Bureau of Competition 

Michael Bloom 

Assistant Director for Policy & Coordination 

Direct Dial 

(202) 326-2475 

August 15,2011 

Mr. Alan L. Cohen 

UNITED STATES OF AMERICA 

FEDERAL TRADE COMMISSION 

WASHINGTON, D.C. 20580 

Vice President and General Counsel 

Council of Better Business Bureaus, Inc. 

4200 Wilson Boulevard, Suite 800 

Arlington, VA 22203-1838 

Dear Mr. Cohen: 

This letter responds to the Council of Better Business Bureaus' request for a Federal 

Trade Commission staff advisory opinion concerning the Council's proposed "accountability 

program." Under this program, the Council of Better Business Bureaus (the "CBBB") will hold 

companies engaged in online behavioral advertising ("OBA") accountable for compliance with 

the "Self-Regulatory Principles for Online Behavioral Advertising" (the "Principles"), released 

in July 2009 by a coalition of industry associations and administered by the Digital Advertising 

Alliance ("DAA',).l The CBBB wishes to know whether Federal Trade Commission ("FTC" or 

"Commission") staff is likely to recommend that the Commission bring an enforcement action 

challenging as an anti competitive restraint of trade "any element of the proposed accountability 

program," if the CBBB proceeds to implement it. 

Based on the information provided in your letter of April 19, 2011 and in subsequent 

telephone conversations between FTC staff and CBBB representatives and DAA representatives, 

FTC staff has no present intention of recommending that the Commission bring any such 

enforcement action. 2 In brief, the proposed accountability program is intended to increase 

Letter from Alan L. Cohen to Donald S. Clark, Secretary, Fed. Trade Comm'n 

(April 19,2011) ("April 19 Letter"). The DAA is a "business league" established to govern an 

industry self-regulatory program based on the Principles. The DAA was formed through funding 

and the cooperation of the American Association of Advertising Agencies, the American 

Advertising Federation, the Association of National Advertisers, the Direct Marketing 

Association, and the Interactive Advertising Bureau. These associations and the DAA are 

described in footnote one of the April 19 Letter. Representatives of these organizations, or some 

of them, are referred to herein as "Trade Association Representatives." 

2 We have determined that issuance of an FTC staff advisory opinion letter in this 

matter is appropriate under Rule 1. 1 (b) of the Commission's Rules of Practice, 16 C.F.R. 

§ 1.1 (b). FTC Staff has issued advisory opinions under similar circumstances, including 
transparency and consumer control of OBA, which has the potential to increase consumer 

welfare, and there appears to be little or no potential for competitive harm associated with the 

proposed accountability program. 

Significantly, our conclusions are entirely dependent on the completeness and accuracy 

of the information provided to us concerning the proposed accountability program and its likely 

effects, and on our understanding of the pertinent facts, as described below. 3 

Statement of the Pertinent Facts 

The CBBB is the national headquarters of the Better Business Bureau ("BBB") system. 

In your April 19 Letter, you explained that the BBB system seeks to promote ethical business 

and advertising practices. Among its operations, the CBBB, in partnership with the National 

Advertising Review Council, administers advertising industry self-regulation programs, 

including the National Advertising Division and the Children's Advertising Review Unit. 

In February 2009, the Commission issued a Staff Report discussing principles for the 

regulation of OBA and calling on the advertising industry to adopt an appropriate self regulatory 

program.4 Your April 19 letter states that in response to that call, a coalition of advertising 

industry associations adopted the Principles described in "Self-Regulatory Principles for Online 

Behavioral Advertising"S in July 2009. The Principles are administered by the DAA, and their 

implementation is ongoing. 

Under the Principles, online behavioral advertising is defined as the practice of collecting 

"data from a particular computer or device regarding web viewing behaviors over time and 

across non-affiliate Web sites for the purpose of using such data to predict user preferences or 

regarding proposed programs of the CBBB and the Direct Marketing Association, also a 

participant in the DAA. See Letter from Michael D. McNeely to Robert L. Sherman (Sept. 9, 

2011) (regarding Direct Marketing Association proposal pertaining to its Mail and Telephone 

Preference Services and related matters); Letter from Alden F. Abbott to Steven M. Mister (Dec. 

