Obama Issues Online Privacy Bill of Rights

The Obama administration proposed a “bill of rights” on Thursday that would give consumers greater online privacy protection and could ultimately give the federal government greater power to police Internet companies. The privacy bill of rights does not impose any immediate new obligations on online companies. President Barack Obama said it is just part of a broader plan to give Americans more control over how their personal data is used online.

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In conjunction with today’s White House announcement, advertising networks associated with Google (NASDAQ:GOOG), Yahoo (NASDAQ:YHOO), and Microsoft (NASDAQ:MSFT) have come out with a “Do Not Track” agreement, promising not to track the location of web browsers, something the Federal Trade Commission has been advocating since 2010.

Many Internet giants, including Google and Facebook, have notoriously tracked customers’ online activities, using them to create personalized advertisements that have boosted ad revenue. Google has received a lot of negative attention lately over the search giant’s plans to begin sharing users’ personal information across all Google products without giving customers an opt-in option.

Until now, lawmakers have done little to curtail online tracking, but on Wednesday, a group of 36 state attorneys general sent a letter to Google expressing concerns over the company’s new privacy policy. Many Internet companies have tried to use privacy policies to protect their own interests, but have come under fire from Congress and consumer groups for not being upfront about how they use information on users’ online activities.

Now the U.S. Commerce Department will begin to work with companies and privacy advocates to develop “enforceable” privacy policies based on Obama’s privacy bill of rights, the White House said. The Digital Advertising Alliance said today that it would immediately begin work to add tools to browsers that will allow consumers to easily express their data collection preferences. Stu Ingis, the group’s general counsel, expects browsers to include a simple, clear mechanism for opting out of data collection within the next nine months.

Obama’s planned privacy bill of rights consists of seven basic protections, the first of which would give consumers control over the kind of data companies collect. The bill would require companies to be transparent about data usage plans and respect the context in which data is provided and disclosed. Companies would also be required to ensure secure and responsible handling of the data, and be accountable for strong privacy measures. The bill of rights also calls for reasonable limits to be placed on the kind of personal data that online companies can try to collect, and for consumers to have the ability to access and ensure the accuracy of their own data.

Though companies can voluntarily choose whether to adopt these principles, those that do commit would face enforcement action if they should ever stray. Once adopted, any failure to meet privacy commitments would be perceived as a deceptive act, warranting fines or other legal action, said Federal Trade Commission Chairman Jon Leibowitz. However, despite potential ramifications, Leibowitz said he expects companies to still come on board, as strong privacy protections encourage trust in Internet commerce “that in turn fuels growth of the cyber economy and all other uses of the Internet.”

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To contact the reporter on this story: Emily Knapp at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com