other expressive materials.43 Within this protected setting, privacy and anonymity are vitally important. Anonymity 

‘‘exemplifies the purpose behind the Bill of Rights, and of the First Amendment in 

particular,’’ because, among other things, it serves as a ‘‘shield from the tyranny of 

the majority.’’ 44 An individual may desire anonymity when engaging in First 

Amendment activities—like reading, speaking, or associating with certain groups— 

because of ‘‘fear of economic or official retaliation, . . . concern about social ostracism, or merely . . . a desire to preserve as much of one’s privacy as possible.’’ 45

The Supreme Court has also recognized that anonymity and privacy are essential 

to preserving the freedom to receive information and ideas through books, films, and 

other materials of one’s choosing. For example, in Lamont v. Postmaster General, 

the Court invalidated a postal regulation that required the recipient of ‘‘communist 

political propaganda’’ to file a written request with the postmaster before such materials could be delivered.46 The regulation violated the First Amendment because it 

was ‘‘almost certain to have a deterrent effect . . . Any addressee [was] likely to 

feel some inhibition’’ in sending for literature knowing that government officials 

were scrutinizing its content.47 Forced disclosure of reading habits, the Court concluded, ‘‘is at war with the ‘uninhibited, robust, and wide-open’ debate and discussion that are contemplated by the First Amendment.’’ 48

These words ring equally true today in the Information Age, with the prevalence 

of the Internet and other new technologies. Although these technological advances 

provide valuable tools for creating and disseminating information, the unprecedented potential for government and companies to store vast amounts of personal 

information for an indefinite time poses a new threat to the right to personal privacy and free speech. In In re Grand Jury Subpoena to Amazon.com, the district 

court recognized this reality in holding that a grand jury subpoena to Amazon requesting the identities of buyers of a certain seller’s books raised significant First 

Amendment concerns.49 The court explained its concern over the chilling effect that 

would flow from enforcing such a subpoena in the age of the Internet, despite its 

confidence in the government’s good-faith motives: 

[I]f word were to spread over the Net—and it would—that [the government] had 

demanded and received Amazon’s list of customers and their personal purchases, the chilling effect on expressive e-commerce would frost keyboards 

across America. Fiery rhetoric quickly would follow and the nuances of the subpoena (as actually written and served) would be lost as the cyber debate roiled 

itself to a furious boil. One might ask whether this court should concern itself 

with blogger outrage disproportionate to the government’s actual demand of 

Amazon. The logical answer is yes, it should: well-founded or not, rumors of an 

Orwellian Federal criminal investigation into the reading habits of Amazon’s 

customers could frighten countless potential customers into canceling planned 

online book purchases, now and perhaps forever. . . . Amazon . . . has a legitimate concern that honoring the instant subpoena would chill online purchases 

by Amazon customers.50

The Internet is, and must remain, the most open marketplace of ideas in the history of the world. In order to guarantee this, we must provide consumers with the 

tools they need to control their personal information and meaningful mechanisms 

74 

51See, e.g., N.Y. C.P.L.R. § 4509; Cal. Gov. Code §§ 6267, 6254(j). The two states that do not 

have library confidentiality laws are Hawaii and Kentucky. However, the Attorney Generals’ Offices in each state have issued opinions in support of reader privacy. Haw. OIP Opinion Letter 

No. 90–30 (1990) (disclosure of library circulation records ‘‘would result in a clear unwarranted 

invasion of personal privacy’’); Ky. OAG 82–149 (1982) (‘‘all libraries may refuse to disclose for 

public inspection their circulation records. . . . [W]e believe that the privacy rights which are 

inherent in a democratic society should constrain all libraries to keep their circulation lists confidential.’’). 52 18 U.S.C. §§ 2710(b)(2)(C), 2710(b)(2)(F), 2710(b)(3). 53 47 U.S.C. § 551(h). 54For a brief history on the principles please see Robert Gellman, Fair Information Practices: 

A Basic History at http://bobgellman.com/rg-docs/rg-FIPShistory.pdf. 55Directive 95/46/EC on the protection of individuals with regard to the processing of personal 

data and on the free movement of such data, October 24, 1995; Fair Credit Reporting Act 

(FCRA), 15 U.S.C. § 1681 et seq. 56Department of Commerce, Commercial Data Privacy and Innovation in the Internet Economy: A Dynamic Policy Framework, December 2010. 57 Id. 

for assuring privacy and protecting the robust rights established by the Constitution. 

VII. Solutions exist 

Reasonable and workable solutions exist for grappling with the problems of excessive data collection. While the technology is new, the problem is not. As the preceding case law demonstrates, as a society we have always been concerned about 

problems like judging or attacking individuals based on their reading or viewing 

habits. That is why 48 states protect public library reading records by statute.51

Congress has also recognized the privacy interests of users of expressive material 

and created strong protections in several other contexts. The Video Privacy Protection Act prohibits disclosure of video rental records without a warrant or court 

order.52 The Cable Communications Policy Act similarly prohibits disclosure of cable 

records absent a court order.53

Moreover, more than 30 years ago the U.S. Department of Health, Education and 

Welfare (now the Department of Health and Human Services), crafted basic privacy 

principles to protect personal information.54 Called the Fair Information Practice 

Principles (FIPPs), they have become the basis for comprehensive privacy laws in 

most of the industrialized world as well as sector specific privacy laws in the United 

States.55 In 2008 the Privacy Office of the Department of Homeland Security formally adopted them in its analysis of DHS programs. And in a recent report, the 

Department of Commerce recommended that the FIPPs as described by DHS be 

adopted as the basis for Internet regulation.56

The FIPPs stand for eight relatively straightforward ideas: 

• Transparency: Individuals should have clear notice about the data collection 

practices involving them. 

• Individual Participation: Individuals should have the right to consent to the use 

of their information. 

• Purpose Specification: Data collectors should describe why they need particular 

information. 

• Data Minimization: Information should only be collected if it’s needed. 

• Use Limitation: Information collected for one purpose shouldn’t be used for another. 

• Data Quality and Integrity: Information should be accurate. 

• Security: Information should be kept secure. 

• Accountability and Auditing: Data collectors should know who has accessed information and how it is used. 

While some adjustments will have to be made to conform to new technologies, 

international Internet data collection practices, as well as the data collection practices of other sectors of the U.S. economy, are already governed by the FIPPs.57 To 

imply as some have done that application of these regulations in this case would 

cause serious harm to the Internet and e-commerce seems overstated at best. 

These protections must be embodied in law, not just in industry practice. For 

years government agencies have called on industry to provide privacy protections for 

consumers. However, as a recent Federal Trade Commission report explains, selfregulatory efforts ‘‘have been too slow, and up to now have failed to provide adeVerDate Nov 24 2008 06:38 Mar 19, 2012 Jkt 073308 PO 00000 Frm 00078 Fmt 6633 Sfmt 6621 S:\GPO\DOCS\73308.TXT SCOM1 PsN: JACKIE
75 

58Federal Trade Commission (Bureau of Consumer Protection), A Preliminary FTC Staff Report on Protecting Consumer Privacy in an Era of Rapid Change: A Proposed Framework for 

Businesses and Policymakers, December 1, 2010. 59World Privacy Forum, Network Advertising Initiative: Failing at Consumer Protection and 

at Self-Regulation, Fall 2007 at: http://www.worldprivacyforum.org/pdf/WPFlNAIl 

reportlNov2l2007fs.pdf. 60 Julia Angwin, ‘‘Web Tool on Firefox to Deter Tracking,’’ Wall Street Journal, January 24, 

2011. 

quate and meaningful protection.’’ 58 One example illustrates this fact well. In 1999 

and 2000 when behavioral targeting first attracted regulatory attention, an industry 

group, the Network Advertising Initiative (NAI), claimed that self-regulation was a 

solution and that all NAI members would follow a common code of conduct.59 As 

regulatory attention faded, so did participation in the NAI. By 2003 it had only two 

members. There is no reason to believe that things would be different now. 

It is important to note that technology is already moving to help. Browser manufacturers are creating technical mechanisms so that web surfers can indicate their 

preference not to be tracked.60 If given the force of law through the passage of a 

‘‘Do Not Track’’ law, those mechanisms set a solid foundation for beginning to protect personal information online. 

VIII. Conclusion 

The current online data collection practices create detailed profiles on each of us. 

These practices are neither benign nor anonymous. They harm consumers and directly impact their fundamental rights. They are also unpopular—even when explicitly tied to the provision of free services. Good solutions exist and have been adopted 

in other countries and other parts of the U.S. economy. The Committee should look 

to these solutions like the ‘‘Do Not Track’’ mechanism and adopt legally enforceable 

rules to protect consumers and end this profiling. 

Senator KERRY. Well that’s a pretty far reach. 

[Laughter.] 

Senator KERRY. I mean it’s a big concept. So I’m not suggesting 

you’re reaching. It’s just it’s a big statement obviously about a potential downside. 

It’s just you, us and that’s it. That’s all that’s left. I’m sorry. 

[Laughter.] 

Senator KERRY. But I want to probe a few things then we’ll get 

you all out of here before too, too long, if I can. 

So Mr. Calabrese, you’ve sort of drawn this potential danger picture, which is appropriate, in front of us. What’s the appropriate 

response to that in your judgment? 

Mr. CALABRESE. Well I mean we’ve heard a lot of great responses. I mean, I think we can begin with the Do Not Track mechanism which again, if backed by law gives people the opportunity 

to sort of opt-out of this state. It’s not enough on its own. 

Senator Kerry, the principles that you described, the ability to 

give consumers control over their information is vital to this as 

well. I think Do Not Track is a part of that. But it’s also about 

sharing information collected by a first party. Just because I want 

a company to collect my information doesn’t mean I want them to 

use it for everything. I may want to limit that. And that’s—— 

Senator KERRY. Is there a balance here in your judgment between the obviously very important interest that you’re highlighting and also the commercial, economic interest that we all 

have in maintaining the viability needed to save a growing enterprise? 

Mr. CALABRESE. Oh, there absolutely is a balance. But we need 

to set—I’m sorry. 

Senator KERRY. No, go ahead. 

76 

Mr. CALABRESE. There is a balance. My fear, candidly, is that 

right now there’s no legal protection. And there’s a great deal of incentive. 

I mean Americans are some of the greatest businessmen and 

businesswomen in the world. If you give them an economic incentive and say there’s an economic incentive to track people online. 

They will do a really good job of it. 

So I think we need to put controls in place to make sure that the 

consumer is part of that process. 

Senator KERRY. And how far do those controls have to go if the 

consumer has knowledge? I mean one of the problems is we’ve 

learned—I don’t know if I have statistics here or not. I don’t think 

I do. 

But we have found historically that, you know, people consistently say well this is something I’m really super, super concerned 

about but then they tend to engage in practices on the Internet 

itself that sort of belie that a little bit. 

Mr. CALABRESE. Sure. Well, I think part of that is they really 

haven’t had meaningful choice up to this point. It’s been sort of a 

take it or leave it approach. And so it’s hard to expect people to 

invest time and energy in something—— 

Senator KERRY. I think that a lot of folks at the table would disagree that they don’t have meaningful choice. 

Mr. CALABRESE. Sure. I think they would. By all—but I mean the 

fact that I can’t point to a law that says I control my personal information makes, you know, makes me—makes it hard for me to 

tell a consumer that they in fact, do have that control. I mean, a 

company’s promises are important but not enough. 

Senator KERRY. Who else? Anybody want to speak to that, sort 

of the balance? 

Mr. ANDERSEN. I’m happy to speak to it for a moment. 

Senator KERRY. Go ahead, Mr. Andersen. 

Mr. ANDERSEN. Microsoft is obviously involved in online advertising. We also provide tools to consumers to help them protect 

themselves from activities that they may view as tracking and also 

spam and things like that as well. So we’re sort of in a somewhat 

unique position of having to make sure that we’re looking at both 

sides of the equation. 

In the testimony that I submitted we did provide some statistics 

about the incredible growth of online advertising, and pointed out 

that it really is fueling a lot of the content available on the Internet today. I do think that it is important to make sure that that 

is kept in mind as one thinks about legislation. 

At the same time consumer trust is incredibly important to our 

company. We know that users want to be in control of the data 

that is collected about them and how that data is used as well. And 

so we’re endeavoring to make sure that they have the tools available to them to make sure that they are in control. 

Senator KERRY. What does that mean, tools available to them? 

Mr. ANDERSEN. What I mean by that? I’ll give you an example 

from Internet Explorer browser. So we have this feature called 

Tracking Protection that we’ve introduced this week with Internet 

Explorer. It’s available on the product. From the menu, you can select a feature called ‘‘tracking protection.’’ And what that will—— 

77 

Senator KERRY. Select that when you download it or do you select that every time it comes up? Is there an icon on your—— 

Mr. ANDERSEN. That’s a good question. When you have installed 

the product there are menu items that are available to you to 

choose from. 

Senator KERRY. Is that in the initial installation because I know 

sometimes when you download something you get a whole menu of 

initial installation, you know, some signs that shows up more than 

it does than other times. It can be more bold faced than other 

times. You can miss them sometimes. 

I mean, how does it show up? 

Mr. ANDERSEN. That’s correct. It would not be part of your installation process. You wouldn’t be asked to choose among different 

settings at the beginning of your installation process. 

What you would do is after you’ve installed the product you 

would choose from the menu of different controls that you have to 

place. 

Senator KERRY. Do you have to choose to go to the menu or does 

the menu show up automatically? 

Mr. ANDERSEN. You’d have to choose the menu. 

Senator KERRY. So you’d have to go to the menu. 

Mr. ANDERSEN. Yes, you would. 

Senator KERRY. It wouldn’t be like a privacy warning, the original warnings where you have to sign up and say, I agree in order 

to proceed forward. There wouldn’t be a stop, you can’t proceed forward until you’ve answered it. 

Mr. ANDERSEN. That’s correct. 

Senator KERRY. So a lot of people say, well, that’s not really an 

in your face choice. 

Mr. ANDERSEN. We understand that perspective, obviously. I 

think—— 

Senator KERRY. I mean I’m sure that when you really want to 

get somebody’s attention you guys know how to do it. 

[Laughter.] 

Mr. ANDERSEN. We’ve been pretty successful at doing that, yes. 

Senator KERRY. So, does this rise to that level or does it not? 

Mr. ANDERSEN. Well, it’s a good question. I think that what we 

found is that, you know, people want to experience the full Internet 

when they use a browser product. And they want to receive the 

personalization that they’re able to get by using the full Internet. 

At the same time there’s many people who want to have a choice 

and want to have tools available to them that are easy to access 

to the product to be able to—— 

Senator KERRY. No one is denying the choice. It’s just a question 

of how boldly it’s there. I mean, you know, as you said, you know 

how to get people’s attention. Everybody does in the business. And 

things keep popping up and popping up and you’ve got to figure out 

how the hell to get them away sometimes. 

And then there are things that don’t pop up. And you can’t find 

or they’re harder to find. I think that’s really at the center of this 

to some degree. There’s got to be some sense of, you know, fair play 

and transparency and accountability in that. 

78 

Mr. ANDERSEN. Absolutely. It’s absolutely a big part of the discussion is that at what point along the user experience should you 

be affirmatively giving users a choice to make a decision. 

Senator KERRY. Let me ask a blunt question. And maybe Mr. 

Montgomery this is in your area and someone else at the table perhaps into it, I’m not sure. In fact before I ask that question let me 

come back to Intuit, if I can. 

Intuit, you were commenting, Ms. Lawler, about the four principles that you apply. And they’re admirable. They’re terrific. And 

you talk about income tax, health, vendor links, all these things 

that you manage. 

But isn’t that a very different kind of relationship and business 

than some other businesses. Which therefore makes it easier for 

you to frame this kind of a wow, we’re able, you know, we’re going 

to protect you because in fact your whole thing is the protection of 

the relationship with the customer. A lot of other people may not 

have that kind of a stake, you know. 

