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FTC could protect privacy by enforcing fair representation laws & conflict disclosures

Saul Hansell's New York Times blog post on "The FTC Bully Pulpit on Privacy" discussing the FTC privacy chief's views on privacy, did a public service in flagging an unnecessary and problematic gap in the Federal Trade Commission's protection of Americans' privacy.

  • In my comment (see #11) to Mr. Hansell's post I challenged the FTC to better implement their free market approach to privacy so that it had a chance of working as designed.
    • "It is perfectly defensible to say that the free market can protect consumers, IF and ONLY IF, consumers are armed with the free flow of information they need to protect themselves -- i.e. enforced fair representation, truth in advertising, and adequate disclosure of conflicts of interest laws. To deny consumers the information they need to protect themselves and their own privacy while also turning a blind eye to the deceptive and unfair competitive arbitrage of US privacy laws, ill serves the US consumers that the FTC is supposed to protect."

The FTC is giving its free market approach short shrift by short circuiting market forces by denying the consumer/demand-side of the marketplace the honest and transparent information it requires -- so the American consumer can be a true "market force" in protecting privacy. 

  • Under the laws the FTC is supposed to enforce, their is no free market freedom to misrepresent or falsely advertise one's business -- that's illegal fraud.
  • When Internet businesses, like search engines routinely misrepresent themselves and their services as working for and "benefiting" the user/consumer without clear disclosure that the consumer understands -- that the real business is to gather private information on the user and sell it to the highest bidder in an auction -- they harm and endanger consumers. 
    • Their "representation" of their business as all 'benefit' and no "cost" to privacy and safety, is misleading and deceptive.
  • If consumers had free and open access to the real conflicts of interests inherent in the ad-driven Internet model dominated by Google and the Google-Yahoo cartel, consumers could actually be an informed and powerful market force to enable the free market to work as designed.
  • The FTC is ill-serving consumers, competition and free markets by enabling Internet companies to shirk their obligations under the law to fairly represent their business, truthfully advertise their services, and adequately disclose conflicts of interest consumers should be aware of.

Bottom line: I certainly hope that the FTC is not more concerned about protecting search engines' "privacy" to not disclose real conflicts of interest, than consumers' privacy to know the vast types and amounts of private information that is being collected on them and sold to the highest bidder at auction.

Unfortunately, this is not the first time I have suggested that the FTC focus on undisclosed conflicts of interest to better protect consumers.  

  • Below you can see the relevant part of my email (sent 8-31-07 at 17:29) to the FTC forum that was planning a two-day FTC forum on "Ehavioral Advertising" reccommending that the FTC feature a panel addressing conflicts of interest...
    • Alas ... they did not have a panel on the topic and from my recollection, the words conflicts of interest were not heard or discussed at its forum. An amazing lack of learning from recent history.  

"Suggested Panel Topic: “Consumer risk of undisclosed financial conflicts of interest in search”

 Search engines work for advertisers not consumers. Search engines do not get paid a dime by the hundreds of millions of search engine users; they get paid by hundreds of thousands of advertisers. 

The question is not whether search engines have a big financial conflict of interest, they obviously do. The question is whether search engines, in all of their representations and branding efforts, are fairly representing to the American public that it is in the search engine’s financial interest to put the interests of its advertisers ahead of its users.  

How is this financial conflict of interest a potential consumer problem?

  • An obvious example... does a search for information on a medical condition or treatment yield the best treatments for the patient or do they yield the information from the highest paying advertiser? 
  • In general, do search results represented to consumers reflect the content the searcher expects or what content that financially rewards the search engine the most?  

Recent studies suggest there is a significant potential problem for consumers from undisclosed conflicts:

  • Per the EPIC complaint in the GoogleDoubleClick merger: "A January 2006 poll of 1,000 Google users found that 89% of respondents think their search terms are kept private, and 77% believed that Google searches do not reveal their personal identities.31 These numbers indicate that Google’s practices violate the public’s expectation of privacy with respect to the collection and use of search history data."
  • Per Computer world, “University students may be encouraged to be critical but they don't seem to question Google's ranking system, according to a recent study published in the Journal of Computer-Mediated Communication.”

For those who dismiss concern over undisclosed conflicts of interest as alarmist, ask those people who lost their financial or retirement security in Enron, WorldCom, or dotcom stocks because they were unaware of the conflicts of interests inherent in investment banking research. 

  • Search engine business practices are a complete black box to outsiders. Even advertisers, the customers, aren't told where their ads are run and how, they just get a check and zero audit trail. 
  • Who is to know if these powerful conflicts of interest are not making consumers more vulnerable to fraud, false advertising and misrepresentation? 

There are clear standards for disclosing financial conflicts of interest in financial services, investment research and real estate brokerage to name the most prominent. Just as financial services and real estate are brokering situations, search is brokering content with a financial conflict of interest.

 Given that:

  • the search market is not financially aligned with consumer interests;
  • Search engines have a strong financial interest to push the envelope in taking advantage of consumer trust;
  • There is little audit and oversight risk of search engines; and
  • The search engine market is highly concentrated;

Search could be the largest and most problematic undisclosed major conflict of interest in the marketplace today."

Bottom line part II:

  • Is the FTC on the job protecting consumers against "anti-competitive, misleading and fraudulent business practices"?
  • You decide.