We Know Where You ve Been: Emerging Rules in Online Behavioral Advertising

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1 We Know Where You ve Been: Emerging Rules in Online Behavioral Advertising Prepared for the International Association of Privacy Professionals by Liisa M. Thomas There is a debate raging in the world of online advertising. On the one side are those that advocate for serving consumers only with content and in particular, advertisements in which they are interested. On the other side are those who are concerned about how that targeting occurs. In the middle of the debate is the Federal Trade Commission, which in early 2009 issued a report regarding the practice of behavioral targeting across multiple websites for the purpose of serving targeted ads. 1 The FTC called on those engaging in what it called online behavioral advertising (OBA) namely tracking consumers across multiple websites to serve targeted ads to provide consumers with notice and choice. Industry responded shortly thereafter, promising to create a self-regulatory program to provide notice and choice. 2 Industry argued that without self regulation, notice and choice would be impossible. There are so many players involved in the tracking that trying to make any one individual company responsible could be impossible. Industry released its self-regulatory program in July 2009, and companies that engage in OBA have worked towards compliance with the program. For those who decide not to participate, the FTC has indicated that if the company engages in OBA, it expects it will provide notice and choice, and settled with an advertising network over its failure to do just this. 3 Similarly, in a series of class action lawsuits, companies that used flash cookies to track consumers in order to serve behaviorally-targeted ads were accused of failing to provide sufficient notice and choice. 4 The lawsuits used arguments similar to that used by the FTC, namely that failure to provide notice and choice was actionable unfair and deceptive trade practice. The lawsuits were brought not under the FTC Act, however, but under state laws that give a private right of action. While admitting no liability, the companies involved in the flash cookie lawsuits settled and agreed not only to stop using the technology, but also to set up a $2.4 million settlement fund. These suits both from the FTC and class action attorneys make it clear that companies should pay attention to the OBA activities in which they engage. If the recent spate of lawsuits is not enough 1 FTC STAFF REPORT: SELF-REGULATORY PRINCIPLES FOR ONLINE BEHAVIORAL ADVERTISING (2009), available at 2 SELF-REGULATORY PRINCIPLES FOR ONLINE BEHAVIORAL ADVERTISING (2009), available at 3 In the Matter of Chitika, Inc., FTC File No (settlement reached March 14, 2011). 4 Valdez et al. v. Quantcast Corporation et al., No (C.D. Cal., settlement reached July 13, 2011). White et al v. Clearspring Technologies, Inc. et al., No (C.D. Cal., settlement reached Aug. 10, 2010).

2 incentive, companies may find compelling proposed legislation, including bills suggesting that consumers should have an absolute right not to be tracked online. 5 So what should companies do? It depends on what their role is in the process. Is it a website who has permitted third parties to place advertisements on the site, which advertisements are placed based on behavioral tracking? Is it a company whose advertisements are being served by third parties based on online behavioral tracking? Or is it a company who is helping to conduct the tracking or place the ads? Where your organization fits in the puzzle impacts what notice and choice it should provide. Websites Where OBA-Served Ads are Posted Many companies host websites where third party advertising occurs. For example, who hasn t visited their local newspaper website and not seen ads? Or run a search on their favorite search engine website and been provided with paid links? Merely because a website allows third parties to serve advertisements does not necessarily mean it has an obligation to provide notice and choice about behavioral advertising. Instead, the website that permits third party advertising must determine if the ads are being served based on behavioral tracking activities. For most companies, the answer resides with either the IT team, the marketing team, or a combination of both. Questions to ask include whether the site uses vendors that assist in placing the advertisements, whether those vendors use behavioral tracking techniques, whether cookies or other technologies are being used by the IT team, and whether those tracking technologies are being provided by vendors who track users across multiple websites. Often, the IT and marketing teams will need to coordinate with the vendors to determine what type of tracking activities occur on the site. According to a Wall Street Journal article, tracking is very common, with the nation s 50 top websites on average install[ing] 64 pieces of tracking technology onto the computers of visitors. 6 It is thus reasonable to expect that the answer from these vendors will be yes, tracking is occurring. If tracking occurs that involves following a user across multiple websites, then the FTC expects organizations to provide notice and choice. Notice is relatively straightforward, and can be accomplished by creating a stand-alone disclosure that a user accesses from the home page of the website. The access would be through a link that reads About Our Ads (or similar language). The notice would describe what behavioral tracking is occurring (by whom, if vendors are involved), and what choices the consumer has. The website could also require the ad network serving the ads if there is one to place a link within the body of the advertisement disclosing the tracking practice. Safest is to do both, just in case an ad is missing the link. What is not sufficient, however, is including a statement somewhere buried within the privacy policy. 7 Trickier, however, is how to provide choice. Since the website allowing the third party ads to appear is typically not the one that is doing the tracking or serving the ads, cooperation with the companies 5 H.R. 654, 112 th Cong. (2011). 6 Angwin, Julie, The Web s New Gold Mine: Your Secrets, The Wall Street Journal, July 30, 2010 (available at search.html?keywords=julia+angwin&collection=wsjie/6month, last accessed Feb. 14, 2012). 7 See FTC STAFF REPORT: SELF-REGULATORY PRINCIPLES FOR ONLINE BEHAVIORAL ADVERTISING, supra note 1, at