19, 2006) (regarding Council for Responsible Nutrition/CBBB proposal pertaining to monitoring 

and review of dietary supplement advertisements for truthfulness). 

3 Staffs opinion in this matter is limited to the competition law analysis requested 

by the CBBB. FTC staff did not review the Principles or their administration in any other 

respect. Nothing contained herein should be construed as stating or implying any FTC staff 

opinion on the extent to which the Principles and their administration are adequate or 

appropriate. 

4 FTC Staff Report: Self-Regulatory Principles for Online Behavioral Advertising 

(Feb. 2009) ("2009 FTC Staff Report"), available at 

http://www.ftc.gov/os/2009/02/P085400behavadreport.pdf. 

5 A copy of the Principles was appended to your April 19 Letter. 

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interests to deliver advertising to that computer or device based on the preferences or interests 

inferred from such Web viewing behaviors.,,6 

As described in your April 19 Letter, the Principles require companies engaging in OBA 

to provide: 

• Transparency about data collection and use practices associated with 

OBA, providing consumers with clear, meaningful and prominent notice 

through multiple mechanisms. 

• Consumer Control over whether data is collected and used or transferred 

for OBA purposes, provided through easy-to-use consumer choice 

mechanisms. 

• Appropriate Data Security for, and limited retention of, data collected and 

used for OBA purposes. 

• Consent to Material Changes in an entity's OBA data collection and use 

policies for previously collected OBA information unless that change will 

result in less collection or use of the consumer's data. 

• Limitations on the collection of specified categories of Sensitive Data for 

OBA purposes. 7 

The Principles also provide for the education of consumers and businesses about OBA 

and how consumer choice and control may be exercised. Finally, the Principles provide for the 

establishment of accountability programs to monitor and seek compliance with the Principles by 

all companies engaged in OBA. The CBBB's April 19 Letter requesting an FTC staff advisory 

opinion relates to an accountability program that the CBBB proposes to implement. 

According to the April 19 Letter, the Principles require all "third party" OBA data 

collectors and advertising networks to use the DAA's Advertising Option icon to indicate 

compliance with the Principles and to timely inform consumers of and link them to a required 

web site notice and mechanism by which consumers can exercise choice concerning receipt of 

OBA. 8 Third party collectors and advertising networks are encouraged to use the consumer 

choice mechanism operated by the DAA, but may use an equally accessible alternative choice 

mechanism. If a third party does not provide the required notice and choice on a web site, the 

web site operator must do so. 

6 April 19 Letter at 3. 

7 As defined in the Principles, "Sensitive Data" includes personal information 

gathered from people known to be under the age of 13, and certain financial and health data. 

A third party is defined under the Principles as "an entity ... to the extent that it 

engages in Online Behavioral Advertising on a non-affiliate's web site." It is distinguished from 

a "first party," which owns or controls the web site with which the consumer interacts. 

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As explained in the April 19 Letter, the DAA licenses use of the Advertising Option 

icon/link to assist companies in providing greater transparency to consumers for a fee of$5,000 

per year, or free of charge to publishers whose revenues from online advertising are less than $2 

million per year. In addition, for a fee of $1 0,000 per year, third party OBA data collectors and 

advertising networks can be listed in the consumer choice system on the DAA web site 

AboutAds.info, http://www.aboutads.info. thereby providing a consumer choice mechanism as 

required by the Principles; or they can adopt an alternative consumer choice mechanism. Trade 

Association Representatives informed FTC staff that other costs of implementation of the 

Principles are expected to be modest and a function of the size of a given third party collector or 

advertising network. In their view implementation costs should not affect the ability of 

companies to compete effectively in their markets. 

