FTC Flexes Its Muscle on Online Privacy

Last year, the Federal Trade Commission accused the online ad industry of not moving fast enough to protect consumers' online privacy. This year, the FTC flexed its authority to do something about it, reaching a settlement with Chitika, an online ad company.

The FTC's action came Monday, just two days before the Senate Commerce Committee holds a hearing on online privacy at which FTC Chairman Jon Leibowitz is scheduled to testify.

During its investigation of Chitika, the FTC found that the company, which bought ad space on Web sites and tracked consumers’ online activity via cookies, offered an opt-out that only lasted 10 days, allowing the company to resume tracking consumers. The FTC found that opt-out mechanism was deceptive and violated federal law.

Chitika took the settlement in stride, explaining that the FTC helped uncover a "big snafu" in a cookie that was supposed to last 10 years, not 10 days. "They let us know last February, and we fixed it a month later," said Daniel Ruby, director of research and marketing for Chitika.
"We're glad it was pointed out to us. We agree that protecting privacy on the Internet is of the utmost importance."

Details of the settlement require Chitika's targeted ads to include a hyperlink that takes consumers to a clear opt-out mechanism that lasts for at least five years. It also requires Chitika to destroy all user information collected when the prior opt-out mechanism was in place. Chitika must also notify consumers who previously opted-out that they need to opt-out again.

"The FTC is under a lot of pressure to show they are on this and taking action to protect the privacy of the Internet user," Ruby said.