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As if you needed another sign that times are tough, here's a fairly reliable measure: The number of cases handled by the advertising industry's best-kept secret -- self-regulation -- are on the rise. Last year the National Advertising Division of the Council of Better Business Bureaus handled 214 cases, up 22% from 2007. And in 2008 ad challenges, in which one advertiser challenges a competitor's claim, rose 31% to 81 cases. Why the increased activity? It's a deadly fight for share of market out there, and in down times advertisers tend to revert to hard-hitting comparative advertising. NAD's purpose is to substantiate these kinds of attack ads, and it can do it faster and cheaper than litigation can. The Federal Trade Commission seems to like the idea of letting advertisers settle their own disputes. When the National Advertising Review Council, the body that sets the policies and procedures for the NAD to enforce, started 38 years ago, then-FTC Chairman Bob Pitofsky wasn't an early convert. "If the truth be known," he said 10 years ago, "there was some skepticism about how the whole thing would work. The FTC had been burned time and time again by unkept promises of self-regulation by other industries. But this group has proved the skeptics wrong. Today, advertising has the best self-regulatory system of any industry in the country." The outgoing chairman of the FTC, William Kovacic, is also a fan. But the current crop of FTC commissioners don't seem as convinced, although they seem somewhat willing to give self-regulation a chance. In issuing guidelines for online behavioral advertising, FTC Commissioner Jon Leibowitz said the industry needs to do a better job of "meaningful, rigorous self-regulation, or it will certainly invite legislation by Congress and a more regulatory approach by our commission."A joint industry task force quickly seized on that statement as an endorsement for self-regulation, and said it supported FTC's goal of a "comprehensive and eff

As if banks didn't have enough on their plates with compliance and regulation on the federal front, come May 1, they will have to be mindful of strict new rules coming from the Commonwealth of Massachusetts around data security. The Massachusetts Data Security Regulations are perhaps like no other in terms of their depth and scope. During a teleconference, attorneys from the privacy and data security practice of the law firm Goodwin Procter (Boston) described this very detailed, all-encompassing set of rules designed to keep consumers' personal data safe. They go beyond the rules of other states and the federal government that simply require companies to notify their customers of theft of their personal information. "Personal information," for the purposes of the regulation, is described as someone's first and last name or first initial and last name, in combination with Social Security Number, driver's license number or financial account number. At its core, the regulation states that companies, including banks, that handle the personal data of a Massachusetts resident must show they have in place a comprehensive, written information security program with heightened security procedures around how this information is handled. The rules also extend to entities' service providers and the degree to which they too much show they comply with the Massachusetts rules of handling data on residents. Companies have until May 1 to amend their vendor contracts to reflect this and until Jan. 1, 2010 to certify their vendors comply. Furthermore, companies must comply with these rules even if they do not have a single office in the Bay State or if they are in an already heavily regulated industry, like financial services. As long as customers in businesses' databases reside in Massachusetts, those companies are affected by the rules. According to partner Deborah Birnbach, this is some of the most intrusive legislation as it relates to the operation of businesses. "It requires

Companies that track consumer behavior on the Web for targeted advertising without proper consent are near their "last chance" to self-regulate, the head of the U.S. Federal Trade Commission said on Monday. Privacy advocates say regulations on big phone and Internet companies, such as AT&T Inc and Google Inc, are too lax, giving the firms excessive control over consumers' personal information. "From my perspective, the industry is pretty close to its last clear chance to demonstrate" that it can police itself, FTC Chairman Jon Leibowitz told the Reuters Global Financial Regulation Summit in Washington. Earlier this year, the FTC issued new guidance urging websites to tell consumers that data is being collected during their searches and to allow them to opt out. If companies fail to do a better job of making their privacy policies understandable to the average person, momentum will keep building for greater regulation, Leibowitz said. "It's really up to industry."