3 conducting the tracking and serving the ads will be necessary. A coalition of industry groups (the IAB, NAI, DMA, 4As, AAF, ANA, and BBB) recognized this need for cooperation, and created the much publicized aboutads.info program. Through this program, consumers can opt out of being tracked for behavioral advertising purposes, and participating companies will thus not track the consumer. The website in our scenario could either work directly with the program, or could require its vendors to work with the program. Advertisers Whose Ads Are Served Through OBA Techniques What about the company who has ads served on third party websites like search engines, newspaper websites, retailer sites, and the like-- as a result of OBA tracking? The advertisers are expected by the FTC to provide both notice and choice. This can be done by the advertiser itself, through a vendor helping to place the advertiser s ads, or by a notice created and posted by the third party site on which the ad appears. Having the notice and choice provided through the vendor placing the ads, rather than by the advertiser or the third party website, is usually the easiest option. The vendor would ensure that each advertisement included a prominent notice, as well as a link taking the website user to an area where he or she could exercise choice. The aboutads.info program has solutions to help companies accomplish both notice and choice, including licensing out a logo to include in the advertisement. The logo would link to information about opting out. Many have asked who creates the language at the link. This language can be created by any of the parties, but perhaps most logically would be created by the ad network, i.e., the company that is negotiating getting the ad placed. Responsibilities of Ad Networks Ad networks who assist in getting advertisements served through OBA techniques also have responsibilities, according to the FTC. They, too, must disclose to consumers that they engage in OBA activities, and must give consumers choice. Many are turning to aboutads.info as a way to effectuate notice and choice. Those that don t should be cautious, as ad networks were the first to be targeted by the FTC with respect to OBA activities. In a case brought by the FTC against Chitika Inc., an advertising network, the FTC alleged that the company had not provided sufficient notice and choice in particular, that the choice provided did not actually work as promised. The FTC alleged that Chitika had violated the FTC Act, inasmuch as its practices were deceptive to consumers. In settling with the FTC, Chitika agreed to conform to the expectations outlined by the FTC in its OBA Principles, namely to provide notice and choice. With respect to notice, Chitika agreed to put a hyperlink on its home page to a statement that reads we collect information about your activities on certain websites to send you targeted advertisements. To opt out of Chitika s targeted ads, click here. When the user selects here, the user would be directed to an opt out page where additional disclosures would be made. These additional disclosures include that by opting out, Chitika would not use that information to serve targeted ads and the status of the user s opt out (i.e., if the user is currently opted out or in). In addition, Chitika agreed to place a link within any advertisement that reads Opt Out? and that contains an interstitial (text that appears when a user s cursor hovers over the link) that reads Opt out of Chitika s targeted ads. The opt out? link in the ad would take people to the mechanism described above. This settlement suggests -3-