People can come and go as long as the traffic is sufficient if 

they’re able to track enough of what they’re doing. There may be, 

as Senator Isakson said, a sort of a commodity value to the information they have that’s sufficient to encourage them. There may 

be better economics on that side of the ledger than on the other 

which encourages them therefore to chase that information rather 

than to be as protective as you are. 

Does that make sense the distinction I’m drawing? 

Ms. LAWLER. Yes, Senator, it does. Our customers’ trust is really 

critical to us. And you talked about the nature of the sensitive information that we have and the relationship that we have with our 

customers is that they’re using our services and products to manage their personal life, their personal finances, to manage their 

businesses online. 

So we have actually gone directly to our customers and asked 

them what’s important to them. And understanding that while 

there is that sensitive information there are other aspects of their 

interaction with us that might not be, if it was another company 

treated in the same, more sophisticated way—— 

Senator KERRY. So might you agree therefore that if you go to 

a retail outlet of some kind, perhaps, they have a different interest? And are there different stakes as a result? Would there be a 

different value level of protection as a result of the difference in the 

activity? 

Ms. LAWLER. I think this is why we are talking about a principles-based approach based on industry sector type of data use. So 

clearly is data more sensitive in a retail environment? Maybe 

somewhat less so, but one of the things that was very clear from 

our customers is that in all contexts whether it is more shopping 

related data or whether it’s related to their personal finances is 

that, while they may not read privacy policies, they really care 

about how their data is used. They want to understand that 

through clear, open, transparent explanations. And actually the 

more clear and open you are about that, the less they want to be 

fed with choices on a constant basis. What actually mattered to 

them was something that was very contextual and relevant that related to their experience. 

79 

So when we think about that and think about our principlesbased approach we would look at something that was flexible that 

worked with our environment but also could be adapted to different 

industries, businesses and sectors of all sizes. 

Senator KERRY. Well I appreciate—I certainly have enormous respect for the concept, the data stewardship concept, that you’ve articulated. I think that putting that kind of statement out front it’s 

the customers, not ours, is a high standard. And we have to sort 

of figure out, you know, where that applies. 

Mr. Montgomery, you may have a different feeling about that a 

little bit. 

Mr. MONTGOMERY. Not a different feeling at all, sir. I think—I 

think an important question that you asked a little earlier which 

was about very clear notice that information has been collected so 

nothing that is hidden under, you know, under a menu. And I 

think that the self regulation program of which Microsoft, by the 

way, is an important part, has an icon on every single advertisement that collects information. 

So the billions of advertisements that go out every week that collect information will have an icon on them which will allow consumers to click on the icon. It will tell them exactly who is collecting information about them. 

Senator KERRY. Is that the icon? 

Mr. MONTGOMERY. That’s the icon in a somewhat expanded 

version. 

Senator KERRY. What’s the chart underneath it? 

Mr. MONTGOMERY. That’s an example of an ad that’s actually 

running at the moment. And if you see in the top right hand corner. That’s a pervasive ad choices icon that consumers would click 

on. 

Once they click on the icon they’ll be told a little about behavioral advertising, who is collecting information. And with one click 

be able to opt-out. So it’s—— 

Senator KERRY. Does Verizon get a piece of the action today? 

[Laughter.] 

Mr. MONTGOMERY. No, they do not, sir. 

Senator KERRY. OK. 

Mr. MONTGOMERY. So I think it’s an important point that you 

raise that it needs to be out there. And we think this is going to 

become like the recycling logo. It’s going to build consumer trust 

and at the end—— 

Senator KERRY. How does that find its way to there now? Is that 

a one to one relationship with Verizon or how does it work? 

Mr. MONTGOMERY. So we’re busy rolling out the program to our 

client base. I think that there are more than 100 major clients that 

already subscribe. And clients just simply have to give us permission to go ahead. And most of our clients agree with it. 

Then there’s an underpinning technology that we employ that allows us to figure out exactly who is tracking so that we can apply 

a compliance mechanism to the process. So if an advertiser doesn’t 

comply we contact them. Then we call them out publicly. And ultimately, you know, that information is made public and that—— 

80 

Senator KERRY. Does that presume our, kind of, consumer awareness about that or would there be some sort of a campaign that 

makes people aware? How would you get the word out, so to speak? 

Mr. MONTGOMERY. Yes. No, it’s a great question. In my testimony earlier I talked about a campaign that we’ve developed with 

the Internet Advertising Bureau called ‘‘Privacy Matters.’’ And that 

is already enjoyed over 600 million impressions against consumers. 

And we’re going to extend that campaign so we can teach consumers about what information is collected, the importance of behavioral advertising and also the importance of having access to 

free content on the Internet which is fueled by advertising. 

Senator KERRY. So do you still accept the notion that—incidentally, I think it’s a terrific step forward and I congratulate you for 

it—but do you still believe that you need a baseline law where 

there’s a safe harbor from preemptive prescriptive regulation? 

Mr. MONTGOMERY. Sir, what we feel is very, very important in 

this process is that self regulation is given an opportunity to work 

in this process. And if it needs to work with a baseline law we will 

be very happy to cooperate with you in any way to refine and ensure compliance around that as long as the self regulation can operate within it. 

Senator KERRY. But suppose, I mean, if the FTC were to certify 

that program or similar program like that and it’s compliant with 

the fair treatment of people’s information given the way the net 

works and the modern technology that’s available and the low cost 

of collection and so forth, couldn’t collectors of information outside 

of your program wind up doing a lot of damage broadly in ways 

that would be inconsistent with what you’ve said consumers ought 

to have? 

Mr. MONTGOMERY. Just to clarify, you mean, data trackers—— 

Senator KERRY. Yes. 

Mr. MONTGOMERY. Who are outside the program? 

Senator KERRY. Precisely. 

Mr. MONTGOMERY. I think that there are bad actors out there. 

And one of the—and we would absolutely support any way that we 

could uncover those bad actors and who are doing anything to 

harm consumers. 

Senator KERRY. Well, since our approach is principles-based, basically, doesn’t that give you the latitude within which to be able 

to move? 

Mr. MONTGOMERY. I think what’s important is right now we have 

over 5,000 companies subscribing to the self regulatory process. 

And in that way we’ve got 5,000 policemen out there watching for 

the bad actors. And we, in fact, interestingly last week we discovered some fraudulent practice on the Internet and handed it over 

to the FBI for further investigation. 

We hear this all the time amongst our, you know, our member 

base where, you know, they’re looking out for that all the time. So 

in summary, we absolutely would work with you in any way we 

could to ensure consumer privacy and continued innovation. 

Senator KERRY. Mr. Andersen, we’ve shared with you, with the 

company, you, the drafts, current drafts, as with several of you. 

And I wonder if you might just share with us your sense of sort 

of where we are in that process now, the direction. 

81 

Mr. ANDERSEN. From our perspective the process is going very 

well. We absolutely appreciate the opportunity to be involved in the 

process. We see the drafting process going in the direction we had 

hoped for which is to establish baseline principles in the law that 

we think are reasonable and we think that industry can and should 

be able to sign up for it. So we’re very encouraged by it. 

Senator KERRY. Appreciate that. 

Ms. Lawler, what about you? 

Ms. LAWLER. We also, excuse me, we also like the direction that 

the proposal is going. We are generally supportive. We like the 

principles-based approach. We like the consideration around codes 

of conduct and safe harbor. 

We look forward to working with you on refining the proposal as 

it moves along. 

Senator KERRY. Do you have a major—is there a major hurdle 

in your judgment? 

Ms. LAWLER. I would say that there aren’t any major hurdles. I 

think where we would like to work with you would be on the level 

of prescriptiveness of certain areas around notice and contacting. 

Senator KERRY. OK. Well we look forward, obviously, to working 

that through with you. And all of, you know, certainly. 

Ms. LAWLER. Yes. 

Senator KERRY. Certainly. 

Ms. LAWLER. There’s very much that we do like in the bill, in the 

proposal. 

Senator KERRY. Good. 

Ms. LAWLER. So we think there’s a lot there to work with. 

Senator KERRY. Good. 

Ms. LAWLER. And in particular, you know, we’ve talked a lot 

today about concern about bad actors. And you have companies 

represented in this room that are high achievers, you know, set 

very high standards. And I think what a principle based approach 

that is outlined in the proposal currently will also help us is really 

aim at the large mass of businesses, organizations in the middle, 

that may not have the same level of resources or expertise in privacy issues that you see at this table. 

And so, principles-based approach, using safe harbors as described in the proposal, I think is a real positive mechanism to 

bring the large masses into a higher level of privacy protection. 

Senator KERRY. Well, we’ll work with you on that. I’ve just been 

noticed that they need me back in the office. So I’ve got to run and 

do that in a moment. 

I think Colonel Khadafi doesn’t believe in privacy or something 

so I’ve got to go deal with it. 

[Laughter.] 

Senator KERRY. Quick question if I can, Mr. Soltani. I want to 

get—you’ve talked thoughtfully about the first party entity and the 

website that you are directly interacting with and the third party 

is some entity that the first party allows to interact with you and 

so forth. It makes sense, very logical and we get it. 

But we’ve been struggling a little bit with the cases where you 

have a first party such as Facebook. And then Facebook tracks behavior in another site, et cetera. And given that the consumer had 

a first party relationship with Facebook as long as notice is proVerDate Nov 24 2008 06:38 Mar 19, 2012 Jkt 073308 PO 00000 Frm 00085 Fmt 6633 Sfmt 6601 S:\GPO\DOCS\73308.TXT SCOM1 PsN: JACKIE
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vided and choices provided for Facebook to acquire the information 

is that a point somewhere in between the first and third party? 

How do we—we’ve been struggling with this a little bit. 

Mr. SOLTANI. It’s a great question. I believe in that context 

Facebook is a first party and a third party. In the context when 

you go and enter Facebook.com into your URL bar of your browser, 

that’s a first party interaction. 

However, in the context where you are on say, the Washington 

Post and there are Facebook widgets, buttons, objects on the page, 

I believe that constitutes a third-party widget. The loading of a 

third-party widget that then results in passive data collection I still 

believe would fall under third-party data collection. 

It’s a little nuanced since users can also interact with that widget. And in the case where users knowingly interact with a widget 

perhaps we can frame it as a first party interaction. 

Senator KERRY. So where would the notice have to be? Would the 

notice have to be the first time when you first sign up? This can 

happen? Or does the notice have to occur each time, each face 

page? How does it work? 

Mr. SOLTANI. Since often these things are tied to identifiers I believe perhaps upon the setting of the identifier in the first party 

context the notice could happen. So, your ‘‘cookie’’ could then be 

later used to tie that activity to the third-party context. 

We also want to be careful here around forced third party interactions, i.e., when you go to a website and a video starts playing 

or an ad pops up that you’re forced to dismiss, since you can actually compel users to require them to interact in a third party context. 

I think we still want to frame it around meaningful interactions 

with third party objects that consumers are aware of, and we might 

consider that okay. All other passive data collection we would consider third party data collection. 

Senator KERRY. OK. We’ve got to work that through obviously. 

And see how we can come out of it. But there’s obviously some, you 

know, some of this is, you know, does get into that nuance. 

Mr. SOLTANI. Absolutely. 

Senator KERRY. Whatever you want to call it, area. It gets tricky. 

I think the principle that we want to have guide us is also to do 

no harm even as we are protecting people. And I think, you know, 

we’re going to try to balance that very, very carefully here. 

So we will continue a thoughtful process here of engagement 

with all of you to try. And Danny Sepulveda has been doing a superb job, I think, of reaching out and sitting with everybody. 

I also want to thank as a slight nepotism here going on. But my 

brother over at the Commerce Department, as General Counsel has 

been involved in this without my instruction or engagement at all. 

They’ve done this on their own. But I thank them for their input 

which has been helpful in this process, enormously helpful. 

And obviously we need to work with the Administration in order 

to figure out where we’re going here. 

I hope we can get a product where everybody is standing up and 

saying this is good. This is something we can live with. We can 

work with. And the consumer is really given a set of choices and 

opportunities here that they don’t have today to make an intelVerDate Nov 24 2008 06:38 Mar 19, 2012 Jkt 073308 PO 00000 Frm 00086 Fmt 6633 Sfmt 6601 S:\GPO\DOCS\73308.TXT SCOM1 PsN: JACKIE
83 

ligent guided selection as to where they’re heading and what’s happening to their information. 

And I think we can come out of there without upsetting the obvious commercial interests that we all want to encourage and that 

are important to us. So on that note we’ll adjourn here today. And 

look forward to trying to get this thing into shape where we can 

get it introduced. 

I’m working, as you know, with Senator McCain, very closely. 

And he’s got some interest in this as we go. But I hope that we’ll 

get to a point where we can introduce this in short order. 

I think we need to do it. I think we need to do it soon. I think 

everybody will benefit by doing this. And I look forward to getting 

this accomplished. So thank you all very, very much for being here 

today. 

We stand adjourned. 

[Whereupon, at 12:09 p.m., the hearing was adjourned.] 

(85) 

A P P E N D I X 

PREPARED STATEMENT OF HON. MARK BEGICH, U.S. SENATOR FROM ALASKA

Thank you to Chairman Rockefeller and Senators Kerry and Pryor for their work 

on this vital issue for Americans. Alaskans value their privacy so much there is a 

right to privacy spelled out in the Alaska State Constitution. We don’t want the government or private businesses invading our privacy. 

Online privacy is one of the most important issues facing consumers today. I frequently hear from constituents regarding the privacy practices of companies or the 

impact of the Internet on their lives. The Unites States Constitution clearly protects 

Americans from unreasonable searches of their private information without a compelling reason, and there’s no reason to believe Americans are any more apt to tolerate someone pulling private information for financial benefit through their actions 

on the Internet. 

I am particularly concerned about the pervasive nature of tracking on children’s 

websites. I have an 8-year-old son who regularly uses the Internet and is extremely 

proficient on computers. My wife and I regularly monitor his Internet usage, but 

I cannot find out what companies target him, who has access to that information 

and to which third parties this information is sold. Additionally, what protections 

are in place to ensure he is not unknowingly downloading inappropriate or dangerous software? What sort of ‘‘e-dossier’’ is already being created by my son’s Internet usage? Unfortunately, I believe there are few if any protections in place for this 

most vulnerable population. 

We must find a solution that will protect people’s online experience while enabling 

the Internet to continue to grow and thrive. We cannot accept the ‘‘wild west’’ status 

quo any longer. I look forward to working toward a solution in the 112th Congress. 

RESPONSE TO WRITTEN QUESTIONS SUBMITTED BY HON. MARK PRYOR TO

HON. JON D. LEIBOWITZ

General Privacy Questions 

Question 1. Based on the FTC’s December staff report, could you please highlight 

for the Committee where you see the most harm posed to consumers due to a need 

for better online privacy protections? Where do you think are the greatest risks to 

consumer privacy? 

Answer. The Commission staff continues to be concerned about harms that can 

result from unauthorized disclosure of consumers’ information, including financial 

harm such as identity theft; physical harm such as stalking; unwarranted intrusions 

into consumers’ time, such as unwanted telemarketing calls and spam; and harms 

that result from the denial of employment, insurance, and other goods and services. 

In addition, consumers suffer harm simply from having their information used 

without their informed consent. Consumers that provide information believing it is 

private will lose trust in a company if the company makes that information public 

without the consumer’s consent. Consumers believing they are simply searching for 

information about a health condition online will lose trust in a company that sells 

information about them without their knowledge. More broadly, consumer trust in 

online services generally is damaged if companies collect and use data in ways that 

consumers do not expect. The loss of consumer trust in online services would harm 

both consumers and business by chilling consumers’ willingness to participate in online activities and electronic commerce. 

