Online Tracking: Is Big Brother Watching?

Have you ever wondered how your web browser determines which advertisements appear on your screen? The answer is that your actions are “tracked” to create a profile of your interests. Each of the major browser makers—Microsoft, Google, Mozilla, and Apple—can keep a record of the web pages you visit or the topics you discuss in your e-mail. The information allows advertisers to match their advertising specifically to you. So, ideally, you only see advertising that offers products or services of interest to you. You see dog food ads if you are a dog owner and cat food ads if you are a cat owner, for example.

The collection of this information, however, has also raised the issue of privacy. Privacy advocates suggest that many consumers do not realize that the information is being collected and used without their consent. They also argue that in extreme situations the information could lead to unintended outcomes for the consumers—being turned down for a mortgage or a health insurance policy because of online book or food purchases, for example.

To facilitate the debate, the Federal Trade Commission (FTC) recently released a report calling for better self-regulation of online information collection. In its report, the FTC suggests that each browser should offer users a “Do Not Track” option to signal a computer user’s desire not to be tracked. Advertisers would be asked to comply with the request. This opt-out system would be very similar to the current “Do Not Call” system. In Europe, the guidelines are more restrictive, requiring consumers to explicitly “opt-in.”

The questions related to this issue are not simple. Consumers will need to decide if giving up some privacy by sharing data is a reasonable trade-off for targeted advertising, customized news sites, and online social networks. Organizations in the $24 billion advertising industry will need to evaluate their ability to self-regulate, and the FTC eventually will need to decide whether legislation is needed. The situation is likely to become even more complicated in the near future as consumers, and especially children, increase their use of smartphone mobile apps that generate tracking data. How do you think the debate will be resolved?

A landmark legal battle regarding deceptive advertising involved the Federal Trade Commission and Campbell Soup Co. It had been Campbell’s practice to insert clear glass marbles into the bottom of soup containers used in print advertisements to bring the soup ingredients (e.g., noodles or chicken) to the surface. The FTC ruled that the advertising was deceptive because it misrepresented the amount of solid ingredients in the soup, and it issued a cease and desist order. Campbell and its advertising agency agreed to discontinue the practice. Future ads used a ladle to show the ingredients.44

Other laws have been introduced to regulate promotion practices. The Deceptive Mail Prevention and Enforcement Act (1999), for example, provides specifications for direct-mail sweepstakes, such as the requirement that the statement “No purchase is necessary to enter” be displayed in the mailing, in the rules, and on the entry form. Similarly, the Telephone Consumer Protection Act (1991) provides requirements for telemarketing promotions, including fax promotions. Telemarketing is also subject to a law that created the National Do Not Call Registry, which is a list of consumer phone numbers of people who do not want to receive unsolicited telemarketing calls.

Finally, new laws such as the Children’s Online Privacy Protection Act (1998), the European Union Data Protection Act (1998), and the Controlling the Assault of Non-Solicited Pornography and Marketing (CAN-SPAM) Act (2004) are designed to restrict information collection and unsolicited e-mail promotions and specify simple opt-out procedures on the Internet. See the Marketing Matters box to learn about the Federal Trade Commission’s effort to create a “Do Not Track” system to ensure online privacy.45 A related Internet issue, taxation, has generated an ongoing debate and temporary laws such as the Internet Tax Freedom Act (2007).