Mixed receptionThe state hopes changes to Massachusetts' data privacy regulation plan will calm business community fears over the cost of the new controls, but watchers of the process say the government may have made things worse. One thing seems certain: the recent changes aren't likely to be the last word on regulating sensitive data in the Bay State. The regulations mandate all "personal information" belonging to Massachusetts residents be encrypted whenever it is stored on portable devices, transmitted wirelessly or shared on public networks. Changes enacted just in time to beat a deadline of Thursday, Feb. 12, pushed the effective date back eight months, from May 1 to Jan. 1, 2010. They also removed a requirement that businesses certify third-party vendors' compliance. The latter move was aimed to address an issue raised in a public hearing with business leaders held Jan. 15 at the State House. The change was designed to make the third-party regulations more adaptable to companies of various sizes and business models, said Massachusetts Consumer Affairs undersecretary Daniel Crane.

Last month, the digital advertising industry's use of behaviorally targeted advertising gained a reprieve of sorts when the Federal Trade Commission issued a final report confirming its earlier support of self-regulation. But some commission members remained concerned about ads that are shown to Web users based on their previous online activities, and in particular the possibility of violations of online privacy. Some form of legal restrictions may be imposed on the industry, the FTC indicated, if the online ad industry isn't up to the task of regulating itself. "Privacy is definitely the biggest concern today," said Joe Apprendi, CEO of Collective Media, an online advertising network based in New York. "There has been the concern that through such approaches as deep-packet technology, companies can leverage information through subscriber-based providers to marry anonymous behavioral segment data and identify real people. "The fact is, online advertising is subject to a higher standard that offline direct marketing tactics," Apprendi said. The FTC report, "Self-Regulatory Principles for Online Behavioral Advertising," continues to advocate voluntary industry self-regulation, in keeping with its principles governing online behavioral advertising issued at the end of 2007, despite the urgings of consumer advocacy groups that it impose rules regulating online advertising. The commission's new guidelines are based on four principles: * Transparency and consumer control. The commission advises that Web sites that collect data for behavioral advertising provide "a clear, concise, consumer-friendly and prominent statement" that the data are being collected to provide ads tailored to the user's interests and that the user has an easy and obvious way to choose whether to allow this. * Security for data retention. Companies that collect data for behavioral advertising should provide "reasonable" protection of that information and reta

Federal regulators on Tuesday met to hear about whether the benefits of cloud computing justify increased regulation, as privacy activists claim, or whether such an approach would do more harm than good. "We need to be smarter about dealing with technology, and cloud computing is posing (a) risk for us," said Hugh Stephenson, deputy director for international consumer protection at the Federal Trade Commission's Office of International Affairs. The FTC convened the two-day meeting in its offices here, which follows a series of similar workshops held in previous years on topics like spam, privacy, and behavioral advertising. The agency may file lawsuits to halt "unfair or deceptive acts or practices," meaning that if cloud computing is not unfair or deceptive, the FTC would likely not have jurisdiction. To secure personal information on the cloud, regulators may have to answer questions such as which entities have jurisdiction over data as it flows across borders, whether governments can access that information as it changes jurisdiction, and whether there is more risk in storing personal information in data centers that belong to a single entity rather than multiple data centers. The current panoply of laws at the state, national, and international level have had insufficient results; FTC Commissioner Pamela Jones Harbour cited a 2008 PricewaterhouseCoopers information security survey (PDF) in which 71 percent of organizations queried said they did not have an accurate inventory of where personal data for employees and customers is stored. With data management practices that are not always clear and are subject to change, companies that offer cloud-computing services are steering consumers into dangerous territory, said Marc Rotenberg, executive director of the Electronic Privacy Information Center. Already, problems of identity theft are skyrocketing, he said, and without more regulation, data management services may experience a collapse analogous to that