4 an outline for ad networks who choose not to work with aboutads.info, however any such companies that decide not to work with aboutads.info would need to have the mechanics in place to be able to respect opt out requests that are made. Special Considerations for Opt Outs Any company that provides consumers with a choice about whether or not they are tracked for OBA purposes will need as mentioned above to take steps to ensure that the choices made are respected. In the Chitika case, for example, the FTC alleged that Chitika Inc., the ad network, provided opt-outs that lasted for only ten days. After ten days, new cookies were placed on users computers, and users were again tracked and served with OBA-based ads. In its settlement with the FTC, Chitika promised that it would offer users an opt-out that would last for at least five years. In addition, it would notify those who had already opted out that their opt outs had expired. In particular, Chitika agreed to place a notice on its website If you opted out of our targeted ads before March 1, 2010, the opt-out has expired and you must opt out again to avoid targeted ads. Chitika also promised to disclose to consumers that the opt-out is specific to the user s browser, and that the opt-out will need to be repeated if the user switches to another browser. The terms of this settlement suggest for companies what steps they should take when developing their own opt out process, should they choose not to work with the industry aboutads.info program. Failure to follow the self-regulatory principles has also resulted in enforcement. The coalition of selfregulatory programs has designated the Council of Better Business Bureaus, through its Online Interest- Based Advertising Accountability Program (the Accountability Program) to serve an enforcement function. The Accountability Program in November 2011 announced decisions in its first six cases. According to the Accountability Program, six entities Forbes Media Extension (FMX), Martini Media, PredictAd, QuinStreet,, Reedge and Vertura had insufficient consumer choice procedures. FMX and Martini Media both had opt-out cookies that expired in less than six months, 8 PredictAd s expired after one month, 9 and Reedge s expired after a year; 10 all shorter than the industry standard of five years. Based on the Accountability Program s review, neither the Veruta nor the QuinStreet opt-out mechanisms functioned properly. 11 All six worked with the Accountability Program to voluntarily modify their practices. OBA in the Mobile Context Mobile applications and smart phones present advertisers with an evolving forum to reach consumers in a personalized, targeted manner. While not yet as prevalent as online OBA advertising, geo-location based advertising is growing in popularity. In response to mobile and geo-location based advertising, the FTC encouraged the industry to design new and innovative mechanisms to provide both the disclosure and choice required under the FTC Principles. In response, the Mobile Marketing Association developed its 8 In re Forbes Media Extension, Case No and In re Martini Media, Case No National Advertising Review Council/Council of Better Business Bureaus Online Interest Based Accountability Program (Nov. 8, 2011). 9 In re PredictAd, Case No (Nov. 8, 2011). 10 In re Reedge, Inc., Case No (Nov. 8, 2011). 11 In re Ventura Case No (Nov. 8, 2011) and In re QuinStreet, Inc., Case No (Nov. 8, 2011). -4-

5 Mobile Application Privacy Policy Framework. 12 The framework addresses mobile applications, not necessarily mobile websites. The framework recommends providing consumers with information that many already have in their privacy policies: (1) what information is collected by the application; (2) how the collected information is used; (3) what information is shared with third parties; (4) how information is shared with third parties; (5) how information is secured and protected; (6) how consumers will be notified of changes to the developer s privacy policy; and (7) privacy compliance with COPPA specific to the collection of information from children under 13. What makes the framework special - and helpful- are tips specific to the mobile environment. These include getting consent before pulling information from social networking platforms (such as friend lists, photos or check-ins), disclosing whether the application collects information through geo-location functionality and if so, how that information is used, shared and how the consumer can opt-out of such collection. The issue of tracking in the mobile environment, especially when that tracking is tied to serving ads, continues to be of interest to class action attorneys. For example, a class action originally filed in August 2011, alleging that iphone apps were tracking consumers for advertising purposes without their knowledge, was recently consolidated with four other actions. 13 The original complaint alleged that Apple tracked users activity through a unique indentifying number that users were unable to disable or block. The case is still pending as of this writing. In light of these types of lawsuits, to the extent that geolocation activities involve combining previously collected information with geo-location information, it may be necessary to give notice and choice, or obtain consent at different times during the consumer relationship. Behavioral Advertising in Canada Canada guidelines and self-regulatory framework echo some of the developments in the U.S. In December 2011, the Office of the Privacy Commissioner of Canada issued new online behavioral advertising guidelines. The guidelines provide that organizations must alert consumers in a clear and understandable way to the use of targeted advertising technologies and make it easy for them to decline tracking of their web activities. The guidelines are intended to help organizations ensure that their online behavioral advertising practices comply with the federal Personal Information Protection and Electronic Documents Act (PIPEDA). A coalition of eight Canadian online marketing associations has also adopted a self-regulatory framework for online behavioral advertising. The framework is similar to that in the United States, including oneclick access to notice about and opt-out from online behavioral advertising. An accountability program is also being developed. Conclusion Companies can engage in OBA in many ways, whether by having OBA-based ads on their website, by helping track and serve OBA-based ads, or by asking third parties to serve OBA-based ads on their behalf. 12 MMA MOBILE APPLICATION PRIVACY POLICY FRAMEWORK (released December 2011). 13 Lalo v. Apple, Inc. et al., No (N.D. Cal., filed Dec. 23, 2010); see also In re Iphone Application Litig, No. 11-MD (N.D. Cal. filed Aug. 25, 2011). -5-

6 Depending on where in the OBA chain your organization falls, it will have different notice and choice obligations, and different mechanisms available to it for providing notice and choice. As the FTC and plaintiffs class action attorneys get more active, companies should take steps now to ensure that they have in place mechanisms that will help lower their risks. -6-

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