The preliminary staff report asked for comment on several recommendations to 

address these harms. For example, to address the problem of data falling into the 

wrong hands—such as identity thieves and stalkers, the report recommends that 

companies not collect unnecessary data, maintain better data security for the data 

they maintain, and dispose of the data when they no longer have a legitimate business need for it. To avoid collection and use of consumers’ data without their inVerDate Nov 24 2008 06:38 Mar 19, 2012 Jkt 073308 PO 00000 Frm 00089 Fmt 6601 Sfmt 6621 S:\GPO\DOCS\73308.TXT SCOM1 PsN: JACKIE
86 

formed consent, the report makes recommendations on how companies can improve 

transparency and obtain more informed choices. 

Question 2. How can consumers be better educated about privacy risks and steps 

they can take to protect themselves? Do consumers have the tools necessary to adequately protect themselves in today’s world? 

Answer. The Commission runs educational campaigns to teach consumers how to 

protect their valuable personal information and make thoughtful decisions about 

when it is shared and used. For example, the Commission manages the interagency 

OnGuardOnline.gov campaign, which helps computers users avoid fraud, protect 

their privacy and stay safe online. The OnGuardOnline.gov site has information to 

help parents talk to their kids about the value of their personal information and 

how to make responsible choices about where and how to share it. The Commission’s 

identity theft information for consumers (FTC.gov/idtheft) also provides tips and advice about how to protect sensitive information online and off. A wide variety of consumer educational materials, including many in Spanish, help consumers deter, detect, and defend against identity theft. For example, the FTC publishes a victim recovery guide—Take Charge: Fighting Back Against Identity Theft—that explains 

the immediate steps identity theft victims should take to address the crime. 

However, the Staff Report noted that companies’ privacy practices—including the 

collection, use, and transfer of consumer information—are often not transparent to 

consumers; therefore collection or use of consumer information may occur without 

their knowledge or consent. In such situations, consumer education is not adequate 

to protect consumer privacy, which is why the Preliminary Staff Privacy Report 

highlights the need for some of the burden surrounding privacy protection to shift 

from the consumer to businesses. Thus, the Report asked whether industry can do 

more to help consumers better understand how their information is collected and 

used. As outlined in the Report, industry could incorporate privacy protections such 

as data security, sound retention practices, and data accuracy into products and 

services; offer simplified consumer choice; and inject greater transparency about 

data collection and use into business practices. 

Question 3. What do you think FTC oversight would provide that self-regulation 

by the industry could not? 

Answer. As an initial matter, the staff report does not take a position on whether 

its recommendations should be implemented through legislation or self-regulation. 

It is intended to provide guidance to industry, Congress, and policymakers as they 

develop rules of the road in this area. 

That said, whether or not legislation gets enacted, self-regulation will always play 

an important role in protecting consumer privacy. The Commission staff has supported self-regulation in the past and continues to believe that self-regulation can 

be an effective tool, as long as it is comprehensive, robust, effective and enforceable. 

And under Section 5 of the Federal Trade Commission Act, the Commission can 

take enforcement action against companies that break their promises to abide by 

self-regulatory codes of conduct. This is an important component of ensuring accountability for self-regulatory programs. 

Question 4. What steps should the industry take to assist citizens with knowing 

what their digital life is like? 

Answer. The Preliminary Staff Privacy Report contained a number of recommendations for industry to help people understand how their personal information is collected and used. In particular, the Report recommended simplifying 

choices for consumers and increasing transparency. 

Recognizing that the current model of lengthy privacy policies was ineffective in 

informing consumers about information practices, the Staff Report recommended 

that businesses simplify choices provided to consumers. For example, the staff report indicated that companies do not need to provide choice before collecting and 

using consumers’ data for commonly accepted practices, such as product fulfillment. 

For practices requiring choice, companies should offer the choice at a time and in 

a context in which the consumer is making a decision about his or her data. This 

will allow the consumer to focus on the choices that matter and make more informed decisions. 

The Staff Report also recommended that companies increase the transparency of 

their data practices, by, for example, making privacy notices clearer, shorter, and 

more standardized, to enable better comprehension and comparison of privacy practices. The Report also recommended that companies consider providing reasonable 

access to the consumer data they maintain, proportionate to the sensitivity of the 

data and the nature of its use. 

87 

RESPONSE TO WRITTEN QUESTIONS SUBMITTED BY HON. KAY BAILEY HUTCHISON TO

HON. JON D. LIEBOWITZ

Question 1. Chairman Leibowitz, in his concurring statement to the FTC report, 

Commissioner Kovacic expresses the concern that a Do Not Track mechanism on the 

Internet could inherently reduce the quality of content provided, by lowering the 

revenue currently derived from advertising and possibly even forcing some online 

content providers to deny free access to those who opt out of tracking. 

• Has the Commission examined what the ramifications of do not track could be 

on the quality of content provided online, particularly of content that is currently provided for free? 

• Will you commit to ensuring that this type of analysis will be part of the Commission’s analysis before the final report comes out? 

Answer. The Commission recognizes the need for an appropriate balance between 

consumer choice about online tracking and ensuring continued innovation in this 

area. As the Preliminary Staff Privacy Report noted, online advertising helps to support much of the content available to consumers on the Internet. Although the Commission is continuing to evaluate the comments received on its staff report, evidence 

suggests a Do Not Track mechanism for exercising choice about behavioral advertising would have minimal impact on the free content available on the Internet and 

on innovation. First, the Preliminary Staff Privacy Report noted that certain advertising, such as first party marketing and contextual advertising, would not be affected by a Do Not Track mechanism. Thus, this type of advertising would continue 

to serve as a source of revenue for content providers. 

Second, recent research from an organization working with the advertising industry suggests that if companies provide adequate transparency and consumer choice, 

consumers will choose not to opt out in great numbers, because they have a greater 

degree of trust in companies’ stewardship of their information. See Evidon (formerly 

Better Advertising), Research: consumers feel better about brands that give them 

transparency and control over ads, http://blog.evidon.com/2010/11/10/researchconsumers-feel-better-about-brands-that-give-them-transparency-and-control-overads/ (Nov. 10, 2010). 

Finally, key industry stakeholders have responded very positively to the request 

for development of a simple, easy to use Do Not Track system. Leading browser 

companies have offered changes to their browsers to implement Do Not Track. 

Mozilla, for example, has implemented a Do Not Track header for use by consumers 

when they browse the web, and Microsoft has rolled out a Tracking Protection List 

feature that allows consumers to block the collection of information by specified 

third parties. Apple has announced a do not track tool in a test version of its browser. The advertising industry itself also appears to recognize the value of offering 

simplified choice to consumers and has ramped up its effort to provide clearer disclosures and choice mechanisms after release of our preliminary staff report. Indeed, 

most recently, several of the leading advertising industry trade associations have 

agreed to work closely with Mozilla to determine how to incorporate Mozilla’s Do 

Not Track feature into its industry self-regulatory effort. I believe these efforts demonstrate that improved consumer choice can be consistent with innovation. 

As these developments take place, the Commission is continuing to analyze the 

comments received on the Preliminary Staff Privacy Report, including those regarding the potential effects of a Do Not Track mechanism on innovation and the availability of free Internet content. The Commission also will continue to evaluate information about the costs and benefits of any such mechanism. 

Question 2. The Commission’s report calls for a ‘‘privacy by design’’ model that 

includes the recommendation for companies to only collect information needed for 

a specific business purpose. Some comments submitted on the report expressed concern that implementing such a restriction could become so specific that it limits innovation on new and potentially beneficial uses of data. How do you envision such 

a restriction being implemented in a way that will allow for the continued innovation of new products and services necessary to keep American companies as leaders 

in the global online world? 

Answer. The goal of privacy by design is to guide and motivate businesses to develop best practices for incorporating privacy into their products and services during 

the early stages of their development. Best practices that ensure that privacy solutions are compatible with business needs should not restrict innovation and will 

likely be more flexible than government rules. To be clear, the principle of privacy 

by design contemplates that businesses can and should collect information for their 

legitimate business purposes; however, as discussed in the Preliminary Staff Privacy 

Report, the concept of privacy by design also means the amount of data collected 

88 

and duration for which such data is retained should be limited by those legitimate 

business needs. This reflects concerns that collected data may be retained by companies indefinitely, increasing the risk that the data may be compromised through a 

security vulnerability or put to use in ways that consumers never would have expected and to which they would object. Staff’s recommendation that companies implement a privacy by design approach is designed to encourage businesses simply 

to think through the privacy and security risks associated with collecting more information than is currently needed from consumers and retaining it for longer than 

necessary. The Commission has recognized these concerns in its enforcement program. For example, we have brought data security cases against companies that 

kept shoppers’ credit card information, long after they had a business need to do 

so. See e.g., In the Matter of BJ’s Wholesale Club, Inc., Docket No. C–4148 (Sept. 

23, 2005) (final consent order). In these cases, the credit card information was obtained by hackers. Had the companies taken more care in disposing of information 

they no longer needed, consumer harm could have been avoided. Similarly, last year 

Google collected personal information through its Street View cars—the company 

claims to have inadvertently collected that information without any intention of 

using it. Under the Privacy by Design approach recommended in our staff report, 

Google would have tested its systems to ensure that it did not collect data it did 

not need. 

As these examples demonstrate, companies should assess privacy and security 

risks as part of the innovation process and work to address them appropriately. For 

example, although they may determine that continued collection of personal data is 

necessary, they could try to anonymize such data to reduce privacy and security 

risks. 

We have received many comments on the concept of collecting and retaining data 

for a ‘‘specific business purpose,’’ which we plan to address in the final report in 

a way that furthers consumer privacy interests without impeding innovation. 

Question 3. Chairman Leibowitz, FTC Commissioner Rosch has expressed ‘‘serious 

reservations’’ about the new privacy proposal advanced in the FTC’s staff report. He 

claims that the current ‘‘harm’’ model of FTC enforcement has served the Commission well. If the FTC is correctly enforcing its statutory responsibilities to ensure 

disclosure of ‘‘material’’ privacy policies and to hold companies accountable for those 

policies, consumers already have information to make informed decisions about their 

online privacy. 

• If that’s the case, why is it necessary to adopt a new, broader regulatory framework for online privacy? 

• If privacy policies are too opaque for consumers to understand and if the FTC 

is concerned that consumers may be misled, why wouldn’t rigorous enforcement 

of the FTC’s Section 5 deceptive trade practices authority improve the clarity 

of privacy policies by companies seeking to avoid enforcement actions? 

Answer. First, I note that the report does not propose a new regulatory framework—it simply provides a framework for industry best practices and potentially, 

for legislation, if Congress chooses to enact it. 

Second, I agree with you that robust enforcement of Section 5 is critical. We have 

recently brought cases against companies like Google, Twitter, and Chitika, an online advertising network, alleging that their practices were deceptive. We have additional cases in the pipeline. 

Third, Section 5 does not generally require companies to disclose their information 

practices. If they choose to make statements about privacy, and those statements 

are deceptive, the Commission may take action under Section 5. However, not every 

long or opaque disclosure will be deceptive under Commission precedent. Regardless 

of the threshold for Commission law enforcement actions, we believe that stakeholders should work together to improve transparency. Indeed, many companies recognize that providing clear disclosures to their consumers about their information 

practices helps them maintain a positive relationship with their customers. Companies have an interest in promoting that relationship regardless of the prospect of 

enforcement action by the FTC. The Preliminary Staff Privacy Report provides businesses with proposals for ways to simplify and improve disclosures, and we think 

those steps would work well in this area while we continue to take action against 

plainly deceptive practices. 

89 

RESPONSE TO WRITTEN QUESTIONS SUBMITTED BY HON. MARK PRYOR TO

LAWRENCE E. STRICKLING

Question 1. From your perspective, what were the two most important privacy 

issues you’d like to highlight in the Department’s Commerce privacy green paper? 

Answer. The Green Paper examines how the United States can strengthen its consumer data privacy framework while ensuring that this framework continues to encourage innovation in the digital economy. Instead of identifying specific consumer 

data privacy issues that companies and policymakers should address, the Green 

Paper focuses on recommendations that would help to create a policy framework 

that better addresses increasingly intensive uses of personal data in the digital 

economy. Two main issues emerged from this analysis. 

First, consumers and businesses would benefit from the adoption of baseline, comprehensive Fair Information Practice Principles (FIPPs) in the commercial context. 

Much of the personal data traversing the Internet falls into the gaps between existing Federal privacy statutes. There is also evidence that consumers who use the 

Internet misunderstand the legal rules that apply to personal information collection 

and use in the commercial context. These gaps in legal protection for personal data 

leave consumers insecure and uneasy about how data about their activities and 

transactions are collected, stored, and used. Widely adopted, comprehensive FIPPs 

would help to fill these gaps and thereby increase consumer trust in the Internet. 

Businesses would also benefit from comprehensive baseline FIPPs. Businesses 

generally recognize that their sustainability depends on maintaining consumer trust 

but find that the rules of the road are hard to discern. Applying a set of general 

principles to commercial activities that are not covered by an existing Federal data 

privacy statute would provide businesses with guidance as to what consumers and 

enforcement agencies expect of them. 

Second, fostering innovation within a consumer data privacy policy framework requires a flexible approach to implementing privacy protections. The Green Paper 

proposes a framework in which the Department of Commerce would convene multistakeholder groups—composed of representatives from industry, civil society, academia, and other government agencies—to define codes of conduct that are enforceable by the Federal Trade Commission under its current authority or through any 

additional authority granted through baseline consumer privacy legislation. These 

codes would provide guidance about how to apply FIPPs in specific contexts. The 

multi-stakeholder process envisioned in the Green Paper would help to ensure that 

these codes set forth practices that reflect evolving consumer expectations. 

Question 2. What role does consumer trust play in the way users exchange information, goods and services over the Internet? 

Answer. Protecting consumer trust in the Internet is a top policy imperative of 

NTIA and the Department of Commerce. Consumer trust is essential to nurturing 

the Internet’s growth, and protecting privacy is an important part of maintaining 

consumer trust. When consumers entrust personal information to a company that 

does business on the Internet, they expect that the company will handle it in ways 

that are consistent with this relationship. If companies use information in ways that 

are contrary to consumers’ expectations, then consumers may be reluctant to adopt 

new Internet services and applications. Finally, consumer trust depends on more 

than privacy. Issues of security, safety, and reliability also come into play. Whether 

making purchases online, communicating with family members, or conducting business, consumers must know that they have control over their personal information. 

As innovative new applications and services are developed, it is important that consumers know that their information is safe and that providers have clear rules 

about how to respect individual privacy. 

Indeed, the Department, in partnership with other Federal agencies and the private sector, is leading the implementation of an Administration effort to improve 

consumer trust online: The National Strategy for Trusted Identities in Cyberspace 

(NSTIC). The NSTIC envisions enhancing online privacy and security through services that provide credentials that improve upon the user name and password 

schemes that are common online. The NSTIC proposes using technologies that 

would provide individuals the option of obtaining a strong credential to use in sensitive online transactions. The NSTIC calls for the participants in this digital identity marketplace to implement privacy protections that are based on comprehensive 

FIPPs. Developing enforceable codes of conduct through multi-stakeholder processes 

is one way that the Department can work with the private sector to implement 

these protections. 

90 

Question 3. What do you envision the Department’s role will be with respect to 

privacy in the future? 

Answer. We propose in the Green Paper an important role for the Department 

of Commerce in convening stakeholders to develop enforceable codes of conduct that 

implement comprehensive Fair Information Practice Principles (FIPPs) that the 

Obama Administration supports as the foundation of Federal legislation in this 

area. The Green Paper outlines a multi-stakeholder process in which the Department would convene companies, civil society groups, academics, and the FTC and 

other government agencies to produce enforceable codes of conduct. An open development process that includes industry and consumers can help align these codes 

and consumer expectations. 

Another important role for the Department of Commerce is to work toward greater interoperability between the U.S. consumer data privacy framework and those of 

our allies and trading partners. Companies would benefit from the potential reduction in multiple compliance burdens, and U.S. consumers would benefit from more 

consistent cross-border consumer data privacy protections. Both objectives are important to the Department of Commerce, and the Department and the Administration are committed to working with Congress to develop an appropriate legislative 

approach. 