The Federal Trade Commission (FTC) is planning to regulate online viral marketing that uses blogs and social networking sites. Marketers are spending billions worldwide to get the endorsements of key bloggers and groups on social networking sites. One tactic, used by Microsoft and others, is to send products to bloggers on 'long-term loans' on the understanding that they will comment about them on their sites. AdvertisementUnder the new regulations being proposed, such bloggers would be legally liable if they make untrue statements about the products or services. The companies too would face sanctions. "This impacts every industry and almost every single brand in our economy, and that trickles down into social media," Anthony DiResta, an attorney representing several advertising associations, told The Financial Times. This is the first revision of the rules on this kind of advertising by the FTC since 1980 and is needed, according to the organisation, because new forms of communication have opened up new fields to marketing. "The guides needed to be updated to address not only the changes in technology, but the consequences of new marketing practices," said Richard Cleland, assistant director for the FTC's division of advertising practices. " Word-of-mouth marketing is not exempt from the laws of truthful advertising." Advertisers are resisting the changes, however, which threaten a highly effective form of marketing new products and services. "Regulating these developing media too soon may have a chilling effect on blogs and other forms of viral marketing, as bloggers and other viral marketers will be discouraged from publishing content for fear of being held liable for any potentially misleading claim," Richard O'Brien, vice president of the American Association of Advertising Agencies, said in an advisory to the FTC.

The Data Protection Directive is old-fashioned and out of date, a report published by the UK's privacy regulator the Information Commissioner's Office (ICO) has said. Commissioner Richard Thomas said that the European Union must change its legislation. The ICO commissioned RAND Europe to investigate whether or not 1995's EU Data Protection Directive was a good basis for Europe-wide data protection law. The research concluded that the law was flawed and needed to be updated. It found that the law must be clearer about what it seeks to achieve, that it should be better at forcing organisations to protect personal data in their charge, that it should encourage a more strategic approach to enforcement and that it does not deal well enough with the export of personal data outside the EU. Thomas said that the Directive, on which the UK's Data Protection Act is based, is outmoded. "The Directive is showing its age. Modern approaches to regulation mean that laws must concentrate on the real risks that people face in the modern world, must avoid unnecessary burdens, and must work well in practice," he said. "Organisations must embed privacy by design and data protection must become a top level corporate governance issue." RAND said that the Directive would be improved by its fundamental approach to ensuring data privacy being changed. It said that the law should focus on the protection of individuals and the security of their data, and not on the processes that lead to that. "The stronger, results oriented approach described in this report aims to protect data subjects against personal harm resulting from the unlawful processing of any data, rather than making personal data the building block of data protection regulations," said the report. "It would move away from a regulatory framework that measures the adequacy of data processing by measuring compliance with certain formalities, towards a framework that instead requires certain fundamental principles to be respected

As the impact of digital advertising on consumer privacy comes under scrutiny, AT&T is taking a stance in support of stricter standards. Rep. Rick Boucher (D., Va.), chairman of the subcommittee, said in an interview Wednesday that a statute is needed to regulate how companies collect, share and use data on consumers' behavior in targeting online advertising. While ad targeting on the Web has been at the forefront of privacy advocates' concerns, worries are growing about other media, ranging from mobile phones to emerging TV technologies. To sell marketers targeted ads, technology and media companies collect data about customers, ranging from the Web sites they visit to the neighborhoods they live in to the TV shows they watch. Marketers often will pay a premium for this form of advertising because it allows them to show their ads to consumers who are likelier to buy their products or services. "Pitfalls arise because behavioral advertising in its current forms is largely invisible to consumers," says Dorothy Attwood, AT&T's senior vice president of public policy and chief privacy officer, in prepared testimony she is expected to deliver at the hearing of the House Subcommittee on Communications, Technology and the Internet. Her statement says consumers don't fully understand that their online activity is used to create detailed profiles of them. Internet and other media companies say the data they use to target ads are anonymous and can't be traced to individual consumers. AT&T plans to argue that consumers should have "full and complete" notice of what information is collected about them and how it is used and protected, and should have tools that let them determine whether their Web activities are being tracked. The company says it won't use consumer information for online behavioral advertising unless it first obtains consent from the consumers involved. AT&T's stance contrasts with the position taken by most big Internet companies and industry trade grou

A top lawyer for P&G called upon industry execs to work harder than ever to defend self-regulation of the ad business at a gathering of top advertisers today. Speaking about the tough economic environment and increased government involvement in business affairs, Deborah Platt Majoras, VP-general counsel at P&G, said the ad business has to tout that it has been responsible and doesn't need additional oversight. The current business environment -- one in which market failures have prompted government bailouts and heightened government oversight -- is leading to a more skeptical outlook from policymakers about self-regulation. ' "The road ahead is not going to be easy, but we are not helpless," said Ms. Majoras, who, prior to joining P&G served as chairman of the Federal Trade Commission from 2004 to 2008. "The industry has been far more responsible than we get credit for. It's time that we backed up rhetoric with facts," she said.

