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One reason the Internet is an excellent marketing and advertising tool is that it provides much more information about consumer behavior than is available through traditional print-based media.
By monitoring visitors on your Web site, and collecting reactions to ads placed on other Web sites, you can obtain a host of consumer information, including how many people viewed your ad, what percentage of people clicked on the ad, what percentage of people purchased your product after seeing the ad, which pages on your Web site are visited most often, the names of other Web sites your customers have visited, and customers' e-mail addresses and other personal information.
This data can help you substantially improve your products and services. Unfortunately, the ease of collecting consumer data has resulted in fraud, violations of consumer privacy, and identity theft. As a result, consumers are increasingly wary of providing personal information, and more laws are being passed to protect their rights.
In this article we examine several Internet advertising and privacy laws, and we discuss how to reassure your customers while legally collecting the information you need to build your business.
The Law of the Land
Long before the Internet, the U.S. government passed laws protecting the privacy of consumers' personal information and shielding them from misleading, fraudulent, and deceptive advertising practices. These laws also apply to the Internet--you should be especially familiar with Section 5 of the FTC Act. The U.S. Federal Trade Commission (FTC) publishes guidelines to help businesses apply older laws to the Internet. For instance, the three primary legal requirements for truth in advertising are:
- Advertising must be truthful and not misleading.
- Advertisers must have evidence to back up their claims.
- Advertisements cannot be unfair.
To honor these legal requirements when advertising on the Internet, the FTC recommends that businesses:
- Place disclosures on the same Web page as the claim they apply to, and when necessary, provide adequate visual cues to indicate that a consumer must scroll down on the page to view the disclosure.
- When hyperlinking to disclosures, make the link obvious and noticeable, label the link accurately and indicate its importance, place the link near relevant information, ensure that the link takes consumers directly to the disclosure, and monitor link usage to ensure its effectiveness.
- Display disclosures prior to purchase.
- Ensure that an advertisement's "text, graphics, hyperlinks, or sound do not distract consumers' attention from the disclosure."
If your Web business sells other companies' products, be aware that the FTC can also hold you responsible for misleading ads and product descriptions, even when those materials are provided by the manufacturer. The FTC recommends that "to protect themselves, catalog marketers should ask for material to back up claims rather than repeat what the manufacturer says about the product" and that "in writing ad copy, catalogers should stick to claims that can be supported." The FTC pays closest attention to ads that make health or safety claims, or that present data or statistics that consumers would have difficulty verifying.
In addition to pre-existing laws, the U.S. Congress has enacted several new laws that govern Internet advertising and privacy. The most important of these is H.R. 29, more commonly known as the SPY Act (Securely Protect Yourself Against Cyber Trespass Act), which came into effect on March 5, 2005. The Act prohibits specific types of Internet advertisements and methods for manipulating users' computers, including:
- Advertisements that cannot be closed "without undue effort or knowledge by the user."
- Advertisements that can only be closed by "turning off the computer or closing all sessions of the Internet browser for the computer."
- Modifying a computer user's browser settings so that a different Web page appears when the browser is launched.
- Changing a computer user's default ISP or Internet connection method, as well as any settings associated with these connections.
- Altering a "list of bookmarks used by the computer to access Web pages."
- Altering any "security or other settings of the computer that protect information about the owner or authorized user for the purposes of causing damage or harm to the computer or owner or user."
- "Collecting personally identifiable information through the use of a keystroke logging function."
The SPY Act also addresses Internet consumer privacy issues, particularly the use of information collection programs that are installed on a user's computer to gather information about that user. The Act defines an information collection program as one that collects personally identifiable information and either sends the information to anyone other than the computer user, or uses the information to display advertising on that user's computer.
Before you can install and execute such a program, the user must be given notice of the program's data collection functions and must consent to the program's execution. The Act states that notice of the program's information collection functions must be clear, conspicuous, written in plain language, and clearly distinguished from any surrounding text or information. Further, the program must contain one of the following statements (or something substantially similar) depending on the program's exact function:
- "This program will collect and transmit information about you. Do you accept?"
- "This program will collect information about Web pages you access and will use that information to display advertising on your computer. Do you accept?"
- "This program will collect and transmit information about you and will collect information about Web pages you access and use that information to display advertising on your computer. Do you accept?"
If your business caters to children, you should be aware of The Children's Online Privacy Protection Act, which requires that businesses "obtain verifiable parental consent before collecting, using, or disclosing personal information from children, including their names, home addresses, e-mail addresses, or hobbies." Also investigate state laws.
Many industries have special laws governing information privacy; these laws also apply to doing business on the Internet. For instance, if your business offers loans, financial or investment advice, insurance, or any type of financial product or service, make sure you adhere to the Gramm-Leach-Bliley Financial Modernization Act of 1999.