RESPONSE TO WRITTEN QUESTION SUBMITTED BY HON. MARK BEGICH TO

LAWRENCE E. STRICKLING

Question. What steps should the industry take to assist Citizens with knowing 

what their digital life is like? 

Answer. Enhancing transparency is one important step that companies can take 

to help consumers understand the role of personal data collection and use in the 

digital economy. As the Department of Commerce’s Green Paper on consumer data 

privacy explains, enhanced, effective transparency requires providing consumers 

with information that is accessible, clear, salient, and comprehensible. Current practices surrounding disclosures of privacy practices generally fall short of this standard; the privacy policies that are the primary mechanism for explaining what information companies collect and how they use are often lengthy, dense, and difficult 

to comprehend. Providing simpler statements of these practices, and providing them 

at times when consumers can act on this information, are ways that companies can 

provide consumers with greater insight into, and control over, their digital lives. Online tools or interfaces that allow consumers to understand and manage the collection of personal information can also provide a link between enhanced transparency 

and enhanced user control. 

The Department of Commerce has also recommended that companies regard enhanced transparency as part of a more comprehensive approach to handling personal information. To this end, the Green Paper encourages the broad adoption of 

comprehensive Fair Information Practice Principles (FIPPs). 

RESPONSE TO WRITTEN QUESTIONS SUBMITTED BY HON. KAY BAILEY HUTCHISON TO

JOHN MONTGOMERY

Question 1. Mr. Montgomery, you mention at the beginning of your testimony the 

importance of behavioral advertising to the Internet. Do you believe the enactment 

of baseline privacy principles in the form of Federal legislation would have an effect 

on targeted advertising? If so, what would it be? And, in turn, what impact might 

that have on the larger online ecosystem? 

Answer. GroupM supports efforts to promote transparency and choice in the marketplace and believes industry self-regulation is the appropriate approach for addressing concerns with online advertising while ensuring the ad-supported web continues to provide consumers benefit and fuel the Internet economy. A major benefit 

of self-regulation is its ability to respond quickly to changes in the technology, business practices, and consumer preferences. It is this adaptive nature of self-regulation that makes it so well suited for the complex Internet ecosystem. 

Our business is built on the belief that both consumers and companies benefit 

when advertising provides timely and relevant information to those consumers who 

are most likely to be interested. While not deliberate, a law could reduce the relevancy and effectiveness of advertising. There is already strong evidence that privacy regulations in the European Union have resulted in an average 65 percent reVerDate Nov 24 2008 06:38 Mar 19, 2012 Jkt 073308 PO 00000 Frm 00094 Fmt 6601 Sfmt 6621 S:\GPO\DOCS\73308.TXT SCOM1 PsN: JACKIE
91 

1 According to a study conducted by Avi Goldfarb and Catherine E. Tucker, ‘‘Privacy Regulation and Online Advertising,’’ available at http://papers.ssrn.com/sol3/papers.cfm?abstract 

lid=1600259. 

duction in the effectiveness of online ads.1 We have concerns that a U.S. law could 

similarly hinder innovation in the advertising and marketing industry, undermining 

economic support for valuable content and services and possibly encouraging higher 

fees to consumers. Inhibiting innovation would restrict growth in one of the healthiest industries in a troubled U.S. economy. These conditions would discourage venture capital funding for new entries, and in so doing, stall job growth in the industry. 

Question 2. Mr. Montgomery, there has been a lot of discussion about whether industry best practices and self-regulatory efforts are effective. Many believe that 

market forces will push companies toward such industry-led efforts and that the 

FTC has the existing legal authority to hold companies accountable as good stewards of consumer information. Which do you believe is best for consumers: having 

the Federal Government act as a legal backstop to industry-led self-regulation or 

having the government set top-down prescriptive rules on how to collect and use 

consumer data? What are some of the advantages and concerns with each approach? 

Answer. Industry-led self-regulation is preferred over top-down, prescriptive rules 

imposed by government. GroupM believes self-regulation is the most effective means 

for addressing concerns with online behavioral advertising. Self-regulatory codes are 

adaptive and may be quickly modified to address changes in consumer preference 

and technology. In addition, this approach helps preserve an environment that fosters online innovation, ensures advertising continues to help fuel the Internet economic engine, and supports a vibrant, ad-supported offering of products and services 

online that consumers now expect to receive for free or at a low cost. GroupM believes that the Digital Advertising Alliance’s (‘‘DAA’’) Self-Regulatory Principles of 

Online Behavioral Advertising (‘‘Principles) are comprehensive yet flexible enough 

to respond to the complex and rapidly evolving online advertising ecosystem. The 

Principles set-forth consumer-friendly standards that require participants to provide 

enhanced transparency and consumer choice with respect to the collection and use 

of data for online behavioral advertising purposes. 

The DAA’s program has been designed for its participants to self-police, promote 

compliance, and, where necessary, report non-compliant companies to the appropriate government agencies. This private-public collaboration where the Federal 

Government acts as a legal backstop augments the self-regulatory program’s credibility and reinforces the program’s accountability measures. 

The DAA program is backed by independent enforcement programs working in 

concert to monitor and enforce compliance with the Principles, as well as manage 

consumer complaint resolution. These accountability programs are live and being 

administered by the Council of Better Business Bureaus (‘‘CBBB’’) and the Direct 

Marketing Association (‘‘DMA’’). The DMA and CBBB Accountability Programs are 

empowered under the Principles to provide a public report on entities that do not 

come into compliance and to refer such cases to the Federal Trade Commission 

(‘‘FTC’’). The FTC through its authority under Section 5 of the FTC Act can enforce 

against entities that fail to honor its commitment to adhere to the Principles. 

Through industry self-policing, more cops are on the beat, which reduces the burden 

on the FTC. 

Question 3. While a large portion of the online industry is participating in the 

self-regulatory program, it has not reached 100 percent. What can be done to increase participation? Is it possible to do get full participation through a self-regulatory program? 

Answer. It is very possible to achieve full participation in the DAA program. The 

leading marketing and advertising trade associations, representing more than 5,000 

companies, have committed to this self-regulatory approach because they strongly 

believe in the program’s purpose. This unprecedented collaborative effort has 

brought together representatives of the entire advertising ecosystem to develop and 

implement principles for the use and collection of data in this important area to the 

economy. Already, over 60 companies are participating in the DAA’s Consumer 

Choice Page (http://www.aboutads.info/choices/) and billions of ad impressions 

have been delivered with the Advertising Option Icon—the icon appearing in or near 

ads or on web pages where data is collected or used for online behavioral advertising 

purpose. This icon is used by participants to provide notice concerning online behavioral advertising practices and link to a universal choice mechanism. 

The launch of the DAA program is resulting in a change in industry practice. 

Companies are starting to require their partners to adhere to the Principles. This 

92 

is driving participation in the program. In addition, the trade associations behind 

this self-regulatory effort and the Accountability Programs are reaching out to companies to promote program participation. To help companies with compliance, the 

DAA has selected three companies as approved providers to assist companies with 

implementing the Principles. These approved providers’ services help companies to 

provide enhanced notice and choice as required by the Principles. 

RESPONSE TO WRITTEN QUESTION SUBMITTED BY HON. KAY BAILEY HUTCHISON TO

ERICH D. ANDERSEN

Question. While a large portion of the online industry is participating in the selfregulatory program, it has not reached 100 percent. What can be done to increase 

participation? Is it possible to do get full participation through a self-regulatory program? 

Answer. The online ad industry, led by the Digital Advertising Alliance (DAA) and 

of which Microsoft is a member, is working to increase participation in the self-regulatory program. Among the efforts to drive participation is increased outreach to 

companies to promote participation and providing assistance to implement the program. Through these efforts the DAA believes it is possible to achieve full participation in its program. 

RESPONSE TO WRITTEN QUESTIONS SUBMITTED BY HON. JOHN ENSIGN TO

ERICH D. ANDERSEN

Question 1. How would you say the self-regulatory approach is working in the 

marketplace to protect consumers thus far? 

Answer. While still in the early stages of roll-out, the self-regulatory approach for 

online advertising is on a sound path. Over 60 companies, including Microsoft, are 

already participating in the Digital Advertising Alliance’s (DAA) Consumer Choice 

Page resulting in an Advertising Option Icon being delivered on billions of online 

ad impressions. The icon not only provides notice to consumers about online behavioral advertising practices, but also provides a link to a universal choice mechanism. 

With the leading marketing and advertising trade associations backing the self-regulatory approach the expectation is that more companies will participate in the Consumer Choice Page. 

The last few months have shown that industry can act quickly and effectively. For 

example, in that short period of time, the three major browser vendors have announced do not track tools that offer unprecedented privacy protection. Even the 

FTC has recognized and commended the progress industry has made in acting 

quickly and effectively to protect consumer privacy. 

Question 2. Mr. Andersen, you talked about the importance of industry self-regulation and best practices. How would your ability to protect consumers be compromised if we went in the opposite direction? 

Answer. Our ability to protect consumers would be compromised by the adoption 

of impractical proposals. Legislation becomes overregulation if it contains preferences for particular services, solutions, or mechanisms to provide notice, obtain 

choice, or protect consumer data, or if it mandates prescriptive rules that may be 

of limited effect or that burden businesses without yielding commensurate privacy 

benefits. Seeking input from interested stakeholders is one way to ensure the right 

balance is struck. 

Question 3. Mr. Andersen, your testimony highlighted the need to promote continued innovation in technology and online services. Fostering and supporting innovation in the marketplace is a top priority of mine, and there is no question that innovation is crucial for creating jobs and economic growth. In your view, what is the 

best way to encourage innovation while still protecting consumers’ online privacy? 

Answer. There are a number of ways to encourage innovation while still protecting consumers’ online privacy: 

• Recognition of the role of self-regulation: while comprehensive privacy legislation may provide a set of baseline protections, self-regulation can build upon 

those protections and adapt them to specific contexts. Consumers have different 

privacy expectations depending on whether they are interacting with online retailers, social media services, search engines, or online ad networks. Self-regulatory principles can be tailored to these different contexts. In addition, self-regulation can address emerging technologies or business models. 

• Ensure there are no technology mandates. 

93 

• Allow for ‘‘operational use’’ of data. This means that companies would be able 

to use data to provide the service the user wanted, improve services, protect 

against fraud, and generally operate their business. 

RESPONSE TO WRITTEN QUESTIONS SUBMITTED BY HON. MARK PRYOR TO

BARBARA LAWLER

General Privacy Questions 

Question 1. How does on-line information collection usually work? 

Answer. Intuit does not engage in online tracking. However, as a technology, online information tracking typically works through the use of ‘‘cookies’’ which are random, identifiers that have no significance on their own. These ‘‘cookies’’ may be limited in their duration to a particular session that a customer is having with a 

website, or they may persist for longer periods of time. In typical ‘‘first party’’ online information collection, these cookies can help a company understand several 

things—the time spent on the site, the pages visited (and for how long), the navigation, or ‘‘path’’ that the visitor took, etc. This information is frequently used to improve the performance and usability of a company’s website. Information may also 

be collected for ‘‘3rd party’’ use—where the kinds of information mentioned above 

may be shared across several different entities, typically advertisers, web-site publishers, and companies that help to match advertisers to publishers. 

Question 2. How does behavioral advertising differ from contextual advertising? 

Answer. Behavioral advertising typically refers to the delivery of advertising messages based on the interests inferred from a person’s on-line behavior, over time. 

It may include the kinds of searches that he/she does; the types of websites visited, 

etc. The combination of these pieces of information can be used to deduce a person’s 

interests, in which case advertisements related to those possible interests can be 

shown to the individual. 

Contextual advertising typically involves a ‘‘single point in time’’ matching of advertising content to someone based on a specific action that the individual takes. 

The classic example is the advertisements, or ‘sponsored links’, which show up in 

the search results for a particular search query. For example, if someone were to 

search for information on car tires, he/she will likely see advertisements from tire 

manufacturers/sellers based specifically on that search request. 

Question 3. What evidence is there that behavioral advertising is effective? 

Answer. There have been some studies done which have shown that people are 

more likely to respond to advertising based on their inferred interests, than more 

general advertising messages unrelated to the audience receiving them. 

Question 4. What does online information collection mean for our children’s reputations? 

Answer. Collection of information on children under 13 is regulated by the 

COPPA. Intuit’s products and services are financial in nature and not intended to 

be used by children. 

We recognize the proliferation of social media and the use of it by minors. We 

would expect that companies providing such services would do so lawfully, and in 

a manner respectful of all individuals using such a service. 

Question 5. To what extent is geo-location tracking a problem? 

Answer. Geo-location information can be very useful to provide specific, highly relevant services to individuals, such as providing directions, identifying nearest services, etc. In all cases, however, the individual should understand that his/her geolocation information is being collected. It should also be retained and used for a very 

limited period of time specifically to provide those relevant services to him/her. Once 

the services have been delivered, the geo-location data should be deleted and/or removed from the service. 

Question 6. Is Federal privacy legislation needed? If so, what should be the basic 

elements of any privacy legislation? 

Answer. We see the value in commonsense Federal privacy legislations that could 

set rules of the road for companies to follow and clear the field of conflicting state 

laws. As the digital economy has grown over the last decade, self-regulatory approaches have allowed many businesses to offer consumers many innovative products and services while incorporating meaningful privacy protections in ways that 

fit the company size, structure, culture and industry. High performers that are committed to capturing and retaining their customers’ trust implement a range of selfregulatory approaches, from privacy seals to government sponsored codes of conduct 

(such as the Dept. of Commerce Safe Harbor Program). Self-regulatory approaches 

may fall short for new, small start-ups, naı ̈ve companies or malfeasant companies. 

94 

The same could be said for regulation as well. It’s our belief that the most effective 

way to protect consumers and support innovation is a principles-based approach, 

covering Fair Information Privacy Practices creates a credible baseline that provides 

the rules of the road. 

Question 7. Should companies be held to higher standards with respect to our children and the way their information is handled? 

Answer. The Children’s Online Privacy Protection Act (COPPA) sets a high standard with respect to children online. The FTC should provide rigorous enforcement 

of COPPA. 

Question 8. Are you concerned about employer or insurance discrimination based 

on information collected about consumers online? 

Answer. We would have to research this issue in order to comment on this question. 

Other questions 

Question 9. Your testimony demonstrates a strong commitment to privacy. Do you 

believe that Intuit’s approach to privacy is generally followed by companies operating online? How would you suggest other companies integrate privacy protections 

into their services? 

Answer. Different businesses can offer consumers various innovative products and 

services while incorporating meaningful privacy protections in ways that fits the 

company size, structure, culture and industry. High performers like Intuit that are 

committed to capturing and retaining their customers’ trust implement a range of 

self-regulatory approaches, from privacy seals to government sponsored codes of conduct (such as the Dept. of Commerce Safe Harbor Program). Self-regulatory approaches may fall short for new, small start-ups, naı ̈ve companies or malfeasant 

companies. It’s our belief that the most effective way to protect consumers and support innovation is a principles-based approach to legislation that creates a baseline 

that provides the rules of the road. We believe that an emphasis on education and 

advocacy through industry sector associations, business groups, small business associations and local chambers of commerce. This would be necessary for both regulatory and self-regulatory approaches. 

RESPONSE TO WRITTEN QUESTION SUBMITTED BY HON. MARK BEGICH TO

BARBARA LAWLER

Question. What steps should the industry take to assist citizens with knowing 

what their digital life is like? 

Answer. We are committed to educating our customers about their data stewardship choices and what they can do to protect their personal information when interacting with our products. Consumers would benefit from additional direct education 

and communication, such as PSAs through mass media, social networks and simple 

and clear information company websites. 

RESPONSE TO WRITTEN QUESTIONS SUBMITTED BY HON. KAY BAILEY HUTCHISON TO

BARBARA LAWLER

Question 1a. Ms. Lawler, your company is engaged in a variety of online businesses and is subject to several Federal and state privacy regulations. You know as 

well as anyone that totally unrelated companies can be impacted in different ways 

by the interconnected web of privacy laws. I fear that addressing a privacy issue 

in one area could have unexpected ramifications in a totally different area. If this 

Committee considers developing new online privacy legislation, what sort of pitfalls 

should we look out for so that we can avoid such unintended consequences? 