I was at an advertising conference last week. Some folks are concerned that privacy advocates will press the government to regulate the most common of tracking technologies: behavioral targeting. That's the system that drops a cookie onto our computers to record many of our wanderings through the Web in hopes of targeting us with relevant ads. I had just written The Next Net, about how we'll be tracked on the mobile Internet. And I was thinking that if behavior targeting worries people, the data cascading from our phone use will terrify them. But there are also plenty of reasons to worry about regulation. First, there's a divide in our society between people extremely worried about erosion of privacy and others who appear, with their Web postings, videos and Tweets, to celebrate it. Which group wins? They both can. Take a look at this new friend-finding location-based application for Facebook, Locaccino. It comes out of Carnegie Mellon. The idea is that people can fine-tune their privacy profiles, deciding who can see where exactly they are, and who gets a blurrier vision, or none at all. The point is that millions of people are clearly eager to exchange all sorts of data. It's a way for them to learn, make friends, find things, and have fun. What's more, it supports a vibrant and innovative software market in a gloom-infested tech industry. Some of the innovation will go toward protecting privacy. Because privacy is something that both sides of this debate want and need, even if they don't agree on what it is. Regulations? The most important privacy regs, in my view, should mandate clear communications on how customer data will be used, and will limit tracking to those who have chosen to participate.

DAVOS, Switzerland (Reuters) - Two years ago anyone uttering the words "state" and "regulation" in the same sentence would have been sneered at in high-powered banking circles gathered by the ski slopes of Davos. Now, more than 18 months into the biggest financial upheaval in the last eighty years, those bank executives that still have jobs are preparing to swallow large doses of regulatory medicine to help cure a crisis they are accused of causing. With bank lending still frozen, the world sliding into recession and more than 300,000 financial jobs already gone, policymakers are replacing bankers in the driving seat at this year's World Economic Forum (WEF) to discuss short- and long-term solutions to the sector's woes. "Two years ago nobody could see the problems and the risks," said Marc Weil, head of EMEA Financial Services at consultancy firm Oliver Wyman, which is publishing a report on the state of the global financial services industry this week. "It is clear now that the financial services industry is like no others and anyone that poses systemic risks needs tighter regulation."

Online ad industry will probably continue to be a hot-button if FTC Commissioner Jon Leibowitz is named chairman. The Federal Trade Commission may strengthen its focus on online advertising and privacy if, as is expected, current FTC Commissioner Jon Leibowitz is named chairman of the agency. "He would certainly keep privacy and online advertising as a focus of the FTC, so I think [his potential appointment] does matter," said Mike Zaneis, VP of public policy at the Internet Advertising Bureau. Reports indicate Leibowitz will be named as head of the commission, replacing William Kovacic. Kovacic replaced former Chairman Deborah Platt Majoras in March 2008, when she left to join the private sector as VP and general counsel of Procter & Gamble. "A kind of privacy switch is going to go on at the FTC [once the new chairman is named] and they're going to engage in this issue in a much more serious way," said Center for Digital Democracy Executive Director Jeff Chester. "Under a Leibowitz regime we would get the kind of serious industry analysis that so far has been lacking from the Bush era approach." "Leibowitz has been a leader on privacy issues," said Zaneis, who expects a Leibowitz-run FTC to continue along the agency's current path of pushing for industry self-regulation, rather than creating new regulations for online advertisers. As a commissioner, Leibowitz, a Democrat, has not ruled out FTC regulation of things like behavioral targeting. During a two-day FTC forum held in Washington, D.C. in 2007, Leibowitz noted, "The marketplace alone may not be able to solve all problems inherent in behavioral marketing." He revealed his sense of humor, adding, "If we see problems...the commission won't hesitate to bring cases, or even break thumbs."