The eBBB program will focus primarily on compliance with the Principles' provisions 

seeking to ensure transparency and consumer control. Through a contracted vendor, the eBBB 

will monitor companies reasonably believed to be engaged in OBA. When appropriate based on 

that monitoring and other sources of information, the eBBB will make confidential inquiries 

into a company's possible areas of non-compliance with the Principles. 9 

When initiating an inquiry, the eBBB will notify the company whose practices are under 

review and seek its response, including information demonstrating its compliance with the 

Principles. If the eBBB finds that a company is not in compliance, the eBBB will recommend 

steps to bring it into compliance, and will ask the company to agree to implement those steps. 

The eBBB will publicly report incidents of non-compliance only if they go 

uncorrected,1O and these incidents "will be referred to the appropriate regulatory authorities."11 

Failure of a company to participate in a eBBB compliance inquiry or to provide the eBBB with 

requested information similarly may result in public reporting and referral to regulatory 

authorities. A finding of uncorrected non-compliance also may result in the company's loss of 

membership in one or more of the trade associations that cooperated through the DAA to 

establish and implement the Principles. 

Trade Association Representatives indicated in conversation with FTC staffthat public 

disclosure that a company has declined to comply with the Principles could injure that 

9 According to the April 19 Letter, other sources of information may include 

consumer complaints and information from competitors, government agencies, and academic 

studies. 

10 Public disclosure will be made through periodic reports published by the eBBB 

and on web sites of some participating trade associations. 

II The April 19 Letter specifies that instances of non-compliance "will" be referred 

to "the appropriate regulatory authorities," but does not specify the authorities in question. We 

note that non-compliance with the Principles will not necessarily equate to a violation of a law or 

rule enforced by a regulatory authority or result in any regulatory agency action. 

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company's business reputation - and perhaps its business - to the extent that other companies 

and consumers believe that non-compliance with the Principles reflects a failing of note. 

Neither public disclosure of non-compliance nor expulsion from a trade association would 

otherwise impair that company's ability to compete effectively. In important part, the benefits of 

trade association membership - such as access to training and networking opportunities - would 

remain available, though perhaps at somewhat greater non-member prices. 

CBBB representatives have indicated in conversation with FTC staff that neither the 

Principles nor the CBBB' s proposed accountability program would impair the ability of 

companies to use alternative systems, including for example browser-based systems with "do not 

track" features,12 to provide consumer protections with respect to OBA, provided that the 

companies also satisfY the notice and choice provisions of the Principles. For example, 

according to the CBBB, some companies have begun to provide consumers with more detailed 

"preference" choices than are required under the Principles. 

Analysis of the Proposed OBA Accountability Pro~ram 

The proposed CBBB accountability program appears similar to industry self-regulation 

to establish and seek industry-member compliance with an ethical code. The antitrust laws do 

not prohibit professional or trade associations from adopting reasonable ethical codes to protect 

consumers. As the Commission has stated, "[ s ]uch self-regulatory activity serves legitimate 

purposes, and in most cases can be expected to benefit, rather than to injure, competition and 

consumer welfare.,,13 In some instances, however, particular ethical restrictions or compliance 

mechanisms can unreasonably restrain competition and harm consumers, thereby violating the 

antitrust laws. Accordingly, we consider the purpose and effects of the proposed accountability 

program. 

The CBBB has explained that the purpose of the proposed accountability program is to 

enhance consumer understanding of OBA and to provide consumers with meaningful notice and 

controlofOBA. We rely on that representation, which finds support in the structure of the 

program itself, and tum to consideration of the program's likely competitive effects. 

As a general matter, industry self-regulation to provide consumers with more useful 

information and increased choice promotes consumer welfare with little or no risk of 

diminishing competition among complying businesses. But industry self-regulatory programs 

can be designed or misused by competitors to limit competition among them, resulting in 

12 Some browsers currently have "do not track" settings, by which the browser can 

alert web sites visited that the consumer does not want his or her browsing monitored by 

companies engaged in OBA. 

13 Am. Academy of Ophthalmology, 101 F.T.C 1018 (1983) (advisory opinion); see 

also Am. Med. Ass'n, 117 F.T.C. 1091 (1994) (advisory opinion); Am. Med. Ass'n, 94 F.T.C. 

