On June 18, 2008, the Senate Commerce, Science, and Transportation Committee (“Committee”) will hold a public hearing on privacy and security issues in the online advertising industry. Specifically, the Committee will focus on industry practices that are collectively referred to as "behavioral advertising." Using the definition promulgated by the Federal Trade Commission (“FTC”), behavioral advertising refers to the “tracking of a consumer’s activities online including the searches the consumer has conducted, the web pages visited, and the content viewed in order to deliver advertising targeted to the individual consumer’s interests.”

Although a witness list for the hearing has yet to be released, the Committee has stated that witnesses will be asked to focus on key factors driving behavioral advertising, methods used to carry it out, and safeguards the FTC and the Federal Communications Commission should adopt to protect consumers from "unwanted or unnecessary invasions of their privacy."

The timing of this hearing is peculiar because it comes directly on the heels of the FTC’s town hall on the subject of behavioral advertising, and its promulgation of industry guidelines on the same. The town hall, held Nov. 1 and 2, 2007, explored many of the issues that are likely to come up during the Committee’s hearing. More information about the behavioral advertising can be found here.

Roughly a month later, the FTC published a set of industry guidelines designed to encourage self-regulation in the online advertising industry to address privacy and security concerns. Self-regulation has been a significant and successful hallmark of the advertising industry for well more than 30 years, and according to the FTC press release that accompanied the release of the guidelines, “the purpose of this proposal is to encourage more meaningful and enforceable self-regulation to address the privacy concerns raised with respect to behavioral advertising. In developing the principles, FTC staff was mindful of the need to maintain vigorous competition in online advertising as well as the importance of accommodating the wide variety of business models that exist in this area.” In the six months since the FTC’s guidelines were published, they have already had noticeable effects. Several companies, including Microsoft and Yahoo, have announced initiatives involving behavioral advertising.

Why This Matters: Instead of giving self-regulation a chance to succeed, the Committee has decided to jump into legislative action despite the FTC’s thoughtful, effective and historically successful efforts in this arena. Thus, all of the encouragement that self-regulation received from the FTC and other agencies within the current administration appears to ignored by the Senate. This resulting tension between the executive and the legislative branches raises the concern that self-regulation, while seen as strong by the FTC and a viable alternative to lawmaking, the lack of patience in Congress, particularly in an election year, may pose a threat to premature legislation