Answer. A principles-based legislative approach will have the highest probability 

of success in protecting consumers while providing a flexible, level playing field for 

a wide range of businesses holding different types of data for different purposes. 

This would allow organizations to incorporate the necessary types of privacy protections for consumers while allowing flexibility on how the protections are implemented. It can be the optimal framework for a wide range of business, especially 

small businesses, which are the backbone of the American economy. We are specifically concerned about requirements that provide risk to innovation and customer delight, that may limit the flexibility to try new options and methods of delivering 

value to our customers in a rapid, iterative fashion. Examples include mandates to 

require the use specific technologies or specific procedural mechanics, such as very 

specific requirements regarding how and when notices are delivered, worded and 

95 

formatted; or rules that place too many controls on the first party use of data especially those uses that are already consistent with consumer understanding and expectations. Specific requirements can create overlapping rules for the exact same 

sets of data; or specific words required for contractual agreements with third parties 

can create confusion or inadvertent non-compliance. The Committee must also be 

careful to avoid prescriptive mandates that attempt to address one set of concerns 

with the Internet but could unintentionally limit or prevent other elements of the 

Internet from functioning properly—for example, the commendable effort to increase 

transparency and choice related to behavioral tracking and advertising, if overly 

proscribed, could inhibit software as a service applications’ functionality. As we developed the Intuit Data Stewardship Principles, our customers told us in multiple 

rounds of research that they prefer the specificity of simple, plain language—Principles rather than the policy-based, business-speak language you or I might think 

is better. 

Question 1b. Is there an approach we can take to build upon or work within existing frameworks, such as HIPPA and Gramm-Leach-Bliley, rather than writing another separate statute? 

Answer. At Intuit we have experience with applying different rules to overlapping 

sets of data. Both HIPAA and GLB have their strengths and weaknesses; both are 

based on recognized privacy principles, and yet take philosophically different approaches. HIPAA is designed to limit data uses and sharing beyond the first party 

organization, while GLB is designed to enable data uses beyond the first party organization. And both contain elements of proscriptive requirements, notices being a 

prime example. 

We recommend starting from a fresh perspective that is principles based and does 

not rely on procedural requirements. 

Question 2a. Ms. Lawler, there has been a lot of discussion about whether industry best practices and self-regulatory efforts are effective. Many believe that market 

forces will push companies toward such industry-led efforts and that the FTC has 

the existing legal authority to hold companies accountable as good stewards of consumer information. Which do you believe is best for consumers: having the Federal 

Government act as a legal backstop to industry-led self-regulation or having the 

government set top-down prescriptive rules on how to collect and use consumer 

data? 

Answer. We believe the most effective solution would be a middle ground between 

the two: A principles-based legislative approach will provide a wide range of businesses holding different types of data for different purposes to incorporate the necessary types of privacy protections for consumers while allowing flexibility on how 

the protections are implemented. It can be the optimal framework for a wide range 

of business, especially small businesses, which are the backbone of the American 

economy. 

Question 2b. What are some of the advantages and concerns with each approach? 

Answer. There is an argument that market forces, policy-maker scrutiny, customer expectations are heading in right direction but will not fully cover all types 

of organizations—high performers, edge riders and the majority that are unaware. 

Enforceable self-regulatory codes of conduct work for most business—high performers are provided opportunity to excel, and those who need rules of the road are 

still able to comply—preserving flexibility and the ability to innovate is key. As Congress considers rules of the road, take care to not be overly prescriptive—protecting 

online privacy while sacrificing innovation will not help consumers or the competitiveness of the American economy. 

Question 3. While a large portion of the online industry is participating in the 

self-regulatory program, it has not reached 100 percent. What can be done to increase participation? Is it possible to do get full participation through a self-regulatory program? 

Answer. We believe that a good approach is an emphasis on education and advocacy through industry sector associations, business groups, small business associations and local chambers of commerce. This would be necessary for both regulatory 

and self-regulatory approaches. 

96 

RESPONSE TO WRITTEN QUESTIONS SUBMITTED BY HON. JOHN ENSIGN TO

BARBARA LAWLER

Question 1. How would you say the self-regulatory approach is working in the 

marketplace to protect consumers thus far? 

Answer. As the digital economy has grown over the last decade, self-regulatory 

approaches have allowed many businesses to offer consumers many innovative products and services while incorporating meaningful privacy protections to protect their 

customers in ways that fit the company size, structure, culture and industry. High 

performers that are committed to capturing and retaining their customers’ trust implement a range of self-regulatory approaches, from privacy seals to government 

sponsored codes of conduct (such as the Dept. of Commerce Safe Harbor Program). 

Self-regulatory approaches may fall short for new, small start-ups, naı ̈ve companies 

or malfeasant companies. The same could be said for regulation as well. It’s our belief that the most effective way to protect consumers and support innovation is a 

principles-based approach to legislation that creates a baseline that provides the 

rules of the road. 

Question 2. Ms. Lawler in your testimony you cite the value of principles-based 

privacy legislation working in tandem with self-regulatory approaches and codes of 

conduct, highlighting the importance of enabling industry flexibility. 

Answer. A principles-based legislative approach will provide a wide range of businesses holding different types of data for different purposes the ability to incorporate the necessary types of privacy protections for consumers while allowing flexibility on how the protections are implemented. It can be the optimal framework for 

a wide range of businesses, especially small businesses, which are the backbone of 

the American economy. 

Question 3. In your opinion, what would be the effect of over-prescriptive, onesize-fits-all regulation on your ability to protect the online privacy of consumers? 

Answer. Intuit’s approach is to provide our customers a high integrity, trusted 

end-to-end experience that ultimately results in customer delight. Proscriptive, onesize-fits-all approaches tend to emphasize form over functional value to consumers 

(when was the last time you read the mandatory financial institution or HIPAA privacy notice?). Such an approach would force us to focus on procedural compliance 

first and customer delight and innovation second. Our priority lies with providing 

our customers with innovative ways to solve their financial problems while making 

sure their data is protected. 

Question 4. Can you give me specific examples of what types of industry regulation you would consider over-prescriptive? 

Answer. We are specifically concerned about requirements that provide risk to innovation and ultimately hurt our ability to meet our customer’ needs, and limit the 

flexibility to try new options and methods of delivering value to our customers in 

a rapid, iterative fashion. Examples include mandates requiring the use of specific 

technologies or specific procedural mechanics, such as very specific requirements 

about how and when notices are delivered, how they are worded and formatted, or 

specific words required for contractual agreements with third parties. As we developed the Intuit Data Stewardship Principles, our customers told us in multiple 

rounds of research that they prefer the specificity of simple, plain language Principles rather than the policy-based, business-speak language you or I might think 

is more descriptive. 

Question 5. In your view, what is the best way to encourage innovation while still 

protecting consumers’ online privacy? 

Answer. We believe that the best way is through a principles-based approach that 

could work in tandem with self-regulatory approaches and enforceable codes of conduct, which provide consistent guidance to all types and sizes of organizations, fill 

the gaps between existing regulations. The principles-based approach is especially 

critical to allow for flexible application by small businesses. 

RESPONSE TO WRITTEN QUESTIONS SUBMITTED BY HON. MARK BEGICH TO

CHRISTOPHER R. CALABRESE

Question 1. What steps should the industry take to assist citizens with knowing 

what their digital life is like? 

Answer. While industry can take some limited steps to protect consumers, the 

best way to improve public knowledge about digital life is for Congress to grant consumers control over their own personal information. If consumers had enforceable 

rights, they would educate themselves about how to use them. In the current system, there is no advantage to consumers in learning key facts about their digital 

97 

life such as the entities that hold personal information or the tools used to monitor 

web tracking. No matter how educated consumers become, they can’t do anything 

practical or beneficial with their knowledge. They can only participate online in a 

‘‘take it or leave it’’ way. They have no power to limit data sharing, access personal 

profiles, or delete records. Consumers will only take the time to learn about the use 

of their information if it is worth their time and effort to do so. That means giving 

them the tools to police their own profiles and limit data sharing. My written statement elaborates in much more detail on the full range of enforceable rights the 

ACLU believes should be available to consumers. 

Given that reality, one useful step industry could take is to work with the Federal 

Trade Commission (FTC) to reduce the complexity of their privacy policies. Because 

the FTC can only penalize companies that engage in unfair and deceptive practices, 

companies have incentives to avoid providing clear notice to consumers because that 

notice could be used to create enforceable rights against them. Instead, they largely 

write bloated privacy policies that describe company practices in such detail and legalistic jargon as to be incomprehensible to consumers. If companies commit to providing simplified policies with common language and definitions that can be compared between companies (like nutrition labels on food), it would be a helpful consumer education tool. 

Similarly, companies could commit in simple terms to honoring any do not track 

preference stated by a consumer and insuring that all advertisers on their site do 

the same. ‘‘Do not track’’ should be understood to mean no tracking or storage of 

information at all, not simply a ban on behaviorally targeted ads. Such a mechanism would also give consumers incentive to learn about their rights. 

Ultimately both of these tools are limited compared to the real explosion of consumer education and understanding that could be created if consumers were actually given enforceable control over their information through a legislative mandate. 

Question 2. Mr. Calabrese, I appreciate your comments regarding the invasion of 

privacy currently occurring on the Internet. Besides your recommendation for a ‘‘Do 

Not Track’’ method for browsers what else could we do to improve the experience 

of Internet users? 

Answer. The best way to improve the experience of Internet users is to increase 

their trust in the system. As Internet use is increasing so is consumer awareness 

and fear of expanding information collection. Many new web applications use and 

share a great deal of personal information. Social networking sites, location based 

services, online retail services, and a variety of other sites all rely on a willingness 

of consumers to share personal information. These websites and applications can 

only reach their full potential if consumers can share this information secure in the 

knowledge that they retain control over it. 

There is evidence that these fears are affecting consumers. According the Federal 

Communications Commission’s National Broadband Plan, 22 percent of people don’t 

use the Internet because of discomfort with computers and concern ‘‘about all the 

bad things that can happen if [they] use the Internet.’’ According to Gallup polling 

conducted for USA Today, 61 percent of consumers opposed web tracking even if 

they kept costs down and allowed consumers to visit websites for free. 

Efforts to protect consumer privacy must be backed by the government, not simply 

created by industry. For years, government agencies have called on industry to provide privacy protections for consumers. However, as the FTC report explains in its 

recent report on privacy, self-regulatory efforts ‘‘have been too slow, and up to now 

have failed to provide adequate and meaningful protection.’’ Though industry has 

taken some steps, there is still no widespread adoption of provisions allowing consumer control and only a limited legally enforceable basis for relying on them. 

Question 2a. Are there different recommendations for those websites targeting 

children? 

Answer. We believe Congress should work toward providing a high level of protection to everyone’s privacy online—adult and child alike. Strong protections that 

allow consumer control over sharing of personal information would benefit both children and adults. Within this framework, it might be necessary to provide heightened protection for children. For example, many advocates have called for special 

protections for sensitive information such as information related to a person’s financial accounts, medical records or sexual orientation. Information on children could 

be placed in that category as well to assure that it receives the highest level of protection possible. 

Question 2b. What about applications on phones? 

Answer. Internet use on mobile phones raises two additional issues—location 

tracking and device identification. Mobile devices constantly record and track an individual’s physical movements and the devices themselves often contain unique 

98 

1Federal Trade Commission, Protecting Consumer Privacy in an Era of Rapid Change (December 2010), http://www.ftc.gov/os/2010/12/101201privacyreport.pdf. 2 U.S. Department of Commerce, Commercial Data Privacy and Innovation in the Internet 

Economy: A Dynamic Policy Framework, U.S. Department of Commerce Internet Policy Task 

Force (December 2010). 3 Adam Thierer, ‘‘Obama Admin’s ‘Let’s-Be-Europe’ Approach to Privacy Will Undermine U.S. 

Competitiveness,’’ Technology Liberation Front, January 5, 2011, http://techliberation.com/ 

2011/01/05/obama-admins-lets-beeurope-approach-to-privacy-will-undermine-u-s-competitiveness/. 

identifying numbers that cannot be easily changed. This allows more robust and 

persistent tracking both in the physical and Internet space. This information can 

be gathered both by cell phone providers and applications running on those phones. 

As of December 2009, more than 90 percent of the overall population of the 

United States subscribed to cell phone service—an estimated 285.6 million people. 

While cell phones are best known as devices used to make voice calls and send text 

messages, they are also capable of being used as tracking devices. As a result, cell 

phone technology has given many parties including the government, marketers, and 

employers an unprecedented new surveillance tool. The technical capacity now exists to track any one of the Nation’s hundreds of millions of cell phone owners, for 

24 hours a day, for as long as it likes. Whether it is a visit to a therapist or liquor 

store, church or gun range, many individuals’ locations will be available either in 

real time or months later. Because of the sensitivity and invasiveness of location 

records, many advocates, including the ACLU argue for high standards for access 

to this information including a warrant based on probable cause for law enforcement 

access. 

An example of the pervasiveness of this location tracking was recently described 

by the New York Times. According to the article a German lawmaker, Malte Spitz, 

gained access from his cell phone provider to all the location information associated 

with him (such access is required under German law). Using that information he 

was able to map his movements for 6 months. In another example, New York City 

attempted to fire an employee using cell phone records as evidence he was leaving 

work early. 

Consumers are concerned about this intrusion. In a recent poll, 49 percent of respondents said they would be more comfortable with location-based services if they 

could more easily and clearly manage who sees their location information; 84 percent were concerned about the sharing of their location data without their consent; 

84 percent were concerned about identity or data theft; and 83 percent were concerned about loss of privacy. 

COMMENTS ON ‘‘THE STATE OF ONLINE PRIVACY,’’ March 16, 2011 

Adam Thierer, Senior Research Fellow, U.S. Senate, Committee on Commerce, Science, and Transportation 

Published by the Mercatus Center, George Mason University and also available at http://mercatus.org/sites/ 

default/files/publication/comments-senate-hearing-state-online-privacy.pdf. 

As the Commerce Committee continues its exploration of online privacy issues, it 

is important that it ask some hard questions about the wisdom of imposing a comprehensive new regulatory regime on the Internet, which the Obama Administration 

appears to now favor. The Federal Trade Commission (FTC) 1 and Department of 

Commerce (DoC) 2 both released new privacy ‘‘frameworks’’ late last year and seem 

determined to move America toward a more ‘‘European-ized’’ conception of privacy 

regulation.3

Here are a few questions that should be put to the FTC and DoC officials, or those 

who support the direction they are taking us: 

• Before implying that we are experiencing ‘‘market failure,’’ why hasn’t either 

the FTC or DoC conducted a thorough review of online privacy policies to evaluate how well organizational actions match up with promises made in those policies? 

• To the extent any sort of internal cost-benefit analysis was done internally before the release of these reports, has an effort been made to quantify the potential size of the hidden ‘‘privacy tax’’ that new regulations like ‘‘Do Not Track’’ 

could impose on the market? 

• Has the impact of new regulations on small competitors or new entrants in the 

field been considered? Has any attempt been made to quantify how much less 

entry/innovation would occur as a result of such regulation? 

