Advocates: Free market doesn't work for online privacy

IDG News Service - Web and mobile device users have little understanding about how much of their personal data is collected online, making it difficult to rely on free-market competition for solutions to privacy concerns, privacy experts told the U.S. Federal Trade Commission Thursday.

The FTC or Congress needs to set clear online privacy rules, said some speakers at an FTC workshop on comprehensive online data collection. Other speakers suggested that competition among Internet and device companies and privacy notification efforts by industry groups can work, even if some Web users don't seem to care or understand about data collection.

Some services, including search engines, browsers and social networks, are offering their products based on privacy tools or policies, said Markham Erickson, general counsel for the trade group the Internet Association.

Consumers will punish companies with bad privacy practices, added Stuart Ingis, counsel for the Digital Advertising Alliance, another trade group. "The market reacts when they see a business practice they don't like," he said.

There's still an open question about the harm to consumers from data collection, some speakers said.

Harm to a consumer's reputation may be a factor, but "if you can't articulate what the harm is, you can't prevent it," said Howard Beales, a business professor at George Washington University and former director of the FTC's Bureau of Consumer Protection. "If the only harm we're worried about is speculative possibilities of what might happen at some point in the future, what we're likely to do is preclude a lot of really useful new services on the horizon that none of us has thought of yet."

But it's difficult for Web and mobile users to make informed decisions about Web-based products because much of the data collection happens behind the scenes, other speakers said. "It's hard to compete on something people don't know about," said Ashkan Soltani, an independent security researcher and consultant.

When researchers ask people about online data collection, many have little knowledge of the topic, said Lorrie Faith Cranor, a privacy researcher and computer science professor Carnegie Mellon University. Many people, when first learning about comprehensive data collection, find it "very creepy," although some people's opinions improve when learning the data collection is generally used to deliver targeted ads and customized services, she said.

"They also feel like, 'I seem to have given a blank check for these companies to collect my data and do whatever they want with it,'" she said.

Still, some Web users are acting in ways that suggest they understand data collection, Beales said. Many Web users are starting to use multiple networks, multiple devices and multiple browsers and are deploying encryption technologies, he said.