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Unedited Version:
Question: With on-line transactions being performed with ever-increasing frequency, hundreds of Web sites collect “personal” information about their customers on a daily basis. Do companies have an obligation to protect the privacy of their customers, or, conversely, do they have the right to collect and disperse consumer information at their own discretion? Should on-line privacy be regulated by governmental mandate, or is consumer protection the responsibility of the corporations and/or their customers?
Given the Internet’s borderless nature, many e-commerce companies are facing inconsistencies in the marketplace when is comes to regulations over online consumer privacy. Over the past decade, numerous surveys have been conducted internationally only to have found consistent and majority concerns about consumer online privacy. For example, Westin (1998) found that 81% of Internet users are concerned about threats to their privacy while online. While a more recent survey, by the Federal Trade Commission, of major e-commerce sites found that roughly 20% met FTC standards for protecting consumer privacy. The issue of online privacy seemed to reach peak levels when the European union expressed deep concern last year that the U.S. standards of securing online privacy was too low. While the single-issue privacy concerns may be posting of privacy policies, freedom of consumers to limit use of their personal data, or the secure handling of all information given voluntarily or through the use of ‘cookies,’ the issue of online privacy is crucial to the development of the e-commerce industry. The Clinton administration has long been strongly advocated a laissez-faire approach despite a tough new European union privacy directive that has threatened to disrupt electronic commerce between the United States and Europe. Although Clinton stated in a commencement speech at Eastern Michigan University last May, “We can’t let breakthroughs in technology break down the walls of privacy. We must be able to enjoy the benefits of technology without sacrificing our privacy.” Many online marketers have endorsed self-regulation, citing that federal intervention could ruin e-commerce entirely. In the effort of scrutinizing the existing ’self-regulation,’ it is clear that the consumer’s groups and government are still weary of most of the privacy statements of major Internet companies mainly because they are contradictory, hard to find, and subject to change which is deficient of any mechanisms of enforcement or redress by law.
A major concern of the e-commerce industry is that the difference of a normal company and an e-commerce one is the personalization that comes from knowing more about a user’s needs and wants. The industry’s response to the threat of consumer uprise and government regulation has been significant in the efforts of the bigger corporations. Groups such as CPEX, Customer Profile Exchange, created a coalition of Internet companies that will try to assure privacy advocates and consumers that they will protect the information consumers share and companies exchange. Corporations such as Microsoft, AOL, AT&T, Dell computer, and Time Warner proposed model international rules designed to make Internet shopping more secure. Last year, the Better Business Bureau launched its new program for certifying and monitoring the collection of personal data online, which was a substantial attempt to link the go between consumer’s privacy interests and business’s practices. The program gives qualified companies an electronic seal for their Website, which verifies that they adhere to their stated practices about what information they collect from consumers and how it is used. The first company to display to the BBB seal was Dell Computer. Among other industry attempts to deal with the privacy issue was the development of software products that help consumers evaluate the privacy policies of individual websites. For example, YOUpowered ™ not only helps consumers evaluate the privacy policies of individual websites but also gives an individual the option of sharing the information or not. However, all of these industry accomplishments could prevent a company called DoubleClick from acquiring Abacus Direct in November of 1999. Abacus is one of the country’s largest catalog databases companies and in the purchase, it was revealed that for the first time, an Internet advertiser could match names along with other personal info to be anonymously collected online. The stock market was quick to praise this financial move as such information would become extremely valuable to companies that wanted to pitch their products to an individual within a short amount of time. After the FTC began to investigate the company’s practices, the stock price fell immensely as investors speculated whether the government would become more intrusive than before.