99 

4 Berin Szoka and Adam Thierer, ‘‘Targeted Online Advertising: What’s the Harm & Where 

Are We Heading? Progress on Point 16.2, (Washington, D.C.: The Progress & Freedom Foundation, February 13, 2009), http://www.pff.org/issues-pubs/pops/2009/pop16.2targetonlinead.pdf. 5 Adam Thierer, Public Interest Comment on Protecting Consumer Privacy in an Era of Rapid 

Change86 (Arlington, VA: Mercatus Center at George Mason University), February 18, 2011, 

http://mercatus.org/publication/public-interest-comment-protecting-consumer-privacy-era-rapidchange. Also see, see Adam Thierer, ‘‘Unappreciated Benefits of Advertising and Commercial 

Speech,’’ Mercatus on Policy 86 (Arlington, VA: Mercatus Center at George Mason University), 

January 2011, http://mercatus.org/publication/unappreciatedbenefits-advertising-and-commercial-speech. 6 ‘‘Exaggerated fears are particular common regarding new technologies.’’.’’ Kent Walker, ‘‘The 

Costs of Privacy,’’ 25 Harvard Journal of Law & Public Policy, no 87, (Fall 2001), 126. A recent 

report by the U.K. government noted that ‘‘New media are often met by public concern about 

their impact on society and anxiety and polarisation of the debate can lead to emotive calls for 

action.’’ Safer Children in a Digital World, Byron Review on Children and New Technology, Department for Children, Schools and Families, [U.K.] task force report, March 2008, 3, http:// 

www.dfes.gov.uk/byronreview/pdfs/Final%20Report%20Bookmarked.pdf. 7 ‘‘The privacy problem has morphed . . . into the latest terror of the digital ago, surpassing 

earlier shibboleths,’’ argues Larry Downes. . . .’’ Larry Downes, ‘‘A Market Approach to Privacy 

Policy,’’ in Berin Szoka and Adam Marcus, eds., The Next Digital Decade: Essays on the Future 

of the Internet (Washington, D.C.: TechFreedom, 2011), 510. Also see generally Adam Thierer, 

‘‘Parents, Kids & Policymakers in the Digital Age: Safeguarding Against ‘Techno-Panics,’ ’’ Inside 

ALEC, July 2009, 16–17, http://www.alec.org/am/pdf/InsidelJuly09.pdf. 

• Were any economists from the FTC’s Economics Bureau consulted before the 

new framework was released? Did the DoC consult any economists? 

• Why do FTC and DoC officials believe that citing unscientific public opinions 

polls from regulatory advocacy organizations serves as a surrogate for serious 

cost-benefit analysis or an investigation into how well privacy policies actual 

work in the marketplace? 

• If they refuse to conduct more comprehensive internal research, have the agencies considered contracting with external economists to build a body of research 

looking into these issues (as the Federal Communications Commission did in a 

decade ago in its media ownership proceeding)? 

• Has either agency attempted to determine consumer’s ‘‘willingness to pay’’ for 

increased privacy regulation? 

• Has either agency explored the potential free speech issues that are at stake 

here since increased privacy regulation could potentially infringe legitimate 

First Amendment rights? 

• More generally, where is the ‘‘harm’’ 4 and aren’t there plenty of voluntary privacy-enhancing tools out there that privacy-sensitive users can tap to shield 

their digital footsteps, if they feel so inclined? 

These are just some of the many of these questions explored in my recent filing 

to the Federal Trade Commission in its proceeding on Protecting Consumer Privacy 

in an Era of Rapid Change.5 Because of the unique focus on the so-called ‘‘Do Not 

Track’’ mechanism as a potential silver-bullet solution to online privacy concerns, 

I am attaching the portion of my filing discussing the potential costs of such a mandated solution. 

How a Mandatory ‘‘Do Not Track’’ Regime Creates Potential Risks to 

Consumers, Culture, Competition, and Global Competitiveness 

More tailored forms of online advertising and the ‘‘tracking’’ technologies which 

make them possible are coming under increasing scrutiny today. Some of this can 

be attributed to a general unfamiliarity with how online advertising works and the 

role personal information and data collection play in the process.6 Although, as 

noted above, no clear case of harm has been established, some privacy fundamentalists who oppose virtually any form data collection have elevated this concern to near 

‘‘techno-panic’’ levels and are now demanding regulation.7 As noted below, a variety 

of tools—such as, browser cookie controls or third-party plug-ins—already exist that 

can help consumers block targeted ads or limit data collection. But the Commission, 

likely inspired by regulatory advocates’ claims of the complexity of those voluntary 

systems, is now pushing for additional steps to simplify or speed up the process. 

Hence, a ‘‘Do Not Track’’ mechanism has become the preferred universal fix, and 

one that the Commission is now pushing upon the marketplace. Do Not Track would 

demand that websites honor a machine-readable header indicating that the user did 

not want to be ‘‘tracked.’’ In theory, this will allow privacy-sensitive web surfers to 

signal to websites that they would like to opt-out of any targeted advertising or not 

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8Federal Trade Commission, Protecting Consumer Privacy, A–4. 9See, e.g., Berin Szoka, ‘‘Privacy Polls v. Real-World Trade-Offs,’’ 5 Progress Snapshot 10 

(Washington, D.C.: The Progress & Freedom Foundation, October 8, 2009), http://www.pff.org/ 

issues-pubs/ps/2009/ps5.10-privacy-pollstradeoffs.html; Downes, ‘‘A Market Approach to Privacy Policy,’’ 514. 10Lauren Weinstein, ‘‘Risks in Mozilla’s Proposed Firefox ‘Do Not Track’ Header Thingy,’’ 

Lauren Weinstein blog, January 24, 2010, http://lauren.vortex.com/archive/000803.html. 11 Ben Kunz, ‘‘The $8 Billion Do Not Track Prize,’’ Bloomberg Businessweek, December 22, 

2010, http://www.businessweek.com/technology/content/dec2010/tc20101222l392883.htm. 12 ‘‘The Internet Browsing Cops,’’ January 21, 2011, http://online.wsj.com/article/SB1000 

1424052748704723104576061900000013690.html. 13Sean Harvey and Rajas Moonka, ‘‘Keeping Your Opt-Outs,’’ Google Public Policy Blog, January 24, 2010, http://googlepublicpolicy.blogspot.com/2011/01/keep-your-opt-outs.html. 14Kunz, ‘‘The $8 Billion Do Not Track Prize.’’ 15 Corey Kronengold, ‘‘Taking Issue: The Value of Privacy,’’ Digiday, December 16, 2010, 

http://www.digidaydaily.com/stories/taking-issue-the-value-of-privacy. 

have any information about them collected when visiting sites. The potential costs 

of such a regime will be explored in this section. 

1. Potential Direct Cost to Consumers 

The Commission poses a variety of questions regarding how a Do Not Track regime may be implemented and what its potential impact might be.8 How many consumers would opt-out? How many would be willing to pay site subscriptions? How 

would it impact online publishers and advertisers? And so on. The truth is, nobody 

knows the answers to these questions, and the Commission has made no attempt 

to conduct a serious cost-benefit analysis of such a regime. Importantly, opinion 

polls cannot predict with accuracy how things will turn out once such a regime 

takes effect because consumer and marketplace reactions to real-world developments are more complex and nuanced than artificial surveys or experiments.9

What we do know is that online advertising today allows consumers to enjoy a 

veritable cornucopia of innovative, and mostly free, sites and services. Government 

regulation could ‘‘break’’ the implicit online quid pro quo currently governing online 

sites and services—that consumers enjoy a bevy of free content and services in exchange for tolerating ads and data collection—by creating what appears to be a costfree choice option for consumers. That choice, however, will be anything but costless. 

Lauren Weinstein, co-founder of People For Internet Responsibility (PFIR), worries that the ‘‘ability [of Do Not Track concepts] to cause major collateral damage 

to the Internet ecosystem of free Web services is being unwisely ignored or minimized by many Do Not Track proponents.’’ 10 Weinstein is correct. There is no free 

lunch. While well-intentioned, government regulation that attempts to create a costfree opt-out for data collection and targeted online advertising will likely have damaging unintended consequences. In terms of direct costs to consumers, Do Not Track 

could result in higher prices for service as paywalls go up or, at a minimum, advertising will become less relevant to consumers and, therefore, more ‘‘intrusive’’ in 

other ways. 

Why might less relevant advertising represent a cost to consumers? It comes down 

to the value of their time and the benefits of relevant advertising to them. Ben 

Kunz, director of strategic planning at Mediassociates, a media planning and Internet strategy firm, argues that Do Not Track ‘‘won’t stop online ads’’ but will instead 

simply lead to ‘‘tons of banners and videos everywhere online. They’ll simply be less 

relevant.’’ 11 The Wall Street Journal agrees, noting: ‘‘While many supporters of Do 

Not Track imagine that the opt-out would reduce the ads they see, the opposite 

would more likely occur, causing advertisers to blanket more media and use more 

intrusive techniques to reach the same number of potential customers.’’ 12 When 

Google recently announced it would be offering a ‘‘Keep My Opt-Outs’’ extension to 

its Chrome web browser to come into line with the FTC’s desire for more Do Not 

Track mechanisms, the company also noted that ‘‘once you install the Keep My OptOuts extension, your experience of online ads may change: You may see the same 

ads repeatedly on particular websites, or see ads that are less relevant to you.’’ 13

Thus, Do Not Track ‘‘will stop marketers from serving up ads for products you may 

actually want,’’ Kunz notes.14 This represents a direct cost to consumers in terms 

of the hassle of unwanted, intrusive (or ‘‘spammy’’) advertising. 

But it is the potential for prices to rise for online content and services that is the 

most important direct cost to consumers. If paywalls go up and subscriptions are 

required as a result of the new Do Not Track regime, Corey Kronengold of Digiday 

suggests the response of users could take one of two forms: 15

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16Quoted in Tanzina Vega and Verne Kopytoff, ‘‘In Online Privacy Plan.’’ 17 ‘‘We might better think of a privacy tax—we pay the regular price unless we want to keep 

information about our food, alcohol, and pharmaceutical purchases from the market; to keep our 

habits to ourselves, we pay extra.’’ Hal Abelson, Ken Ledeen, and Harry Lewis, Blown to Bits: 

Your Life, Liberty, and Happiness After the Digital Explosion (Upper Saddle River, NJ: AddisonWesley, 2008), 11. 18 Concurring Statement of Commissioner Kovacic, in Federal Trade Commission, Protecting 

Consumer Privacy, D–4. 19Daniel Castro, ‘‘Policymakers Should Opt Out of ‘Do Not Track’,’’ Information Technology 

& Innovation Foundation, November 2010, 3, www.itif.org/files/2010-do-not-track.pdf. 

1. Users (especially those who are highly privacy sensitive) might gladly accept 

the trade-off and pay something more for those sites and services instead of 

having data collected or ads served; or, 

2. Users might revolt against the resulting paywalls, subscriptions, micropayment schemes, tiered services, etc, and demand government intervention in the 

name of ‘‘fairness.’’ We might even hear talk of ‘‘gouging’’ and calls for price regulation, even though developers would have no choice but to raise prices to 

cover costs in the absence of advertising support. 

Some mix of the two could be the end result, but the latter scenario seems far 

more likely. ‘‘If we move too far one way, the people supplying the free content will 

get together and say we aren’t going to supply the content for free,’’ says Dilip 

DaSilva, chief executive of Exponential Interactive, owner of the Tribal Fusion online advertising network. ‘‘It’s not like the publishers will offer free content to people 

who visit their site but don’t want ads tracking them.’’ 16

Of course, there is nothing wrong with online sites and service providers charging 

for what they offer consumers, but, as Kronegold suggests, if regulation moves the 

marketplace in that direction unnaturally, many consumers will likely have a problem with it since they have grown accustomed to an abundance of ‘‘free’’ online services. It is impossible to determine what prices online providers might seek to charge 

for their services, but anything more than the $0.00 they currently charge will likely 

come as a shock to many consumers. As discussed in the following section, it will 

also have profound repercussions on the broader availability of much content and 

many of the services consumers take for granted. In this sense, Do Not Track becomes a ‘‘privacy tax’’ on consumers, requiring them to pay for things they previous 

received inexpensively, or for free.17

There are other costs associated with the process of creating paywalls and setting 

prices that will be borne by online content providers and consumers, as Commissioner William Kovacic noted in his statement on the Commission’s privacy report: 

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 addriven 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? 18

How much content will go behind paywalls? Dan Castro of the Information Technology & Innovation Foundation fears much will: 

If a Do Not Track list ever became widely implemented companies could respond by simply blocking access to those sites for users who opt out, just as 

some sites today block users who use ad-blocking software or do not register on 

a site. Users who currently opt out of targeted advertising but continue to use 

the content or service which the advertising pays for are essentially free riders. 

They are the minority of users who are benefiting from the willingness of the 

majority to divulge some personal information in exchange for free or reducedprice content. It is this exchange that enables the U.S. Internet ecosystem to 

be so robust and largely free of charge to the average user. Privacy advocates 

rarely acknowledge the harm to advertising revenues that would result from a 

large number of consumers signing up for Do Not Track.19

Another alternative short of paywalls would be interstitial pop-ups warning consumers they must first disable Do Not Track before they are allowed to use portions 

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20 Ironically, depending on how such permission systems are structured, this may actually end 

up forcing consumers to reveal more information about themselves to many sites as a condition 

of access content or services on those sites. 21 Arvind Narayanan, ‘‘ ‘Do Not Track’ Explained,’’ 33 Bits of Entropy, September 30, 2010, 

http://33bits.org/2010/09/20/do-not-track-explained. 22David Hallerman, ‘‘Audience Ad Targeting: Data and Privacy Issues,’’ eMarketer, February 

2010, http://www.emarketer.com/Reports/All/Emarketerl2000636.aspx. 23Katy Bachman, ‘‘(Ad) Apocalypse Soon,’’ AdWeek, December 19, 2010, http://www.ad 

week.com/aw/contentldisplay/esearch/e3i9f75082f2f627711694ca34d9b326105. 24Quoted in Steve Lohr, ‘‘Privacy Concerns Limit Online Ads, Study Says,’’ New York Times, April 30, 2010, http://bits.blogs.nytimes.com/2010/04/30/privacy-concerns-limit-online-adsstudy-says. 25Larry Ponemon, ‘‘Fear and Loathing in Online Advertising,’’ Ponemon Institute blog, May 

3, 2010, http://www.ponemon.org/blog/post/fear-and-loathing-in-online-advertising. 26For a summary, see Adam Thierer, ‘‘Unappreciated Benefits of Advertising and Commercial 

Speech,’’ Mercatus on Point 86 (Arlington, VA: Mercatus Center at George Mason University), 

January 2011, http://mercatus.org/publication/unappreciated-benefits-advertising-and-commercial-speech. 

of the site, or perhaps any of it.20 In other words, sites may seek to formalize the 

previously unwritten quid pro quo of information as currency. Some Do Not Track 

regulatory advocates try to assuage such concerns by pointing to the existence of 

widespread online website registration or site ‘‘login’’ procedures today, which do not 

generally require user to disable settings (such as cookie-blocking or ad-blocking) or 

pay anything before using site content/services. For example, Arvind Narayanan of 

Stanford University argues: 

I do not believe that disabling DNT as a requirement for service will become 

anywhere near as prevalent as logging in as a requirement for service. I bring 

up login only to make the comforting observation there seems to be a healthy 

equilibrium between sites that require login always, some of the time, or 

never.21

Ultimately, however, this observation provides little comfort since it ignores the 

fact that Do Not Track could be preemptively breaking business models on an unprecedented scale, thus forcing vast numbers of online publishers to make uncomfortable trade-offs going forward if they wish to provide the current level of service 

or expanded options. Narayanan may end up being correct and a highly tiered, permission-based Internet may not be erected. But, as the next section notes, that is 

a risky bet and one that could have profound consequences for the future online content and the richness of its culture. 

2. Potential Indirect Costs/Impact on Content & Culture 

Direct monetary cost to consumers is not the only issue here. The indirect impact 

of regulation on content and culture must also be considered. 

