• by Wendy Davis  @wendyndavis, February 11, 2011

Privacy advocates are cheering an online privacy bill unveiled on Friday that would require the Federal Trade Commission to craft regulations requiring that Web companies allow consumers to opt out of online tracking. But ad industry representatives say the measure could discourage innovation.

Unlike some other privacy proposals, the Do Not Track Me Online Act (H.R. 654), introduced by Rep. Jackie Speier (D-Calif.), has drawn support from a host of privacy advocates, including the Consumer Federation of America, U.S. Public Interest Research Group, World Privacy Forum, the Center for Digital Democracy and the ACLU. Jeff Chester, executive director of the Center for Digital Democracy, said advocates worked closely with Speier to develop the bill. "We really think it's a model," he says. "It's a reflection that the privacy community is coming together to refine what the characteristics are for a regulatory system."

The ad industry, on the other hand, says the measure is problematic. "There is no consumer product in the world right now that people love more than the stuff that's going on in the Internet. And that requires the free flow of information," says Stuart Ingis, counsel to the self-regulatory group Digital Advertising Alliance.

He adds that any specific concerns can be addressed without legislation that would affect online data collection. "If the worry is that this type of data is being used for employment decisions, tell us and we'll restrict that," he says.

The bill would give consumers the right to prevent behavioral advertising companies from collecting information about sites that Web users visit, even when the companies don't know users' names. The measure also allows users to opt out of the collection of information that could be used to identify them, including IP addresses, names, postal addresses, screen names and email addresses. The bill applies to companies engaged in interstate commerce, but excludes small sites that collect information from fewer than 10,000 visitors a year.

Speier's proposal provides for exceptions for "commonly accepted commercial practices," including fraud prevention and inventory control. It permits the FTC to enforce the new regulations by conducting random audits of Web publishers subject to the new rules.

Jules Polonetsky, co-chair and director of the industry-funded think tank Future of Privacy Forum, took issue with a portion of the bill that allows audits. "The FTC performing random audits of the Web servers of sites -- including of popular bloggers, or WebMD or search engines -- is a particularly troubling new idea," he says.

Speier isn't the only Congress member supporting new privacy laws. Rep. Bobby Rush (D-Ill.) this week reintroduced an online privacy bill that would require ad networks to obtain users consent to tracking. That measure says that consent can be given on an opt-out basis if the networks provide prominent notice through an icon and also allow people to view and edit their profiles.

In addition, Rep. Cliff Stearns (R-Fla.) has said he intends to introduce a measure floated last year by himself and former Rep. Rick Boucher (D-Va.), which also would require ad networks to obtain users' consent to tracking. That measure also specifically preempted state laws and banned consumers from bringing private lawsuits -- provisions that led privacy advocates to condemn the proposal.

Of the various proposals, only Speier's specifically authorizes the FTC to promulgate regulations establishing a do-not-track mechanism. But all of the proposed bills require ad networks to allow users to avoid tracking.