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Data-Driven Online Ads Enter Spotlight as FTC Moves Toward Rules

Sept. 8, 2022, 9:05 AM

Industry and consumer representatives will weigh in at an event Thursday on potential new Federal Trade Commission rules governing the data collection that drives personalized advertisements online.

The agency’s public forum is part of its recently launched effort to regulate what it’s dubbed “commercial surveillance” by businesses such as Alphabet Inc. and Meta Platforms Inc. that gather information about people’s use of apps and websites, often for the purpose of targeting ads. The rules also would set standards for how data must be secured.

The event is one of many steps in a lengthy rulemaking process that’s already stirring political tensions among commissioners on the five-member, Democrat-led panel. The same is true in Congress, where lawmakers remain divided over a pending bill to oversee consumer data use across sectors. States, led by California, have adopted their own data protections, complicating the compliance regime for companies that handle personal information.

The consumer data rulemaking dovetails with FTC Chair Lina Khan’s broader bid to rein in big tech companies’ market power with tougher antitrust enforcement. In writing new rules on data protection, the commission would have to balance the costs and benefits of regulating companies’ use of information about consumers, which could have implications for competition.

Companies such as Meta and Snap Inc. have reported losing billions in revenue following Apple Inc.‘s introduction of a feature that lets consumers decide whether apps can track them to deliver personalized ads. Critics point out the tracking transparency regime doesn’t apply to Apple’s own apps.

“The economics is really important,” said Jason Kint, chief executive officer of Digital Content Next. The trade association for news and entertainment providers represents companies including Bloomberg LP.

Setting common standards for the use of consumer data could help chip away at the dominance of adtech platforms from companies like Alphabet and Meta, said Kint, who’s participating in the FTC event. Companies that provide the technology behind online advertising say it helps fund free-to-use services like social media or search, and that targeting gives consumers more relevant ads.

Industry Initiatives

New federal regulations could complement efforts by some tech platforms to rein in tracking of consumers, according to Marshall Erwin, chief security officer at Mozilla Corp. The web browser offers a mechanism known as Global Privacy Control that allows consumers to tell several websites at once not to sell or share their personal information.

Erwin, who’s speaking at the FTC event, said platform-level protections can only go so far, demonstrating the need for regulators to step in and require more transparency into user tracking.

“When browsers and operating systems have a permissive environment, that overtakes the consumer and overwhelms the regulator,” Erwin said.

Long Process

Consumer advocates have been pressing the commission to begin the likely years-long process of putting out consumer data regulations. The FTC started taking steps toward a rulemaking in August with a notice asking for public feedback on how to proceed.

Compared to other parts of the federal government, the agency must follow a more complicated procedure for writing rules that includes several rounds of hearings and opportunities for public input.

“It was important for the FTC to get started,” said Caitriona Fitzgerald, deputy director at the nonprofit Electronic Privacy Information Center. Fitzgerald, who’s also taking part in the agency’s event, said she plans to highlight harms to people’s privacy from widespread tracking online.

‘On Parallel Tracks’

The commission’s Democrats and Republicans are united in their preference for lawmakers to act first on establishing national protections for consumers’ data, though Republican commissioners would prefer to wait until after the passage of legislation to begin a rulemaking.

A bipartisan legislative proposal that promised to break long-running deadlock hasn’t reached a House floor vote. It’s run up against concerns from California’s lawmakers, who worry that the federal measure would undermine their state’s privacy law.

“These two trains are on parallel tracks,” said Paul Martino, vice president and senior policy counsel at the National Retail Federation. The trade association pushed lawmakers for a provision that would allow businesses time to fix compliance issues before facing potential penalties from the FTC or state attorneys general.

“We have to be mindful that regulatory movement and legislative movement will potentially influence and inform each other,” said Martino, who’s participating in the commission’s event.

To contact the reporter on this story: Andrea Vittorio in Washington at avittorio@bloombergindustry.com

To contact the editors responsible for this story: Tonia Moore at tmoore@bloombergindustry.com; Martha Mueller Neff at mmuellerneff@bloomberglaw.com; Jay-Anne B. Casuga at jcasuga@bloomberglaw.com