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The Commission has been involved
in addressing online privacy issues for almost as long as there
has been an online marketplace. In April 1995, staff held its
first public workshop on privacy on the Internet, and in November
of that year the Commission held hearings on online privacy as
part of its extensive hearings on the implications of
globalization and technological innovation for competition and
consumer protection issues.
In June 1996, the Commission
conducted a two-day workshop to explore privacy concerns raised
by the online collection of personal information, and the special
concerns raised by the collection of personal information from
children. The workshop considered an array of alternatives to
address those concerns, including industry self-regulation,
technology-based solutions, consumer and business education, and
government regulation. A summary of the workshop testimony was
published by the Commission in a December 1996 staff report
entitled Consumer Privacy on the Global Information
Infrastructure. A second workshop in June 1997 delved more
deeply into these issues.(2) In all of these endeavors the Commission's goals
have been (1) to identify potential consumer protection issues
related to online marketing and commercial transactions; (2) to
provide a public forum for the exchange of ideas and presentation
of research and technology; and (3) to encourage effective self-regulation.(3)
The World Wide Web is an exciting
new marketplace for consumers. It offers easy access not only to
a vast array of goods and services, but also to rich sources of
information that enable consumers to make better-informed
purchasing decisions. It also offers the convenience of shopping
from the office or home. This information-rich medium also serves
as a source of vast amounts of personal information about
consumers. Commercial Web sites collect personal information
explicitly through a variety of means, including registration
pages, user surveys, and online contests, application forms, and
order forms. Web sites also collect personal information through
means that are not obvious to consumers, such as "cookies."(4)
The online consumer market is
growing exponentially. In early 1997, 51 million adults were
already online in the U.S. and Canada,(5) and 73% reported that they had shopped for product
information on the World Wide Web.(6) By December 1997, the number of adults online in
the U.S. and Canada had climbed to 58 million, and 10 million had
actually purchased a product or service online.(7) Analysts estimate that Internet advertising --
which totaled approximately $301 million in 1996 -- will swell to
$4.35 billion by the year 2000.(8)
While these figures suggest that
the online marketplace is growing rapidly, there are also
indications that consumers are wary of participating in it.
Surveys have shown that increasing numbers of consumers are
concerned about how their personal information is used in the
electronic marketplace. This research indicates that consumers
have less confidence in how online service providers and
merchants handle personal information than they have in how
traditionally offline institutions, such as hospitals and banks,
handle such information.(9) In fact, a substantial number of online consumers
would rather forego information or products available through the
Web than provide a Web site personal information without knowing
what the site's information practices are.(10) According to the results of a March 1998 Business
Week survey, consumers not currently using the Internet
ranked concerns about the privacy of their personal information
and communications as the top reason they have stayed off the
Internet.(11) Clearly, consumers care deeply about the privacy
and security of their personal information in the online
environment and are looking for greater protections.(12) These findings suggest that consumers will continue
to distrust online companies and will remain wary of engaging in
electronic commerce until meaningful and effective consumer
privacy protections are implemented in the online marketplace. If
such protections are not implemented, the online marketplace will
fail to reach its full potential.
Children represent a large and
rapidly growing segment of online consumers and are being
actively targeted by commercial Web sites.(13) Children use the Web for a wide variety of
activities, including homework, informal learning, browsing,
playing games, corresponding with electronic pen pals by e-mail,
placing messages on electronic bulletin boards and participating
in chat rooms.(14) Among the activities most attractive to children
are those that allow them to communicate directly with their
peers, for example, chat rooms, bulletin boards and e-mail.(15) Almost 10 million (14%) of America's 69 million
children are now online, with over 4 million accessing the
Internet from school and 5.7 million from home.(16) Children are also avid consumers and represent a
large and powerful segment of the marketplace. They are estimated
to spend billions of dollars a year, and to influence the
expenditure of billions more.(17) Their growing presence online, therefore, creates
enormous opportunities for marketers to promote their products
and services to an eager audience.(18) At the same time, the Web offers an easy way to
collect large amounts of detailed marketing data from and about
children.
A wide variety of detailed
personal information is being collected online from and about
children, often without actual notice to or an opportunity for
control by parents.(19) This information may be collected from children at
various places on a site: when the child is registering for a
contest, enrolling in an electronic pen pal program, completing a
survey, or playing a game. A child may also reveal such personal
information in the course of participating in chat rooms or
posting messages on electronic bulletin boards -- areas that are
publicly accessible to anyone surfing the Web.(20) These practices present unique privacy and safety
concerns because of the particular vulnerability of children, the
immediacy and ease with which information can be collected from
them, and the ability of the online medium to circumvent the
traditional gatekeeping role of the parent.
The most potentially serious
safety concern is presented by the posting of personal
identifying information by and about children -- i.e.,
information that can be used to identify children, such as name,
postal or e-mail address -- in interactive public areas, like
chat rooms and bulletin boards, that are accessible to all online
users. These activities enable children to communicate freely
with strangers, including adults. The FBI and Justice
Department's "Innocent Images" investigation has
revealed that online services and bulletin boards are quickly
becoming the most powerful resources used by predators to
identify and contact children.(21) Further, anecdotal evidence indicates that many
children surfing the Web claim to have experienced problems such
as attempted password theft and inappropriate advances by adults
in children's chat rooms.(22)
Traditionally, parents have
instructed children to avoid speaking with strangers. The
collecting or posting of personal information in chat rooms and
on bulletin boards online runs contrary to that traditional
safety message. Children are told by parents not to talk to
strangers whom they meet on the street, but they are given a
contrary message by Web sites that encourage them to interact
with strangers in their homes via the Web. The dangers in the Web
environment are heightened by the fact that children cannot
determine whether they are dealing with another child or an adult
posing as a child.
In addition to these safety issues
are privacy concerns raised by commercial Web sites' collection
of personal information from children for marketing purposes. As
described below, the practice is widespread and includes the
collection of personal information from even very young children
without any parental involvement or awareness.
There is considerable concern
about online collection practices that bypass parents, who have
traditionally protected children from marketing abuses.(23) Children generally lack the developmental capacity
and judgment to give meaningful consent to the release of
personal information to a third party.(24) This is an even greater problem when children are
offered an incentive for releasing personal information, or when
release of personal information is a prerequisite to registering
for a contest, joining a kid's club, or playing a game.(25)
Survey data confirm that parents
strongly favor limiting the collection and use of personal
information from and about their children. For example, 97% of
parents whose children use the Internet believe Web sites should
not sell or rent personal information relating to children, and
72% object to a Web site's requesting a child's name and address
when the child registers at the site, even if such information is
used only internally.(26)
In sum, the immediacy and ease
with which personal information can be collected from children
online, combined with the limited capacity of children to
understand fully the potentially serious safety and privacy
implications of providing that information, have created deep
concerns about current information practices involving children
online.
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