The U.S. Federal Trade Commission has released its long-anticipated staff report on consumer privacy. The report, “Protecting Consumer Privacy in an Era of Rapid Change: A Proposed Framework for Businesses and Policymakers,” is the culmination of the FTC’s “privacy rethink” project and includes preliminary recommendations.

"The report appears to address the key themes that [the commission] previously had indicated would be covered,” said Hunton & Williams partner Lisa Sotto. “Industry leaders undoubtedly will pay close attention to the FTC's pronouncements.”

One of the major themes of the 122-page report is the need to reduce the burden on consumers by simplifying choice, embracing privacy-by-design principles and making privacy policies more consistent across the board. 

“We need to greatly simplify consumer choice,” FTC consumer protection director David Vladeck said while previewing the report at a Consumer Watchdog event in Washington, DC, this morning.

Morrison & Foerster partner D. Reed Freeman, CIPP, commented on the breadth of the report, noting that it applies to online and offline data and encourages companies to adopt the full panoply of Fair Information Practice Principles, among other proposals. Freeman says it will be important to determine to what extent the report’s recommendations are enforceable by Section 5 of the FTC Act.

Freeman also noted that the commission left open the issue of whether, when and under what circumstances consent should be opt in or opt out, as well as whether or when opt in would be appropriate for practices involving sensitive data.

There has been much speculation about the commission’s position on the viability of a do-not-track mechanism, designed to let consumers opt out of having their browsing activities monitored.  In its report, the FTC supports the idea of such a system, but does not propose to develop or implement one of its own.

"The most practical method of providing such universal choice would likely involve the placement of a persistent setting, similar to a cookie, on the consumer's browser signaling the consumer's choices about being tracked and receiving targeted ads," the report says. "Commission staff supports this approach, sometimes referred to as 'Do Not Track.'"

In this regard, “The commission…wisely left the door open to either legislative or self-regulatory solutions,” said Jules Polonetsky, CIPP, co-chair of the Future of Privacy Forum. “The industry should act quickly to explore and implement a do-not-track mechanism that both supports responsible advertising practices and enhances consumer controls and choices.”

On a call with members of the media this afternoon, FTC Chairman Jon Leibowitz addressed whether, given the scope of the report, the FTC is moving towards a definition of “consumer” data rather than “personal” data and whether this is a broadening of the FTC’s overall approach to consumer privacy. Leibowitz said that the commission’s approach today is in some ways consistent with what it has done in previous decades, but personal data can be synthesized differently today. “You can take information that’s not technically a Social Security number or name” and find out who that person is. “We’re not looking for more authority,” Leibowitz said. “This is only advice to businesses and advice to consumers.”

The staff report also addresses increased transparency and outlines the commission’s desire for better privacy policies and systems to enhance notice and choice and outlines the commission’s hopes to improve “consumers’ ability to compare data practices across companies, thereby encouraging competition on privacy issues,” and it calls for strong protections surrounding sensitive information such as healthcare and financial data, children’s information and geo-location data. The commission is exploring what other areas might need to be treated as sensitive.

At the morning forum, Vladeck provided an indication of how the FTC will deal with the disregard of consumers’ privacy wishes.

“Consumer choices, once exercised, must be respected,” Vladeck said, adding that the commission “will not tolerate a technological arms race” aimed at subverting those choices. 

The FTC will accept comments on its proposals through January 31, 2011. The report includes a number of specific questions in areas where the commission seeks feedback. 

Privacy Tracker subscribers, tune in to tomorrow’s monthly call for additional report analysis.

Hear more about the report at the IAPP Practical Privacy Series in Washington, DC, next week. FTC commissioner Julie Brill and FTC Bureau of Consumer Protection Director David Vladeck will deliver keynote addresses to kick off a two-day program dedicated exclusively to the Federal Trade Commission and consumer privacy.