The new Obama Administration and a stronger Democratic party control of Congress set in the midst of a struggling economy and foreign policy issues, has created an interesting environment for legislation and regulations affecting customer interactions both federally and at state levels. While contact center-and-direct marketing-affecting issues such as offshoring, privacy, and telemarketing may haven been pushed offstage, they are not out of the hall. Ironically, economic pressures may shove them back into the spotlight as governments, especially states, seek ways to keep jobs and revenue sources, which contact centers provide. Federal Legislation Here is an examination of federal industry issues that lawmakers and regulators are and may be addressing in 2009: * Offshoring Federal lawmakers may reintroduce a bill similar to HR 1776, The Call Center Consumer's Right to Know Act, which would require contact center agents to disclose the physical location of such employee at the beginning of inbound and outbound calls. Firms would also have to annually certify to the Federal Trade Commission (FTC (News - Alert)) their compliance with such requirement. HR 1776 is an attempt to restrict offshoring by making customers aware that their calls may be going to or originating out of country. The bill's supporters hope customers and negative publicity would pressure firms to bring such jobs back to the U.S. The downsides are that such bills may significantly add to contact center costs in both onshoring and time spent location disclosing and in compliance, which would ultimately be paid for by consumers. In doing so bills like it that hike contact center expenses may also be self-defeating as they may result in fewer domestic jobs. "The particular type of disclosure contemplated by HR 1776 is a burdensome additional disclosure without clear benefit to the consumer," American Teleservices Association (ATA) CEO Tim Searcy told the House Energy and Commerce subcom

There are four "high risk" areas that aren't getting the attention they deserve as financial institutions work toward complying with the ID Theft Red Flags Rule, says a leading industry compliance expert. Many institutions have already complied with the regulation and have done their risk assessment to identify covered accounts and determined what red flags they need to be monitoring. But there are areas that should be considered "high risk" and aren't getting the attention they deserve from institutions, says Sai Huda, CEO of Compliance Coach. The Red Flags Rule is a risk-based regulation. As such, Huda says, compliance should be approached from a risk management and not a purely technical perspective, and institutions should ask these questions: * Which accounts are more at risk to identity theft? * Which red flags represent higher risk? * Which detection and response procedures are commensurate with the risks? * Which service providers pose greater risk? * What controls exist to mitigate the risks? The big question that most institutions have at top of mind is "What about enforcement?" Huda says the federal banking regulators are taking a risk-based, top-down approach when assessing institutions. "They are first assessing whether the [institution] has implemented a risk-based program and how it is overseeing compliance," he says. "If the program is risk-based and sound, they will limit their scope. If not, then they will dig deeper."

"A key, centrist digital rights group is set to put out a report calling for strong federal privacy laws and guidelines to regulate the growing tracking and targeting of Americans online. It argues that the self-regulation approach that industry fights for just hasn't worked. The online ad industry has "historically failed to fully implement its self-regulatory principles," according to the 34-page draft report by the Center for Democracy and Technology. CDT is a centrist D.C. group that works with and is substantially funded by the tech industry, including companies like Facebook, Google and AOL that are deeply invested in targeted ads. "Recently revised self-regulatory principles still fall short (.pdf) even as written," charges the draft, obtained by Wired.com. These tough words spearhead a new tactic for a group more used to convening inside-the-Beltway tech policy forums than launching ACLU-style send-outraged-e-mail campaigns. The CDT, which splintered off from the rabble-rousing Electronic Frontier Foundation 15 years ago, is also planning to launch a "Take Back Your Privacy" campaign on Thursday, designed to garner support for its call for comprehensive federal privacy legislation. Dozens of tech firms, known and obscure, record users' behaviors as they interact with search engines, blogs, e-commerce sites and even government websites. The tracking goes on in the background with little knowledge by consumers and even less oversight from government authorities. The tech industry - like others subject to potentially blunt-forced government regulation - has argued that policing itself was enough to prevent egregious privacy intrusions that could proliferate without any real chance individuals would even be aware of them."