While targeted online advertising only accounted for $1.1 billion in 2010, it has 

been growing at healthy 20 percent clip, estimates eMarketer.22 ‘‘Factor in the use 

of data to determine marketing efficiencies and that figure could be as high as $7 

billion to $8 billion of the $25 billion online ad spend,’’ says Katy Bachman of 

AdWeek.23 Larry Ponemon, Chairman of the Ponemon Institute, which studies privacy and security issues, told the New York Times that ‘‘Privacy fears are definitely 

having an economic impact’’ on the market, especially the uncertain legal and regulatory environment and the threat of regulation.24 A May 2010 Ponemon Institute 

survey of senior marketing executives with 90 diverse organizations that were actively engaged in online marketing found that: 

63 percent of those we surveyed said behavioral advertising generated their 

greatest return on investment. Yet 98 percent told us that, because of consumers’ 

privacy fears, their companies are curtailing investments in online behavioral 

targeting. These companies are willing to sacrifice the revenue they believe they 

can generate through an online campaign rather than risk the potential hit to 

brand reputation for being as aggressive as they would like to be. Overall that 

curtailment has kept more than $600 million out of the behavioral targeting industry.25

This matters because it represents foregone investment in new forms of content, 

culture, and services. Media economists and industry experts have long realized that 

advertising is the great sustainer of media.26 Advertising benefits society by subsidizing the creation of news, information, and entertainment. ‘‘Advertisers are critical to the success of commercial media because they provide the primary revenue 

stream that keeps most of them viable,’’ argues Robert G. Picard, author of The EcoVerDate Nov 24 2008 06:38 Mar 19, 2012 Jkt 073308 PO 00000 Frm 00106 Fmt 6601 Sfmt 6621 S:\GPO\DOCS\73308.TXT SCOM1 PsN: JACKIE
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27 Robert G. Picard, The Economics and Financing of Media Companies (Bronx, NY: Fordham 

University Press, 2002), 122. 28Mary Alice Shaver, ‘‘The Economics of the Advertising Industry,’’ in Alison Alexander, et. 

al., Media Economics: Theory and Practice (Mahwah, NJ: Lawrence Erlbaum Associates, Third 

Edition, 2004), 250. 29To some extent, these are all just variations of a fee-for-service business model. ‘‘Micropayments,’’ for example, would require a small payment for each media unit accessed or 

downloaded, such as $1 per news article or song. 30Much of the valuable information content available on the Internet, and so many of the useful services we use every day, is free,’’ explains Larry Downes, ‘‘not because of some utopian 

dream of inventors or even because of the remarkably low transactions costs of the digital economy. The content is free because the costs of the services—blogs, stock quotes, even home movies posted on YouTube—are underwritten by advertisers. If we don’t read and respond to ads, 

we’ll have to pay for these services some other way,’’ he notes. Downes, The Laws of Disruption, 

83–4. 31See Adam Thierer, Berin Szoka, and W. Kenneth Ferree, Comments of the Progress & Freedom Foundation in the Matter of the Federal Communications Commission’s Examination of the 

Future of Media and Information Needs of Communities In a Digital Age, The Progress & Freedom Foundation, May 5, 2010, 28–38, http://www.pff.org/issues-pubs/testimony/2010/2010-05- 

05-CommentslinlFCClFutureloflMedialproceeding.pdf. 32 Howard Beales, ‘‘The Value of Behavioral Targeting,’’ Network Advertising Initiative, March 

2010, www.networkadvertising.org/pdfs/BealeslNAIlStudy.pdf. 33 Ibid., 1. 34 Ibid., 18. 35Federal Trade Commission, ‘‘How Will Journalism Survive the Internet Age?’’ Workshop Series, 2010, http://www.ftc.gov/opp/workshops/news/index.shtml. All filing made to the Commission in the proceeding are located here: http://www.ftc.gov/os/comments/newsmedia 

workshop/index.shtm. 

nomics and Financing of Media Companies.27 Mary Alice Shaver of the University 

of Central Florida puts this support in context: ‘‘Advertising revenues pay for virtually all broadcast media, 70 percent to 80 percent of support for newspapers and 

an equally high percentage for magazines.’’ 28

Importantly, advertising is proving increasingly to be the only business model 

with any real staying power for many media and information-producing sectors. 

Pay-per-view mechanisms, micropayments, and even subscription-based business 

models are all languishing.29 Consequently, the overall health of modern media 

marketplace and the digital economy—and the aggregate amount of information and 

speech that can be produced or supported by those sectors—is fundamentally tied 

up with the question of whether policymakers allow the advertising marketplace to 

evolve in an efficient, dynamic fashion.30 In this sense, it is not hyperbole to say 

that an attack on advertising is tantamount to an attack on media itself.31

A March 2010 study on ‘‘The Value of Behavioral Targeting,’’ conducted by Howard Beales on behalf of the Network Advertising Initiative, demonstrates how this 

could be the case.32 Beales, the former Director of the Bureau of Consumer Protection at the FTC, found that advertising rates are significantly higher for behaviorally targeted ads, with the average return on behaviorally targeted advertising 

being just over twice that of other advertising. The reason that greater return on 

investment is important, Beales notes, is because: 

Advertising using behavioral targeting is more successful than standard run of 

network advertising, creating greater utility for consumers from more relevant 

advertisements and clear appeal for advertisers from increased ad conversion. 

Finally, a majority of network advertising revenue is spent acquiring inventory 

from publishers, making behavioral targeting an important source of revenue 

for online content and services providers as well as third party ad networks.33

This illustrates how more effective advertising can cross-subsidize and sustain online content and culture. More and better advertising means more and better content and services will be made available to consumers. Beales concluded his study 

by noting: ‘‘Increasingly, advertising is the financing mechanism that makes online 

content and services possible as well. As content traditionally provided offline (such 

as newspapers) continues to move to the Internet, the link between online advertising and content is likely to become increasingly vital to the provision of information and services that we have long taken for granted.’’ 34

With these insights in mind, it is peculiar that the Commission ignores the connection between this proceeding and another FTC proceeding which poses the question, ‘‘How Will Journalism Survive the Internet Age?’’ 35 That is a fair question for 

the FTC to ask, and one that the Federal Communications Commission has also 

104 

36Federal Communications Commission, ‘‘Future of Media,’’ http://reboot.fcc.gov/future 

ofmedia. 37 Castro goes even further, arguing that ‘‘If the goal of the initiative is to restrict targeted 

advertising, it would be better for Congress to just ban Internet advertising outright and develop a ‘Corporation for Public Internet’ to fund Internet content and applications.’’ Castro, ‘‘Policymakers Should Opt Out of ‘Do Not Track’,’’ 4. 38 John Battelle, ‘‘Thurs. Signal: Go On, Opt Out. Just Don’t Come Cryin’ To Me . . .’’ Federated Media Publishing, December 1, 2010, http://www.federatedmedia.net/blog/2010/12/ 

thurs-signal-go-on-opt-out-just-don’t-come-cryinto-me. 39 ‘‘Regulation that disfavors one technology or business model would also deter entry, thwart 

innovation, and limit competition and choice in the sale of online advertising.’’ Joan Gillman, 

Testimony before the House Energy & Commerce Committee, Hearing on Do Not Track Legislation: Is Now the Right Time? December 2, 2010, 5, http://energycommerce.house.gov/hearings/ 

Testimony.aspx?TID=4184. 40Katy Bachman, ‘‘(Ad) Apocalypse Soon,’’ AdWeek, December 19, 2010, http://www.ad 

week.com/aw/contentldisplay/esearch/e3i9f75082f2f627711694ca34d9b326105. 

been pondering in a series of workshops on ‘‘The Future of Media.’’ 36 What the 

Commission proposes in this proceeding certainly will not help matters any and it 

begs the question: If not advertising, then what will sustain online media, digital 

age culture, and social networking services going forward? 37

John Battelle is blunter in his assessment of how damaging this move could be 

to online culture: 

don’t come crying to me when you realize that in opting out of our marketingdriven world, you’ve also opted out of, well, a pretty important part of our ongoing cultural conversation, one that, to my mind, is getting more authentic and 

transparent thanks to digital platforms. And, to my mind, you’ve also opted out 

of being a thinking person capable of filtering this stuff on your own, using that 

big ol’ bean which God, or whoever you believe in, gave you in the first place. 

Life is a conversation, and part of it is commercial. We need to buy stuff, folks. 

And we need to sell stuff too.38

This is a simplified explanation of the value exchange that drives the Internet, 

but Battelle is correct that if heavy-handed regulation replaces common sense or the 

current online quid pro quo of information-forservices, then something must give. 

While the idea of a cost-free opt-out model for the all online data collection/advertising may sound seductive to some, it is vital to take into account the opportunity 

costs of such regulation. The real world is full of trade-offs and there is no such 

thing as a free lunch. 

3. Competition & Market Structure 

The Commission does not need to be reminded that it was created in large part 

to safeguard competition. This proceeding, however, threatens to tip the balance in 

favor of existing technologies or market players over future ones.39 AdWeek’s Katy 

Bachman argues that: 

Heavy-handed privacy legislation could actually curb competition by crippling 

ad networks that serve ads to niche Websites dependent on advertising to fund 

content. Websites would have to resort to pay models in a medium where free 

content is the norm. No doubt the big brands would still draw contextual advertising, but that would come at the expense of new, emerging brands, thus 

squelching competition in a space that has thrived on it.40

Similarly, Tanzina Vega and Verne Kopytoff of The New York Times have noted 

that: 

The Federal Trade Commission’s proposed privacy mechanism could cause a 

major shift in the online advertising industry, as companies that have relied on 

consumers’ browsing history try to make up for what could be billions in lost 

revenue. 

If the vast majority of online users chose not to have their Internet activity 

tracked, the proposed ‘‘do not track’’ system could have a severe effect on the 

industry, some experts say. It would cause major harm to the companies like 

online advertising networks, small and midsize publishers and technology companies like Yahoo that earn a large percentage of their revenue from advertising that is tailored to users based on the sites they have visited. 

Under a situation where many users opt out of being tracked, other companies, 

like Google, may take a much smaller hit because the vast majority of its revenue comes through search ads that would not be affected by a do-not-track 

mechanism. Microsoft, which also sells display advertising through its ad netVerDate Nov 24 2008 06:38 Mar 19, 2012 Jkt 073308 PO 00000 Frm 00108 Fmt 6601 Sfmt 6621 S:\GPO\DOCS\73308.TXT SCOM1 PsN: JACKIE
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41Tanzina Vega and Verne Kopytoff, ‘‘In Online Privacy Plan, the Opt-Out Question Looms,’’ 

New York Times, December 5, 2010, http://www.nytimes.com/2010/12/06/business/media/ 

06privacy.html. 42 Avi Goldfarb and Catherine Tucker, ‘‘Comments on ‘Information Privacy and Innovation in 

the Internet Economy,’’’ Comments to the U.S. Department of Commerce, January 24, 2011, 4, 

http://www.ntia.doc.gov/comments/101214614-0614-01/attachments/NTIAlcommentsl2011 

l01l24.pdf. 43 Ibid. 44Kunz, ‘‘The $8 Billion Do Not Track Prize.’’ 45Thomas M. Lenard and Paul H. Rubin, Privacy and the Commercial Use of Personal Information (Washington, D.C.: The Progress & Freedom Foundation, 2002), xxii. 46 As the National Cable and Telecommunications Association (NCTA) noted in comments to 

the Department of Commerce: ‘‘In a nascent and highly dynamic market characterized by rapid 

technological change such as online advertising, any regulation that favors or disfavors one technology or business model over another could seriously thwart innovation and the development 

of new business models that could benefit consumers, content providers, and advertisers, by prematurely locking market participants into one sanctioned approach. Moreover, limiting online 

advertising to specified designated permissible techniques would deter new entry, and limit competition.’’ National Cable and Telecommunications Association, Reply Comments to the U.S. Department of Commerce, January 28, 2011, 10–11. http://www.ntia.doc.gov/comments/10121 

4614–0614–01/comment.cfm?e=17AF54FD-5201-474A-8EB8-E8B6071AEDEC. 47 Avi Goldfarb and Catherine Tucker, ‘‘Privacy Regulation and Online Advertising,’’ 57 Management Science 1, (January 2011), 57–71, http://papers.ssrn.com/sol3/papers.cfm?abstractl 

id=1600259. 

work, could also survive a hit to user data collection since it earns revenue from 

sources other than advertising, including software and gaming, experts say.41

‘‘In a setting where first-party advertising is allowable but third-party marketing 

is not, substantial advantages may be created for large incumbent firms,’’ argue Avi 

Goldfarb and Catherine Tucker.42 ‘‘For example, if a large website or online service 

were able to use its data to market and target advertising, it will be able to continue 

to improve and hone its advertising, while new entrants will find it difficult to challenge the incumbent’s predominance by compiling other data or collecting their own 

data,’’ they conclude.43

And Kunz fears that ‘‘the ‘Long Tail’ of niche content is going to get crushed’’ 

since ‘‘thousands of small websites may disappear as dollars flow to consolidated 

publishing centers.’’ ‘‘Do Not Track will send billions of dollars to the big online publishers, hurting the little sites you might find most interesting. The second point 

is painful. It could really harm you, too, dear consumer, if you read things online 

other than The New York Times, Bloomberg, or iVillage.com.’’ 44 This should hardly 

be surprising since economists have long recognized that ‘‘advertising typically benefits new entrants and small firms more than it does large, established firms,’’ 45 and 

that is likely to be the case for targeted online advertising since it would be the 

easiest way for niche sites to find interested consumers and advertisers. 

Thus, the risk exists that a Do Not Track mandate could steer markets in unnatural, inefficient directions by erecting new barriers to entry or directly picking technological winners and losers.46 If so, the Commission will have failed in its mission 

to safeguard competition and improve consumer welfare. 

4. International Competitiveness 

Some advocates of intervention on this front do not hide their desire to move the 

United States in a direction the European Union has followed with ‘‘data directives’’ 

and more stringent forms of privacy regulation. But America’s refusal thus far to 

walk down that more regulatory path offers scholars the chance to evaluate Europe’s more-restrictive approach and study whether America’s lead in the global digital marketplace might be tied to its more ‘‘hands-off’’ approach to online regulation. 

A recent study by Goldfarb and Tucker found that ‘‘after the [European Union’s] 

Privacy Directive was passed [in 2002], advertising effectiveness decreased on average by around 65 percent in Europe relative to the rest of the world.’’ 47 They argue 

that because regulation decreases ad effectiveness, ‘‘this may change the number 

and types of businesses sustained by the advertising-supporting Internet.’’ Regulation of advertising and data collection for privacy purposes, it seems, can affect the 

global competitiveness of online firms. 

This is what makes talk of ‘‘harmonization’’ among privacy regimes so dangerous. 

It threatens to undermine America’s competitive advantage in the global digital 

arena. It is hard to find many European counterparts that rival Google, Amazon, 

Apple, Facebook, eBay, Microsoft, or other market leaders. Why is it that the information technology sector has thrived in America and that U.S. companies are leaders in many of their respective sectors across the globe? Might it be precisely because the U.S. did not follow others down the path of ‘‘data directives’’ and heavy 

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48Steve DelBianco and Braden Cox, NetChoice Reply Comments on Department of Commerce 

Green Paper, January 28, 2011, 7, http://www.ntia.doc.gov/comments/101214614-0614-01/ 

comment.cfm?e=1EA98542–23A4-4822-BECD-143CD23BB5E9. 49 Anne Toth, Comment of Yahoo! on Commercial Data Privacy and Innovation in the Internet 

Economy, January 28, 2011, 2, http://www.ntia.doc.gov/comments/101214614-0614-01/comment.cfm?e=F6A50C0B-00CC-44A6-B475-FE218170CA02. 50Department of Commerce, Commercial Data Privacy and Innovation, 20. 51 Ibid. 52http://www.w3.org/PICS. 

handed, top-down regulation of the Internet more generally? ‘‘If applied to American 

companies, these European laws would restrict the breakneck innovation of the 

commercial web,’’ argues the NetChoice Coalition.48 And Yahoo! correctly summarizes: 

It is no coincidence that the U.S. is the birthplace of most of the widely used 

global websites and online services. Our legal frameworks encourage innovation 

through reasonable liability regimes, controls on harmful uses of information, 

promotion of a diversity of online voices, security requirements based on the 

sensitivity of the data, and a light regulatory hand that favors and recognizes 

complementary roles for industry self-regulation.49

The Department of Commerce’s recent privacy green paper says America should 

look to ‘‘prevent conflicting policy regimes from serving as a trade barrier.’’ 50 But 

should the U.S. impose burdensome new regulations on American companies to 

achieve that goal? Would we really be better off if all U.S. firms and policy more 

closely resembled the E.U. in this regard? 

