FTC-Sears Deal Points toward BT Regulation

The US FTC has approved a settlement with Sears regarding online tracking that requires it to destroy data collected from consumers, who were paid $10 to download software that monitored their online behavior. According to MediaPost, the Sears program sent “pop-up ads to 15 of every 100 visitors that asked for their email addresses. Respondents were then invited by email to download software that would track ‘online browsing,’ and promised $10 if they kept the software for at least one month.”

The settlement between the FTC and Sears was originally announced in June by the government agency. Here’s the FTC’s summary of the case and the remedy:

The FTC charges that the software would also monitor consumers’ online secure sessions – including sessions on third parties’ Web sites – and collect information transmitted in those sessions, such as the contents of shopping carts, online bank statements, drug prescription records, video rental records, library borrowing histories, and the sender, recipient, subject, and size for web-based e-mails. The software would also track some computer activities that were not related to the Internet. The proposed settlement calls for Sears to stop collecting data from the consumers who downloaded the software and to destroy all data it had previously collected.

According to the FTC’s complaint, Sears invited certain consumers visiting the sears.com and kmart.com Web sites to become members of the “My SHC Community.” Sears solicited these consumers to “participate in exciting, engaging, and on-going interactions – always on your terms and always by your choice.” Sears paid consumers $10 to participate. As part of this process, Sears asked consumers to download “research” software that it said would confidentially track their “online browsing.” Only in a lengthy user license agreement, available to consumers at the end of a multi-step registration process, did Sears disclose the full extent of the information the software tracked, according to the complaint. The complaint charges that Sears’ failure to adequately disclose the scope of the tracking software’s data collection was deceptive and violates the FTC Act.

Under the proposed settlement, in addition to destroying information previously collected, if Sears advertises or disseminates any tracking software in the future, it must clearly and prominently disclose the types of data the software will monitor, record, or transmit. This disclosure must be made prior to installation and separate from any user license agreement. Sears must also disclose whether any of the data will be used by a third party.

In this case we already are seeing the future of online data collection going forward. Here are the most interesting and relevant bits from the excerpt above:

Only in a lengthy user license agreement, available to consumers at the end of a multi-step registration process, did Sears disclose the full extent of the information the software tracked, according to the complaint. The complaint charges that Sears’ failure to adequately disclose the scope of the tracking software’s data collection was deceptive and violates the FTC Act.

Under the proposed settlement, in addition to destroying information previously collected, if Sears advertises or disseminates any tracking software in the future, it must clearly and prominently disclose the types of data the software will monitor, record, or transmit. This disclosure must be made prior to installation and separate from any user license agreement. Sears must also disclose whether any of the data will be used by a third party.

(Emphasis added.)

I think these provisions point the way toward future FTC rules that will govern all of online advertising and behavioral targeting in particular. Here’s what I think the regulation will look like:

  • Prominent disclosure requirements (what is being tracked and by whom)
  • Prominent ability to opt-out of tracking
  • Data retention (disclosure that tells people how long their information will be stored)

If I’m correct this could throw a big monkey wrench in the works for BT because if people see prominent disclosures that they’re being tracked they’re likely opt-out, wouldn’t you? The “benefits” of behavioral targeting are highly abstract to consumers, though very real to marketers. However Google, with its “interest based ads,” may be something of a model for the future. Here’s Google’s discussion of the privacy controls in the program:

  • Transparency – We already clearly label most of the ads provided by Google on the AdSense partner network and on YouTube. You can click on the labels to get more information about how we serve ads, and the information we use to show you ads. This year we will expand the range of ad formats and publishers that display labels that provide a way to learn more and make choices about Google’s ad serving.
  • Choice – We have built a tool called Ads Preferences Manager, which lets you view, delete, or add interest categories associated with your browser so that you can receive ads that are more interesting to you.
  • Control – You can always opt out of the advertising cookie for the AdSense partner network here. To make sure that your opt-out decision is respected (and isn’t deleted if you clear the cookies from your browser), we have designed a plug-in for your browser that maintains your opt-out choice.

The Ad Preferences Manager is a kind of dashboard for consumers to convey their “interests” and opt-out:

Picture 8

Make no mistake, regulation and enhanced disclosure requirements are coming. Marketers and publishers should be preparing for this inevitability.

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Related (from AdAge): The Ad-Tracking Debate: Where Should Disclosure Live?:

A more perfect (and not much harder) solution would put links to disclosure both in the ads and on the page or site. As proposed by industry groups, there should be a recurring icon in or around ads that consumers can come to associate with tracking and learning about why any particular targeted ad was served to them.

But if consumers want to look into their privacy options on that site more generally, a link on every page should take them to one place with all of the privacy information they need.


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One Response to “FTC-Sears Deal Points toward BT Regulation”

  1. Yahoo Introduces “Ad Interest Manager”: Allows Opt-In And Out Of Behavioral Targeting Says:

    [...] I’m not trying to argue, however, that this is being done cynically to fend off regulation. Not at all. But I think that it potentially preempts the imposition of such a system from lawmakers, which have been gearing up to do so. [...]

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