March 15th, 2011

FTC Sanctions Online Firm That Tracks Users

The Wall Street Journal

In its first major sanction over the fast-growing business of tracking Internet users, the Federal Trade Commission has reached a settlement with online-ad company Chitika Inc. over its extremely short-lived “opt-out” settings.

The FTC found that Chitika’s tool for letting Internet users opt out of being tracked and targeted online was set to last only 10 days—a practice the FTC described as deceptive and a violation of federal law. After the 10-days, Chitika would resume tracking, the FTC said. People who wanted to avoid being tracked and targeted further would have to go through Chitika’s opt-out process again.

Chitika says its opt-out was mistakenly set to expire after 10 days, rather than an intended 10 years.

Chitika is one of hundreds of companies that collect, sell and use online-tracking information about Web surfers. The company uses the information to target ads based on likely interests.

The FTC’s settlement restricts the Westborough, Mass., company from making misleading statements about the way it collects and uses data about consumers. It also requires that targeted ads include a link that takes consumers to a website where they can choose not to be tracked or targeted for at least five years.

Chitika also must destroy identifiable user data collected about consumers who had signed up to the defective opt-out and alert consumers who previously tried to opt out that their actions weren’t effective.

The FTC alerted Chitika to the problem in February 2010 and since March 1, 2010, its opt-out tool has allowed consumers to decide not to be tracked or targeted for 10 years, the company said. The company added that it did not and has not collected personally identifiable information about consumers for ad targeting.

“We have always placed the utmost importance on the privacy of online users, and we believe this agreement will help us continue to place a premium on privacy as our advertising network continues to expand,” Chitika said.

The company said that during the period its opt-out process was defective, the company received an average of 30 opt-out requests per month across its network that reaches more than 450 million unique monthly users around the globe.

The news comes as the industry beefs up its efforts to get companies into compliance with self-regulatory principles governing online tracking and ad targeting.

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