701,1029 (1979), affd as modified, 638 F.2d 443 (2d Cir. 1980), affd by an equally divided 

Court, 455 U.S. 676 (1982). 

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increased prices, reduced consumer choice, lesser innovation, and other consumer harms. 14 In 

addition, industry self-regulatory programs can operate as agreements to exclude non-compliant 

products or companies from the market. 15 Thus, an agreement among competitors to impose on 

non-complying companies sanctions that limit their ability to compete effectively would be of 

concern to antitrust enforcement authorities. 16 In the context of OBA, for example, an agreement 

among competitors to deny advertising space to companies that do not comply with the 

Principles would be troubling. 

Because industry self-regulation to increase transparency and consumer control has the 

potential to enhance consumer welfare, staff would analyze these and other potential concerns 

using the "rule ofreason.,,17 Under the rule of reason, FTC staff weighs the potential for 

competitive harm arising from an agreement among competitors against any procompetitive 

benefits arising from that agreement. If FTC staff concludes that the procompetitive benefits 

more than offset the potential for competitive harm, staff will not recommend an enforcement 

action. 

Given the pertinent facts relating to the CBBB' s proposed accountability program as we 

understand them, FTC staff concludes that the program has little potential for competitive harm. 

We base this conclusion on five points. 

First, the accountability program is intended to enhance consumers' understanding and 

control of OBA. All other things being equal, the enhancement of consumer understanding and 

control has the potential to increase consumer welfare. 

Second, information provided by the CBBB and Trade Association Representatives 

14 E.g., Allied Tube & Conduit Corp. v. Indian Head, Inc., 486 U.S. 492, 501 (1988) 

(manufacturers of steel electrical conduit that attempted to influence association's promulgation 

of electrical systems product standards to exclude plastic conduit by agreeing to "pack" 

standard-setting meeting and vote as a bloc held not immune from federal antitrust liability); 

Accrediting Comm 'n on Career Schs. and Calls. a/Tech., 119 F.T.C. 977 (1995) (advisory 

opinion) (Commission declined to approve proposed accreditation standard that would define 

acceptable tuition levels, reasoning that adoption of standard would in effect be an agreement 

among members of accrediting body to charge no more than standard would permit). 

15 Id. 

16 See, e.g., Radiant Burners, Inc. v. Peoples Gas Light & Coke Co., 364 U.S. 656 

(1961); Am. Soc'y a/Sanitary Eng'rs, 106 F.T.C. 324 (1985) (consent order). 

17 See the analytical framework set out in the Federal Trade Commission! 

Department of Justice Guidelines for Collaborations Among Competitors, available at 

http://www.fic.gov/os/2000104/ficdojguidelines.pdf. See also the Commission's recent 

application of the rule of reason in In the Matter 0/ Realcomp II Ltd., Docket No. 9320 (Oct. 30, 

2009), available at http://www.fic.gov/os/adjpro/d9320/091102realcompopinion.pdf. 

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indicates that the accountability program will impose only relatively minor burdens on 

companies participating in OBA. These consist principally of use of the Advertising Option 

icon/link to signal compliance with the Principles and provide consumers with a notice about 

OBA that will, in turn, link to and explain a consumer choice mechanism. Compliance does not 

impose significant technical burdens or costs that would advantage some companies over others. 

A license to use the Advertising Option icon/link and the DAA's choice mechanism is available 

at a modest cost - one that it appears will not limit consumer choice of goods and services or 

exclude companies or prevent them from competing effectively. 

Third, the sanctions for non-compliance with the Principles contemplated under and in 

conjunction with the accountability program do not appear unreasonable. Those sanctions 

include public disclosure of non-compliance, referral of non-compliance to government 

regulatory authorities, and suspension of non-compliant companies from certain trade 

associations. Based on the information available to us at this time, it does not appear likely that 

imposition of these sanctions would limit the ability of companies to compete effectively. 

Companies may compete based on reputation, including reputation for ethical dealing. 

