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Jewish World Review March 15, 2001 / 20 Adar, 5761


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Consumer Reports

Profits vs. privacy -- PRIVACY advocates and industry representatives sparred this week over the need for new privacy regulations on information-sharing during a Federal Trade Commission workshop on data-handling practices in the private sector.

The FTC held the workshop just as the debate regarding Internet privacy begins to build up steam in Congress. Dozens of lobbyists, reporters and commission staffers crowded into the commission's downtown fortress to hear presentations on how direct marketers, retailers, credit card companies and the like, compile personal information on consumers to better target their marketing and advertising efforts.

Industry representatives argued information-sharing is good for business - and even consumers - while privacy advocates argued that more-transparent data-handling practices are needed.

"There are many businesses where the difference between profits and loss is selling that information," said Ted Wham, president of a company called Database Marketing for the Internet.

Jerry Cerasale, an executive at the Direct Marketing Association, the leading industry group, said any new regulations banning the gathering and sharing of personal information would disproportionately affect "economically disadvantaged" people and rural consumers who shop from catalogs and on Web sites because they don't have access to as many stores as more well-to-do consumers.

"We need much better notice (of data practices)," said Mary Culnan, a professor at Bentley College. "Really, there's a need to bring consumers in the loop."

Evan Hendricks, editor of the biweekly newsletter Privacy Times, called on the FTC to investigate the widespread use of mail-in warranty cards as an unfair and deceptive trade practice. Hendricks said the cards, which are included with many retail products, are one of the primary sources of unlisted telephone numbers for marketers and "a real problem that deserves official attention."

Jason Catlett, president of Junkbusters - a free service that helps consumers stop the sale of their names to direct marketers - criticized the practice of dynamic pricing, whereby different customers are deliberately charged different prices for goods.

Catlett referred to a public flap in September in which allegedly engaged in the practice. Amazon spokesman Paul Misener denied that the company has ever engaged in dynamic pricing even though he went on to defend the practice as perfectly legal.

The private sector also has been busy defending itself on other fronts. Earlier in the week a small group of reporters was quietly briefed on a series of both previously published and unpublished industry studies conducted during the past two years to assess the impact of data-handling rules on various commercial segments. Several figures from those studies were also cited at Tuesday's FTC workshop.

One study, commissioned by the Direct Marketing Association, claims a law requiring affirmative consent from consumers before their private information can be shared would cost catalog and online retail apparel businesses and, by extension, their customers $1 billion per year. Another study, conducted for the Financial Services Roundtable, said that its 90 members, including Bank of America, Goldman Sachs and Chase Manhattan, "save" their customers $17 billion per year because financial institutions are not now prohibited from freely distributing consumers' personal financial information.

The study concluded that implementing privacy provisions in the 1999 Financial Services Modernization Act, which take effect July 1, will cost the Roundtable members alone more than $400 million.

While most observers still expect some type of online privacy law to pass this year, the fact that Congress and the White House are in Republican hands, combined with the resurgent strength of corporate lobbyists on issues such as ergonomics rules and bankruptcy changes, has led to renewed industry optimism that some of the stronger consumer protection measures might be minimized in "a long-term struggle."

Keith Perine writes for The Industry Standard. Comment by clicking here.


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