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The FTC issued a preliminary staff report yesterday titled "Protecting Consumer Privacy in an Era of Rapid Change." Finding that many companies do not adequately address consumer privacy concerns, the 79 page report (available at proposes a framework for using consumers' data commercially. The report also proposes implementing a "Do Not Track" mechanism - likely a persistent setting on consumers' browsers - so consumers can choose whether to allow the collection of data regarding their online searching and browsing activities.

Although the report is preliminary and advisory only, we believe that it is a step closer to increased regulation and additional compliance burdens for anyone who collects or uses consumer data electronically. FTC Chairman Jon Leibowitz commented yesterday: "We don't have regulatory authority; what we're doing is offering best practices to companies and guidance to lawmakers." The report solicits comments before January 31, 2011 and promises a final report in 2011.

The FTC's current regulation of data privacy is limited to its enforcement of deceptive marketing practices under the FTC Act. As an example, on Tuesday, the FTC announced a settlement with EchoMetrix over EchoMetrix's failure to adequately disclose to parents that it sold data, gathered by its Sentry monitoring software, about their children's online activities to third-party marketers.

Do Not Track

The report's endorsement of a "Do Not Track" mechanism as a key element of the framework is likely to be its most debated aspect. The report suggests that consumers be allowed to opt out of behavioral advertising; that is, be given the choice of whether or not to allow the collection of data about online searching and browsing for use with third-party ads. The report suggests implementing "Do Not Track" through legislation or robust and enforceable self-regulation, likely involving placing a setting similar to a persistent cookie on a consumer's browser. The setting would signal to sites whether or not the consumer wants to be tracked or receive targeted advertisements.

Commissioner Leibwitz's remarks in introducing the report were more direct:

"A 'Do Not Track' browser setting would serve as an easy, one-stop shop for consumers to express their choices, rather than on a company-by-company or industry-by-industry basis. Microsoft, Google, Mozilla and Apple have already experimented with this, by the way, as has a coalition of companies."