Open MIC Urges U.S. Federal Trade Commission to Adopt New Online Advertising Guidelines

Open MIC Urges U.S. Federal Trade Commission to

Adopt New Online Advertising Guidelines

Consumer Privacy Protection Called Critical to Growth of the Internet and U.S. Economy

 New York – November 2, 20009 - Current online advertising practices increasingly threaten the privacy of millions of American consumers and should be subject to new regulation that provides consumers with far greater control of their personal data.

 That’s the recommendation of the Open Media and Information Companies Initiative – or Open MIC (www.openmic.org) – in a formal comment to the U.S. Federal Trade Commission, which is currently reviewing privacy challenges posed by technology and business practices that collect and use consumer data.

Launched in 2007, Open MIC is a non-profit media advocacy group that organizes shareholders of publicly-held media and information technology companies to bring about responsible corporate management policies.  Members of the Open MIC coalition are investors, investment advisory and mutual fund companies, foundations and shareholder advocacy groups with a combined total of more than $100 billion in assets under management. 

In its filing, Open MIC told the FTC: “As responsible investors, we believe in maximizing revenue and profitability while also respecting the privacy rights of individuals.  In fact, we are convinced that the best way to encourage long-term growth of the Internet is to encourage responsible management practices that foster transparency, accountability and trust.”

However, Open MIC said, there is now “abundant evidence” that the American public is concerned about online privacy, particularly behavioral advertising which targets consumers based on their online usage habits.  

The filing pointed to a recent study by researchers at the University of Pennsylvania and the University of California, Berkeley, which found that “contrary to what many marketers claim, most adult Americans (66%) do not want marketers to tailor advertisements to their interests. Moreover, when Americans are informed of three common ways that marketers gather data about people in order to tailor ads, even higher percentages— between 73% and 86%--say they would not want such advertising.”

Open MIC said that members of its investor coalition “consider broad-based economic growth important to increasing the value of our portfolios. Accordingly, we view threats to the health of Internet-based commerce as a material issue.”

And while Open MIC investors would prefer industry self-regulation, recent industry proposals “lack detail and fall far short of presenting the innovative approaches to privacy protection that we would expect of corporate management with a long-term perspective toward shareholder value creation.” 

“We believe that failure to provide greater transparency regarding privacy practices will weaken consumers’ confidence in the firms and their willingness to protect consumers’ privacy and freedom of expression,” Open MIC said. “Such failure will also heighten the companies’ perceived risk and penalize their share values.”

Open MIC told the FTC that any new regulation of online advertising should address the following principles:

• Federal privacy law should be based on “opt-in” principles, requiring an affirmation by an individual permitting the collection of personal data and tracking information;

• Users should be allowed to access and erase their digital data, and files about them, as compiled by online marketers and advertisers;

• Publishers and distributors of Internet browsers should be required to provide technology that permits users to browse the Internet without leaving data trails;

• Particular care and attention should be given to respecting personal dignity and to protecting consumer information, including individual medical and financial data, that could be used for purposes other than those intended by the Internet user;
• Consumers should be provided with strong and transparent consumer protections related to the secondary uses of personal information. So-called information accountability regimes modeled on consumer lending laws offer a promising template for such protections;
• Data should be retained for no more than 24 hours without obtaining an individual’s consent.

Privacy is a core issue for Open MIC.   In the past year, members of the investor coalition introduced shareholder resolutions at publicly-held Internet Service Providers (ISPs) seeking reports from their boards regarding Internet network management practices and their impact on Internet privacy and freedom of expression.

At two of those ISPs - CenturyTel, Inc. and EarthLink, Inc. – investors controlling stock worth almost $1 billion voted in favor of the Open MIC resolutions. At CenturyTel, the resolution received a remarkable 30% of the vote – a clear expression of shareholder concern.  A third ISP, Knology Inc., agreed to revise its Internet privacy policy following the filing of a shareholder resolution.

A full text of Open MIC’s comment to the Federal Trade Commission can be found on the Open MIC web site (www.openmic.org).