Some privacy advocates posit the need for greater ‘‘interoperability’’ or harmonization of privacy policies internationally to facilitate smoother online commercial 

interactions or data flows. Yet, the Commerce Department’s recent privacy green 

paper notes that ‘‘a considerable amount of global commerce takes place on the 

Internet [and] global online transactions currently total an estimated $10 trillion 

annually’’ and is growing. Still, it continues on to claim that ‘‘the lack of cross-border interoperability in privacy principles and regulations creates barriers to crossborder data flow and significant compliance costs for companies,’’ 51 and repeats the 

argument for harmonization. 

There are three problems with that theory. First, it assumes that the benefits of 

regulatory harmonization—which, to be perfectly clear, would arrive in the form of 

increased regulation on U.S. operators—would outweigh the cost of complying with 

those new rules. 

Second, there is no reason that harmonization could not work in the opposite direction. If the Commerce Department, the FTC and other U.S. lawmakers want to 

promote U.S. trade, exports, commerce, and global competitiveness, the proper way 

to ‘‘leveling the playing field’’ in this context should be the same as it is in relation 

to speech policy or trade law: the rest of the world should follow America’s lead; the 

U.S. should absolutely not regulate up to achieve parity with theirs. 

Which raises a final problem with the argument for harmonization of privacy regimes through increased regulation on U.S. businesses: it sets a horrible precedent. 

At least thus far this has not been the approach the U.S. Government has taken 

in most other Internet policy contexts, and with good reason. Consider this in the 

context of speech controls. When policymakers in Europe and other regions or countries stifle free speech and expression online, America’s response has not been to 

mimic them but, rather, to lead by example. That is, when confronted with conflicting regulatory regimes abroad, our response has usually been to proudly boast 

to the world that we have the more sensible approach to Internet regulation, which 

is to say, it should be tightly limited so as not to stifle speech or commerce. Some 

critics might label this ‘‘American exceptionalism,’’ but it is really just common 

sense if we hope to promote the international competitiveness of U.S. online businesses and remain a global leader in this arena. 

5. ‘‘Silver-Bullet’’ Solutions Rarely Adapt or Scale Well 

Finally, there is the more general normative problem of the Commission seeking 

a simple solution to a complex ‘‘problem’’ such as online privacy protection. Do Not 

Track fits into a long line of proposed silver-bullet solutions that would mandate a 

‘‘universal’’ solution to a complicated economic or social issue. 

When it comes to such information control efforts, there aren’t many good examples of simple fixes or silver-bullet solutions that have worked, at least not very 

long. Consider the illusive search for a solution to online pornography. The PICS/ 

ICRA experience is instructive in this regard. PICS and ICRA refer to the W3C’s 

Platform for Internet Content Selection 52 and Internet Content Rating AssociaVerDate Nov 24 2008 06:38 Mar 19, 2012 Jkt 073308 PO 00000 Frm 00110 Fmt 6601 Sfmt 6621 S:\GPO\DOCS\73308.TXT SCOM1 PsN: JACKIE
107 

53http://www.fosi.org/icra. 54http://www.icra.org. 55 Royal Pingdom, ‘‘Internet 2010 in Numbers,’’ January 12, 2011, http://royal.pingdom.com/ 

2011/01/12/internet-2010-in-numbers. 56http://www.spamclock.com. Also see, Danny Sullivan, ‘‘Blekko Launches Spam Clock To 

Keep Pressure On Google,’’ Search Engine Land, January 7, 2011, http://searchengine 

land.com/blekko-launches-spam-clock-tokeep-pressure-on-google-60634. 57Steve DelBianco and Braden Cox, NetChoice Reply Comments on Department of Commerce 

Green Paper, January 28, 2011, 14, http://www.ntia.doc.gov/comments/101214614–0614–01/ 

comment.cfm?e=1EA98542-23A4-4822-BECD-143CD23BB5E9. 58Michael Fertik, Comments of Reputation.com, Inc. to the U.S. Department of Commerce, January 28, 2011, 12, http://www.reputation.com/blog/2011/01/31/reputation-com-commentscommerce-department-privacy-greenpaper. 59Sidney Hill, ‘‘Internet Tracking May Not Be Worth the Headaches,’’ Tech News World, December 29, 2010, http://www.technewsworld.com/story/Internet-Tracking-May-Not-Be-Worththe-Headaches-71543.html. 60Some examples: ‘‘The header-based Do Not Track system appeals because it calls for an armistice in the arms race of online tracking.’’ Rainey Reitman, ‘‘Mozilla Leads the Way on Do 

Not Track,’’ Deeplinks, Electronic Frontier Foundation, January 24, 2011, https://www.eff.org/ 

deeplinks/2011/01/mozilla-leads-the-way-on-do-not-track. Similarly, Chris Soghoian argues that 

‘‘opt out mechanisms . . . [could] finally free us from this cycle of arms races, in which advertising networks innovate around the latest browser privacy control.’’ Christopher Soghoian, 

‘‘What the U.S. Government Can Do To Encourage Do Not Track,’’ Slight Paranoia, January 

27, 2011, http://paranoia.dubfire.net/2011/01/what-us-government-can-do-to-encourage.html. Finally, Arvind Narayanan of Stanford University argues that Do Not Track, ‘‘is a way to move 

past the arms race between tracking technologies and defense mechanisms, focusing on the actions of the trackers rather than their tools.’’ Arvind Narayanan, ‘‘’Do Not Track’ Explained,’’ 

33 Bits of Entropy, September 30, 2010, http://33bits.org/2010/09/20/do-not-track-explained. 61 ‘‘Too often, well-intentioned efforts to regulate technology are far worse than the imagined 

evils they were intended to prevent.’’ Abelson, Ledeen, and Lewis, Blown to Bits, 159. 

tion.53 For a time, there was hope that voluntary metadata tagging and content labeling could be used to screen objectionable content on the Internet. But the sheer 

volume of material to be dealt with made that task almost impossible. The effort 

has been abandoned now.54 Of course, it is true that effort did not have a government mandate behind it to encourage more widespread adoption, but even if it 

would have, it is hard to believe that all pornography or other objectionable content 

would have been labeled and screened properly. 

In a similar way, The CAN–SPAM Act aimed to curtail the flow of unsolicited email across digital systems and, yet, failed to do so. Private filtering efforts have 

helped stem the flow to some extent, but have not eliminated the problem altogether. Royal Pingdom estimates that in 2010 89.1 percent of all e-mails were 

spam.55 ‘‘Spam pages,’’ are also a growing concern. In January 2011, Blekko, a new 

search engine provider, created a ‘‘Spam Clock’’ to track new spam pages and found 

1 million new spam pages were being created every hour.56

Similar problems await information control efforts in the privacy realm, even if 

a mandated Do Not Track mechanism required the re-engineering of web browser 

architecture and/or standards. ‘‘It’s a single response to an overly-simplifies set of 

choices we encounter on the web,’’ notes the NetChoice Coalition, which represents 

e-commerce companies.57 Also, Do Not Track ‘‘does not address mobile or app data, 

nor any data created outside a traditional web browser,’’ notes Michael Fertik, CEO 

of Reputation.com.58 ‘‘At the same time, the growth in technology and understanding can render current solutions inadequate. A privacy rule to limit behavioral 

advertising today might not work in the future when more data is available and 

there are more powerful algorithms to process it,’’ he says. ‘‘There is no reliable way 

of ensuring this technology is being used, however,’’ says Sidney Hill of Tech News 

World. ‘‘Ensuring compliance with antitracking rules will become even more difficult 

as more users turn to mobile devices as their primary means of connecting to the 

Web.’’ 59

Importantly, Do Not Track would not slow the ‘‘arms race’’ in this arena as some 

seem to hope or suggest.60 If anything, as noted in more detail below, a Do Not 

Track mandate will speed up that arms race and have many other unintended consequences.61 Complex definitional questions also remain unanswered, such as how 

define and then limit ‘‘tracking’’ in various contexts, as well as how to enforce such 

a regime. Lauren Weinstein summarizes some of the most obvious issues: 

Sending out a new ‘‘Do Not Track’’ header—even beyond basic associated technical requirements at the client and server ends—and even if there’s agreement 

on how that header is defined—tells you nothing about what actually happens 

to that header after being sent by the client browser. How does the user who 

sends such a header actually confirm that they’re ‘‘not being tracked’’ as a result? And how do they know that continued tracking isn’t caused by a technical 

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62Lauren Weinstein, ‘‘Risks in Mozilla’s Proposed Firefox ‘‘Do Not Track’’ Header Thingy,’’ 

Lauren Weinstein blog, January 24, 2010, http://lauren.vortex.com/archive/000803.html. 63 ‘‘Many behavioral targeting companies are based outside the US—making legislation ineffective,’’ says Doug Wolfgram, CEO of IntelliProtect, an online privacy management company. 

Quoted in Tony Bradley, ‘‘Why Browser ‘Do Not Track’ Features Will Not Work,’’ 

Computerworld, February 10, 2011, http://news.idg.no/cw/art.cfm?id=ACE91A0E-1A64-6A71- 

CE2572C981C0204A. 64 Castro, ‘‘Policymakers Should Opt Out of ‘Do Not Track’,’’ 3. 65The Cato Institute’s Jim Harper argues: ‘‘Privacy is not a gift from politicians or an entitlement that can be demanded from government. Privacy is a product of personal responsibility. 

Like moral living, privacy is the product of careful consideration and concerted effort by individuals. To be sure, protecting privacy can be hard. It involves knowledge, vigilance, and constant 

trade-offs.’’ Harper, ‘‘Understanding Privacy,’’ 5. 

issue that prevented the header from ever being received and processed by the 

destination server? 

Perhaps the header line was ‘‘eaten’’ by an intermediate proxy server (it’s quite 

common for proxies not to pass along all headers). Or maybe the header reached 

a server that simply hadn’t been modified to recognize it yet. Or did the header 

reach a server in some jurisdiction (say, outside of the U.S.) that wouldn’t even 

be ‘‘required’’ to know about that new header? And so on. 

You can’t just send a Do Not Track header and expect meaningful results. In 

practice, you end up having to build an entire confirmation apparatus of some 

sort—and even then it’s likely to be a mess. Without confirmation, you can send 

out whatever headers you wish, but when you don’t get the results you expect, 

what does that mean? Who knows? This all gets very complicated, very quickly.62

Moreover, in light of the global nature of online commerce and speech, Do Not 

Track will not scale as well as advocates hope.63 Castro says: 

Another problem with Do Not Track is that it does not scale well on the global 

Internet. As described above, to be effective, the proposal would require a Federal mandate calling for substantive modifications to networking protocols, web 

browsers, software applications and other Internet devices. Besides raising costs 

for consumers, it is unclear how effective such a mandate would be outside of 

the U.S. borders or how well the proposal would be received by international 

standard bodies.64

Again, as noted previously, the regulatory experience with spam, objectionable 

content, and copyrighted content suggest serious challenges lie ahead because of the 

borderless nature of online activity /commerce. 

6. Implications of This New Regime in Other Contexts 

A final danger with the FTC’s proposed Do Not Track information control regime 

is that it could also establish a precedent for other forms of Internet regulation. If, 

in the context of privacy policy, ‘‘opt-in’’ becomes the new default norm or mechanisms such as Do Not Track become the preferred top-down mandate, similar regulatory norms might be expected in other contexts. Why not mandatory ‘‘opt-in’’ for 

other types of speech or content? For example, should the presence of potentially 

objectionable content across digital networks be used as an excuse for greater regulation of the Internet? 

That is not the way things currently work, of course. At least in the United 

States, we demand that personal and parental responsibility be the first and primary line of defense against unwanted communications or content. Why should it 

be any different when it comes to ‘‘privacy’’ concerns? 65

Consider how things work in the context of speech and content regulation, American jurisprudence has become a fairly settled matter: people (or parents) are expected to take responsibility for unwanted information flows in their lives (or the 

lives of their children). Under current law, it is assumed that the many user empowerment tools on the market (filters, monitoring software, other parental control 

technologies) constitute a so-called ‘‘less-restrictive means’’ of controlling content 

when compared to government regulation. 

Many privacy advocates—such as ACLU, the Center for Democracy & Technology, 

and the Electronic Frontier Foundation—vociferously endorse this ‘‘less-restrictive 

means’’ test or ‘‘educate and empower’’ paradigm in the free speech context. Generally speaking, when it comes to speech regulation, they rightly argue ‘‘household 

standards’’ (user-level controls) should trump ‘‘community standards’’ (government 

regulation). And in Court they repeatedly employ the ‘‘less-restrictive means’’ test 

to counter government efforts to regulate information flows. 

109 

66 United States v. Playboy Entertainment Group, 529 U.S. 803, 815 (2000). 67 Ibid., 824. 68 Chapman University Law Professor Tom Bell has argued the same principle should hold 

in both contexts. Tom W. Bell, ‘‘Internet Privacy and Self-Regulation: Lessons from the Porn 

Wars,’’ Briefing Paper 65 (Washington, D.C.: Cato Institute, August 9, 2001), http:// 

www.cato.org/publdisplay.php?publid=1504. 

When it comes to privacy, however, many of them abandon this vision. For some 

reason, when the topic of debate shifts from concerns about potentially objectionable 

content to the free movement of personal information, personal responsibility and 

self-regulation become the last option, not the first. What is most troubling about 

this is that those advocates could be unwittingly undermining the power of the ‘‘less 

restrictive means’’ test more generally, which is a vitally important barrier to greatly enhanced government control of cyberspace. That is, when privacy advocates ignore, downplay, or denigrate user empowerment tools, they are essentially saying 

self-help is the right answer in one context, but not the other. 

That is a shame because, as discussed below, self-help tool work well in both contexts. And the same arguments used against private parental empowerment technologies are often trotted out in opposition to privacy controls. Can privacy tools be 

confusing at times or difficult to set up? Yes, they can, but no more so that parental 

control tools. Are privacy tools as effective as parental control tools? In some ways 

privacy tools are actually more effective because in the case of parental controls, the 

person you are attempting to ‘‘protect’’ (namely, kids) often have a stronger incentive to evade/defeat those tools. Moreover, privacy-enhancing controls can be very 

effective—perhaps even too effective—at shutting down unwanted information flows. 

Whether it is ad-blocking tools, cookie controls, or encryption techniques, these tools 

can actually be far more effective blocks on information flows than, say, Internet 

filters meant to block porn or hate speech, which is also more subjective by nature. 

Of course, no technological empowerment tool or solution is perfect. But as the 

Supreme Court held in United States v. Playboy, empowerment tools need not be 

perfect to be preferable to government regulation. ‘‘Government cannot ban speech 

if targeted blocking is a feasible and effective means of furthering its compelling interests,’’ the Court held.66 Moreover, ‘‘It is no response that voluntary blocking requires a consumer to take action, or may be inconvenient, or may not go perfectly 

every time. A court should not assume a plausible, less restrictive alternative would 

be ineffective; and a court should not presume parents, given full information, will 

fail to act.’’ 67

Again, the exact same principle should hold for privacy regulation 68 Why not expect those especially privacy-sensitive users who object to targeted online advertising to do something about it? To the extent effective self-help privacy tools exist, 

they provide a means of solving policy problems that is not only ‘‘less restrictive’’ 

than government regulation but generally more effective and customizable as well. 

Why settle for one-size-fits-all solutions of incomplete effectiveness when users can 

quite easily and effectively manage their own privacy? Indeed, those who advocate 

personal responsibility and industry self-regulatory approaches to free speech and 

child protection issues should be advancing the same position with regards to privacy. 

Æ