We cannot assess the extent to which some companies or consumers may decide to limit or 

avoid business dealings with companies that choose not to comply with the Principles. But if 

some companies and consumers were to make unilateral decisions to limit or avoid business 

dealings with companies that do not comply with the Principles, the resulting effects would not 

flow from anticompetitive conduct, but from competition itself - competition based on 

reputation for protecting consumer privacy. 18 Such unilateral conduct is entirely consistent with 

the antitrust laws. Further, referral of matters to governmental authorities may, in some 

instances, aid those authorities in carrying out their responsibilities, and may, as well, be a lawful 

exercise of the right to petition the government for redress. 19 

The last sanction contemplated by the CBBB for non-compliance with the Principles, 

expulsion from certain trade associations, might be characterized as a group boycott of some 

kind. However, expulsion from a trade association does not always result in predominantly 

anticompetitive effects.20 Here, loss of trade association membership would result in the 

18 That would contrast markedly with any agreement among companies to refuse to 

deal with non-compliant companies, which would raise substantial antitrust concerns. See, e.g., 

Fashion Originators' Guildv. FTC, 312 U.S. 668 (1941). 

19 See, e.g., United Mine Workers v. Pennington, 381 U.S. 657 (1965) (exempting 

from antitrust challenge concerted effort to influence administrative processes); Cal. Motor 

Transport Co. v. Trucking Unlimited, 404 U.S. 508 (1972) (exempting from antitrust challenge 

concerted effort to influence adjudicatory processes). 

20 See, e.g., NW Wholesale Stationers, Inc. v. Pacific Stationery & Printing Co., 

472 U.S. 284, 286 (1985) (expUlsion of retailer from purchasing cooperative by vote of 

membership held not unlawful absent a showing that the cooperative had market power or 

unique access to an element of business necessary for effective competition). 

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limitation or loss of certain trade association benefits such as access to certain training and 

networking opportunities at association member prices. Information provided to us by the 

CBBB and the Trade Association Representatives indicates that the loss of these benefits is not 

likely to impair companies' ability to compete effectively. 

Accordingly, we conclude based on the information provided to us by the CBBB and the 

Trade Association Representatives that the contemplated sanctions for non-compliance with the 

Principles are unlikely to adversely affect competition. 

The fourth basis for our conclusion that the accountability program has little potential for 

competitive harm is this: the self-regulatory system envisioned by the Principles and the 

accountability program is broadly applicable across product categories, advertisers, and web site 

operators. Accordingly, its impacts are not focused on any specific market for goods or services. 

As a result, the potential for adverse competitive impact in any specific market for goods or 

services is further attenuated. 

Finally, adoption of the CBBB's proposed accountability program to foster compliance 

with the Principles does not preclude adoption of, and poses little risk of "crowding out," other 

systems for protecting consumers with respect to OBA. According to the CBBB and Trade 

Association Representatives, neither the Principles nor the accountability program preclude 

companies' use of other systems, including browser-based "do not track" systems, for providing 

consumers with transparency and control. Should it later appear, however, that collective 

adoption and enforcement of the Principles operates as an impediment to adoption of 

complementary or superior consumer protections, we might then reconsider this opinion. 

Conclusion 

For the reasons stated above, FTC staff believes that the CBBB's proposed OBA 

accountability program is unlikely unreasonably to restrain trade. Accordingly, we have no 

present intention to recommend a challenge to the program. 

This letter sets out the views of the staff of the Bureau of Competition, as authorized by 

Rule 1. 1 (b) of the Commission's Rules of Practice, 16 C.F.R. § 1.1(b). Under Commission Rule 

1.3( c), 16 C.F.R. § 1.3( c), the Commission is not bound by this staff advisory opinion and 

reserves the right to rescind it at a later time. In addition, FTC staff retains the right to 

reconsider this opinion, and, with notice to the requesting party, to rescind or revoke it if 

implementation of the proposed accountability program appears to result in significant 

anticompetitive effects, if the program is used for improper purposes, if pertinent facts (or our 

understanding thereof) change significantly, or if it would be in the public interest to do so. 

//p!~yours 

!~~ael m 

Assistant Director for Policy & Coordination 

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