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May 10, 2010

Proposed Legislation Will Increase Burden for Website Legal Compliance

The U.S. Congress will soon be voting on two separate bills, which if they become law will certainly increase the burden on webmasters for website legal compliance, including new disclosures and website legal forms.

Given the current mood in Congress for more and more regulation, it’s likely that the federal government will soon have increased regulatory authority over the advertising practices of Web business – both in terms of how they target consumers and with the advertising messages themselves.

Consumer Privacy Bill to Target Behavioral Ads

Congressman Rick Boucher (D-VA), chairman of the House Energy and Commerce Subcommittee on Technology and the Internet has been planning to introduce a consumer privacy bill since last year, and he most likely will introduce it in the near future.

Rep. Boucher’s primary target is how advertisers target consumers with behavioral advertising. Web marketers have long sought to use tracking technology to increase the relevance with online ads – the more relevant the ad, the more conversions increase.

Behavioral ads increase relevancy significantly. Behavioral technology tracks a user’s behavior on the Web, including sites visited, length of visits, content read, and searches made. This data is then used to create a behavioral pattern for a specific user which in turn is related to a specific online demographic. Ad networks then serve so-called behavioral ads that are targeted and relevant to that specific demographic.

Many Web advertisers fear that the new bill will require opt-in by consumers. However, Rep. Boucher says he’s leaning toward opt-out.

“Where I want to go with this is generally opt-out,” says Rep. Boucher. “If I were [a publisher or advertiser], I would want Internet users to have a sense that their experience is more secure, that they know what information is collected about them, and they be given much more control. They will be more trusting of electronic commerce. . . .it’s good for business.”

Even if the bill is proposed on an opt-out basis, there will likely be increased regulation in the form of new disclosures and website legal forms requirements indicating how data is tracked and used.

Proposed Expansion of FTC Enforcement Powers

In November, 2009, the U.S. House of Representatives passed the Wall Street Reform and Consumer Protection Act of 2009 which is now under consideration in the U.S. Senate. The bill if passed into law would enlarge the current the Federal Trade Commission’s (FTC) powers to levy civil penalties on “unfair” and “deceptive” advertising. Under existing law, congressional review and public testimony must take place before penalties can be imposed for “unfair” and “deceptive” advertising. These checks and balances were added by congress in 1975 and 1980 to curb the FTC’s then-broad powers stemming from the act that created the FTC in 1914.

Ad industry proponents fear that the proposed law would enable the FTC to have enforcement authority over anyone providing “substantial assistance” in a violation, including any website that publishes the ad and the creative people who produced it.


The proposed consumer privacy bill focuses on behavioral advertising – how consumers are targeted. The proposed expansion of FTC enforcement powers focuses on the advertising messages themselves. The combination of the two proposed laws will have a significant impact on webmasters seeking compliance with regulations on online advertising.

On January 20, 2010, the Direct Marketing Association joined twenty eight other trade and business associations in sending a letter to members of the U.S. Senate Committee on Commerce, Science & Transportation. The letter opposed the current proposed expansion of the FTC’s powers on the grounds that the FTC could act as an “unelected legislature” across the economy. This would be “like putting the FTC on steroids”, according to a former FTC chairman.

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