Beyond PCI: Other Regulations to Look For in 2009 Just a few days ago, the Federal Reserve, the Office of Thrift Supervision and the National Credit Union Administration announced the enactment of comprehensive new rules regarding card practices. These rules, which will not take effect until July 1, 2010, impose restrictions on a number of controversial issuer practices, including interest rate increases, late fees and double-cycle billing. Many industry observers predict that the rules will result in less credit being made available, and on stricter terms, than has been the case over the last several years. These rules may not be the end of the matter. Rep. Carolyn Maloney (D-NY), who in 2008 introduced the Credit Cardholders' Bill of Rights Act of 2008 (which sought to regulate many of the same practices as the then-proposed Fed rules), stated that she was disappointed in the delayed effectiveness of the Fed rules and promised to revive the Credit Cardholders' Bill of Rights in 2009 to, as she put it, "bridge the gap" between now and the effective date of the Fed rules.

"Computer scientists have recently undermined our faith in the privacy-protecting power of anonymization, the name for techniques that protect the privacy of individuals in large databases by deleting information like names and social security numbers. These scientists have demonstrated that they can often "reidentify" or "deanonymize" individuals hidden in anonymized data with astonishing ease. By understanding this research, we realize we have made a mistake, labored beneath a fundamental misunderstanding, which has assured us much less privacy than we have assumed. This mistake pervades nearly every information privacy law, regulation, and debate, yet regulators and legal scholars have paid it scant attention. We must respond to the surprising failure of anonymization, and this Article provides the tools to do so."

Assumption of privacy through anonymization of data is called into question by deanonymization techniques. The work is not new but its implications have gone under-realized. In a country struggling to understand how to even define privacy, will anyone listen?

"Lora Bentley spoke with Anzen analysts Megan Brister and Jordan Prokopy via e-mail regarding behavioral advertising - what companies are doing, what regulators want to do and what we, as advertising consumers, need to know. With their coworker Miyo Yamashita, the analysts recently wrote a guest opinion for IT Business Edge. Bentley: Why are so many concerned about privacy when it comes to behavioral advertising? What is it about the Internet that convinces consumers that information they share there is not being used? Brister and Prokopy: Most concerns stem from the lack of transparency around data disclosure practices. While consumers may value a Web site's product and service offerings, they are generally unaware that businesses share their information with an extensive group of other businesses in order to deliver targeted advertising. This group includes news Web sites, advertising networks, profiling services, and Web analytics providers, to name a few. As Pamela Jones Harbour, a Commissioner at the Federal Trade Commission (FTC), discussed at the FTC Roundtable earlier this week, there is an asymmetry between consumer perceptions and business realities. Once consumers are informed of businesses' data handling practices, they will want to have more control over how businesses manage their information. As we discuss in our article, some businesses engaged in online behavioral advertising have been slow to adopt transparent consumer data management policies. This is a concern particularly for vulnerable groups, such as minors or non-English speaking consumers, because they may not understand legally written policies. Consumer advocacy groups argue that without knowledge and control over the collection, use, and disclosure of data, Web sites may misuse or expose sensitive data about consumers' health, lifestyles and finances."

"The U.S. Supreme Court Monday will hear arguments for and against the constitutionality of the oversight board established to monitor public company financial activity as part of the Sarbanes-Oxley regulation. The Sarbanes-Oxley Act was created and enacted into law partly in response to corporate accounting scandals such as Enron and WorldCom. The regulatory standard set out to reduce such fraudulent financial activities and provide an oversight mechanism for public companies. Part of the law includes the establishment of the Public Company Accounting Oversight Board (PCAOB), which consists of five members appointed by the Securities and Exchange Commission (SEC). The arguments to be heard this week relate directly to the PCAOB. While set up to regulate financial accounting at companies, those opposed to the board's powers argue that because its members are not appointed by the president, the board's control is unconstitutional based on the country's tenets of three branches of government. The challengers to the law say that the PCAOB lacks the presidential control required for executive branch agencies because the five members are appointed by the SEC, which doesn't fall under presidential powers. As a private agency in essence, the PCAOB is able to act as a government authority, which the Free Enterprise Fund believes to be unconstitutional. "