Firms to Set Standards for Online Privacy

An unprecedented roster of online business giants, including America Online Inc., IBM Corp. and Microsoft Corp., is expected to unveil on Monday an extensive plan for protecting consumers’ privacy on the Internet.

The proposal, which comes on the heels of a Federal Trade Commission report finding widespread problems with online privacy protections, seeks to set guidelines for handling personal information increasingly culled from consumers over the Net.

The plan calls for companies to post their privacy policies on their Web sites and establish a means of handling complaints about privacy issues. It also calls for setting up separate policies for collecting data from children, possibly requiring parental consent.

“This marks the first time that the industry is really banding together to try to deal with the way information is collected and used online,” said Jill Lesser, deputy director of law and public policy at America Online.

But critics said the proposal appears to be a belated attempt to head off possible government regulation. The Department of Commerce is set to hold a two-day meeting on online privacy starting Tuesday and is scheduled to make policy recommendations to the White House next month.

Those familiar with the plan say it is also missing critical pieces, including an enforcement mechanism for making sure companies adhere to their stated policies. Without that, the plan is unlikely to get government blessing.

“Enforcement is absolutely essential,” said Becky Burr, an official with the Department of Commerce. “Self-regulation cannot be merely an articulation of fair information practices principles.”

Still, the proposal goes much further than any previous industry attempt to establish guidelines for the ways that companies collect and use such private information as names, addresses and credit card numbers.

The Online Privacy Alliance, as it is being called, includes companies that account for the bulk of Internet traffic and billions of dollars in electronic commerce.

Beyond the computer industry, the alliance includes such corporate giants as Walt Disney Co., Ford Motor Co., Eastman Kodak Co., Procter & Gamble Co. and Xerox Corp. There are also nearly a dozen trade associations, including the Direct Marketing Assn. and the American Advertising Federation.

To a large extent, these members hope to lead by example, putting pressure on other firms and organizations on the Net to adopt strict privacy policies. Members of the alliance have been meeting for months, hammering out principles that all its members have pledged to honor.

Among its stated goals are to promote consumer awareness of the consequences of disclosing personal information over the Net. The plan also seeks to establish guidelines for collecting information from children. Details of the plan are to be released Monday in Washington.

The potential for privacy abuses online has become one of the more pressing issues in cyberspace. A recent government study found that 85% of Web sites collect personal information from consumers and only 14% disclose how it will be used.

Privacy advocates and government officials applauded the alliance’s efforts, but questioned how meaningful any reforms will be without a viable enforcement mechanism.

“That is clearly the most important--and the most difficult--issue for the industry to deal with,” said Lesser of AOL. Another participant said the alliance has set a timetable for returning to the issue.

Participants said that a single approach to enforcement is unlikely, and that a solution will probably depend on a mix of existing private and government initiatives.

Traditional consumer protection laws that outlaw deceptive trade practices already apply on the Internet, but the FTC has signaled that its online responsibilities need to be clarified.

There are also a number of private efforts underway on the Net, including one from the Better Business Bureau and another from Trust-e, a nonprofit initiative sponsored by AT&T; Corp., IBM and others.