August 29, 2011, 3:31 PM

A consumer advocacy group calls for federal action on web advertising

Consumer Watchdog slams ad industry’s self-regulation effort.

Lead Photo

The Advertising Option icon.

Consumer Watchdog today called for a federal law that would enable online shoppers to opt out of receiving ads based on their online behavior. The consumer advocacy group said an attempt by the digital advertising industry to self-regulate such marketing efforts fails to protect consumers’ online privacy.

The call comes on the day that trade groups such as the Direct Marketing Association and the Interactive Advertising Bureau start to require their members to comply with the self-regulation program. 

The Advertising Option program was announced in October 2010 by trade groups that include the Interactive Advertising Bureau, the Association of National Advertisers the American Advertising Federation and the Direct Marketing Association. The trade groups say that by self-regulating, the direct marketing industry can take action more quickly and respond to consumer needs better than can the U.S. government.

“Self-regulatory programs are inherently far more adaptable than inflexible technology mandates, especially those imposed by a federal government with no expertise in managing complex, continually evolving technological systems,” says Randall Rothenberg, president and CEO of the Interactive Advertising Bureau. “Not a single instance of consumer harm relating to online advertising relevance has been identified by any organization. If there had been, IAB and our self-regulatory partners would be the first to call for severe penalties and aggressive enforcement.”

Companies that don’t comply with the rules face no financial penalties, only investigations and cancelled memberships in the trade groups.

That’s not enough for Consumer Watchdog. It says the program of self-regulation gives consumers too little information about how to opt out of behavioral ad programs, and applies only to companies that agree to take part, not all advertisers. The advocacy group also says the self-regulation program does not apply to mobile devices, and that consumers must opt out again if they happen to clear their web browser cookies.

“Consumers have no more control today than they did yesterday over whether their information is tracked and collected by companies online,” says Carmen Balber, Washington director for Consumer Watchdog. “This industry program is another example of the failure of self-regulation to protect consumers from unwanted monitoring of every move they make on the Internet and their mobile devices. Action by Congress and the Federal Trade Commission to require a Do Not Track Me option is crucial for consumers to gain control over their own information.”

Linda Woolley, the Direct Marketing Association’s executive vice president for Washington operations, says the trade group soon will announce what she calls a “persistent cookie” that will remember consumers’ opt-out choices. She also says that the DMA, which has some 3,600 member companies, and the other trade groups have so many members that the self-regulation effort acts as a best practice regime for behavioral ads.

Woolley says that if federal lawmakers pass a law regarding consumer opt-outs for behavioral ads, that could result in shoppers opting out of ads in droves, resulting in less revenue for e-commerce as online ads become less effective.

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