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5-point plan to avoid online privacy minefields
Almost all Web sites collect and extrapolate information about
their users to enhance the users' experience and provide customized
services. As technology that tracks and profiles Internet users
continually becomes more advanced, the potential for online privacy
violations and resulting liability can be a minefield.
However, by following a handful of basic measures, you can ensure
the fair use of information while allowing individuals to participate
in decisions on the disclosure and use of their personal information.
If the Web site uses personal information, a link to the company's
should, at minimum, address issues of notice, choice, access,
security, and enforcement.
Notice. Consumers are entitled to know when information
is being collected, how it will be used, and when personal
information might be disclosed to others. Notice should include
the consequences to the consumer of refusing to give the information.
It should also address the issues of choice, access, and security
Choice. Consumers should have choices about how their
information is used or disclosed beyond the original purpose
for which it was provided (e.g., to complete a transaction).
Choice may be opt-in (e.g., click here to receive valuable
information from our sponsors) or opt-out (e.g., click here
if you do not want to receive new product announcements).
Opt-in affords stronger privacy protection because it establishes
a default rule against disclosure and use.
Access. Consumers should have access to stored information
about them and an opportunity to correct inaccuracies or delete
Security. Web sites should protect the security of
the data and ensure its integrity and accuracy.
Enforcement. These principles must be enforceable
to be effective. You should have procedures in place to address
Any online company should formulate and comply with its own
the Federal Trade Commission's October 1999 publication entitled
"Self-Regulation and Privacy Online."
No policy? Significant liability risk!
Apart from damaging consumer confidence, a company's failure
to adopt and follow reasonable privacy policies creates a significant
risk of liability. The development of company-wide information
collection practices, including notice and disclosure of such
practices to consumers, is critical to establishing and maintaining
consumer confidence and a viable online presence.
The use of personally identifiable information collected from
Internet users, whether through voluntary means, such as registration,
can make a company vulnerable to legal actions based upon federal
and state fair trade, unfair competition, and other laws. Similarly,
the use of information in ways that are inconsistent with a company's
the FTC and attorneys general, and class action lawsuits by
Potential privacy violations become more complex when Internet
companies merge, acquire one another, or form relationships that
involve the sharing or transfer of Internet user information.
Before acquiring or entering into an online partnering relationship,
it is wise to compare a potential partner's information collecting
Similar issues may arise when an online business enters into
an advertising or outsourcing relationship. For example, the advertiser
may routinely collect, aggregate, and disclose user information
The parties should address any conflicts in their information
collecting and disclosure practices before finalizing the relationship.
State, federal, and international regulation
Internet privacy law is in its infancy. There remains significant
uncertainty in this area, given the absence of clear legal precedent;
proliferation of privacy-related litigation nationwide; and the
emergent body of state, federal, and international regulation.
For example, federal banking regulators are accepting comments
on proposed privacy regulations for financial institutions.
Since the passage of the Gramm-Leach-Bliley Act of 1999, state
legislatures have been preparing privacy statutes and regulations
that will affect companies from many industries. The Yahoo! Inc.,
DoubleClick Inc., and Amazon.com Inc.litigations, and the class
action lawsuits filed against RealNetworks for secretly tracking
the music-listening habits of its users through RealJukebox (free
software downloaded from the RealNetworks Web site) all reflect
the propensity of the dot.com world to become involved in litigation
alleging privacy violations.
For example, the FTC sued GeoCities for misrepresenting its reasons
for collecting personal information from its visitors. The FTC
claimed that GeoCities sold visitors' personal information to
that it would only use information for advertising offers or visitor-requested
services. GeoCities settled the case and agreed to post a revised
principles established by the FTC.
Online privacy resources
There are many online resources that are excellent for small
businesses. For example, the Online Privacy Alliance Web site
is an excellent educational resource. The Alliance has roughly
100 corporations and associations as members, and is committed
to working with government to avoid having the public debate over
Internet privacy result in unnecessary anti-industry sentiment.
Also, there is an extensive hyperlinked reference to privacy-related
news stories and legal resources, the E-Commerce Law Source.com.
The discussion above is for informational purposes only, and
is certainly not a substitute for consulting a qualified lawyer
to examine the issues and risks of your particular venture.
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may have regarding the range of business, technology and intellectual
property services we offer. Please feel free to call us at (866) 734-2568 should you have any questions.
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