Online 'Privacy Policies' Vastly Misunderstood

by Broderick Perkins
© 2007 DeadlineNews.Com

Deadline Newsroom – Follow up the federal Do Not Call registry with a Do Not Track list for those who shop online from home and elsewhere.

That's the appeal from consumer agencies to the Federal Trade Commission after a compilation of several academic studies revealed online "privacy policies" at ecommerce sites are not what users think they are -- often because they don't take the time to read them.

With no Do Not Track service in place as the holiday shopping frenzy ensues in households from coast-to-coast, reading privacy policies is consumers' best bet to learn what happens to their information when they shop online.

As many as 63 percent of Americans incorrectly believe the phrase "privacy policy" on online shopping sites signifies that their information will be kept private, according to "Consumers Fundamentally Misunderstand The Online Advertising Marketplace".

Also, 37 percent of online shoppers falsely believe that a privacy policy prohibits a website from using information to analyze individuals' activities online.

Wrong again.

In fact, "privacy policies" typically explain common ecommerce practices, those perfectly legal information-collection techniques that are the foundation of online advertising business models, according to the report of surveys co-compiled by the University of Pennsylvania Annenberg School for Communication and University of California-Berkeley Samuelson Law, Technology & Public Policy Clinic.

"They assume the website cannot engage in many practices that, in reality, are common in ecommerce. Consumers do not understand the nature and legality of information-collection techniques that form the core of online advertising business models," according to the report.

The report's authors say because incorrect consumer beliefs about privacy policies are so widespread and disconnected, the Feds should step in to better police the term "privacy policy" to make it truer to its perception.

Consumers also believe privacy policies prohibit "enhancement" -- the common practice of collecting data and combining it with information from other sources.

In one survey when consumers were asked "If a website has a privacy policy, it means that the site cannot buy information about you from other sources to analyze your online activities," 39.8 percent answered (incorrectly) true, and 10.8 percent didn't know.

However, when information-gathering techniques -- the process of tracking, extracting and sharing information to make money from advertising -- were explained to consumers, 85 percent overwhelmingly rejected the privacy they give up in exchange for access to content.

When offered a choice to get content from a valued site with such a policy or pay for the site and not have it collect information, 54 percent of adults who go online at home said that they would rather use legwork and search for information offline than exercise either option presented.

The report concludes: "As the Federal Trade Commission revisits privacy issues implicated by behavioral profiling and online advertising, its approach must be informed by the fact that consumers understandably assume that 'privacy policies' create substantive rules limiting collection and use of data. The Commission should police the term 'privacy policy' so that websites and network advertisers have protections in place consistent with reasonable consumer expectations."

Consumers are also responsible for taking steps to keep private information as close to the vest as possible.

• Privacy Rights Clearing House offers insights on the privacy policy issue in "Online Shopping Tips: E-Commerce and You."
• The Federal Trade Commission also offers a guide "Online Shopping & E-Payments."

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© 2007 DeadlineNews.Com

Broderick Perkins, an award-winning consumer journalist of 30 years, is publisher and executive editor of San Jose, CA-based DeadlineNews.Com, a real estate news and consulting service, and the new Deadline Newsroom, DeadlineNews.Com's new backshop. In both cases, it's where all the news really hits home.

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