Two Words on Why the FTC’s Self-Reg Approach is Wrong: Financial Meltdown

It has been deregulation, including forms of self-regulation, which led to the current financial crisis.  Regulators and most policymakers looked the other way, while many from the investment community created a Ponzi scheme bigger than Bernie Madoff’s.  The online marketing of mortgages and loans played a role in the `borrow’ and `buy’ culture which contributed to the economic mess we are in.

It’s now more important than ever that online marketing, including the structure of data collection and privacy, be regulated.  Congress has to act to make sure consumers understand the loans and other financial products they are being offered interactively online.  The financial crisis, noted Google, is actually fostering the growth of online marketing (as consumers look for less expensive ways to shop).   As Google recently explained to advertisers, the “slowdown is actually accelerating the use of consumer online shopping for goods and services.”  The “mass market is now online,” they noted.

Consumers need to completely understand and fully control how data is collected and used when they seek financial services.  The behavioral targeting system involved with mortgage loan sales, we believe, is totally unknown to consumers (and sadly, regulators).  That’s why my group and others criticized last week’s FTC report.  It’s self-regulatory approach is based on a failed policy (from the people on both sides of the aisle who got us into this mess).  We can have both regulation/fair rules and make the commercial market prosper.  It’s time for the online ad industry to support a regulatory policy that will help make our financial future more secure.

FTC’s Behavioral Ad Principles–the last act of the Bush Administration? Why is the Obama White House Allowing the FTC To Remain Under the Leadership Appointed by Pres. Bush?

In a few hours, approximately between 10-11 am eastern, the FTC is expected to release its final “Online Behavioral Advertising Principles.” Originally released for comment in December 2007, the principles are a sort of Valentine’s Day present to the online ad industry from the (supposedly departed) Bush Administration.  From what we know, the FTC principles support self-regulation.  Online marketers will be told they should behave better–and here are suggestions.  It’s like a teacher telling a misbehaving student–‘behave better, dear,’ or else we will have to tell your parent (in this case, the guardian being potential congressional action).

My CDD urged Commissioners Harbour and Leibowitz to issue separate statements on the principles, and call for tougher requirements—especially in the area of so-called sensitive information.  This would include data connected to our financial and health related online activities (think mortgage and loan applications or queries for prescription drugs).  CDD and a coalition of groups also formally asked the commission to impose serious privacy safeguards for both children and adolescents.

But these principles were crafted within the narrow confines of the Bush Administration philosophy prevailing at the FTC.  Only self-regulation is permitted.  Consequently, such an approach likely means these rules leave the online data collection, profiling and targeted marketing system which comprise behavioral marketing off the privacy protection hook.

But one question looms at the moment.  Why has the new Obama administration allowed the FTC to remain under the leadership of Bush-appointee William E. Kovacic? The principles being issued today, in fact, reflect the “old” FTC, not one run under the philosophy of President Obama.  Why is the Obama White House failing to ensure a change of leadership at the FTC?  The agency is responsible for overseeing a huge portion of the economy, including critical financial issues.  It’s also supposed to be the leading agency on consumer protection issues.   The Obama White House should have–by now-found someone who would led the FTC, so it can better protect the public.

The principles being released today were only made possible because of the Bush FTC give-away to Google, when it approved its takeover of online ad giant DoubleClick.  CDD, the Electronic Privacy Information Center (EPIC), and USPIRG fought the merger, including on privacy grounds.  FTC Commissioner Pamela Harbour played a key role forcing the agency (then run by Chairwoman Majoris, whose husband’s law firm represented DoubleClick) to address the privacy concerns. As a consequence of the political pressure from its failure to seriously examine the consumer privacy issues of the Google deal, the FTC staff were told to develop these principles.

The next chair of the FTC needs to take privacy and online consumer protection issues seriously.  The agency does need more resources, but also a new spirit.  If the FTC had been on the job, and was examining how lending institutions were recklessly promoting loans and mortgages, maybe today’s mess wouldn’t be as tragic as it is.  More to come after the commission releases the principles.

The Loss of the Trade Press Covering the Media Industry in D.C.: Why it matters

This week we learned that the long-time reporter covering the cable industry in Washington, D.C. for the industry “trade” publication Multichannel News had lost his job.  Variety also closed its DC bureau in December.  Hollywood Reporter doesn’t have its veteran DC reporter.  Adweek/Mediaweek/Brandweek no longer have a regular person based in Washington.  There’s been consolidation at Ad Age and TV Week as well, with one journalist now responsible covering issues for both publications.  We understand there has been some belt-tightening also at Broadcasting and Cable.

These D.C.-based reporters played an incredibly important role–not just covering their own industry for insiders, but providing people like myself (consumer and public interest advocates)  real insight into what the industry was actually saying and doing.  I know many of these journalists–they are fine reporters who did their work seriously.   I imagine reporters working for trade publications covering other industries have also lost their positions.  The losses in the daily print press are frightening.  And so too is the decimation of the cadre of trade journalists covering the media and entertainment industry. Trade reporters are a crucial part of the journalistic ecosystem–their loss is another indication of how the entire journalistic enterprise is collapsing.  It cannot be replaced solely by bloggers.  It takes real shoe “leather” and digging into the facts on a daily basis they helps keep an industry accountable–and the public informed (including industry insiders ).

We have longed urged officials in the Newspaper Guild and academic journalists to call for congressional hearings into the plight of journalists and newspapers.  Sadly, they did not act to, for example, have Congress and the states implement the many common sense recommendations made in 2001 by the writers of Taking Stock: Journalism and the Publicly Traded Newspaper Company.  The American public needs to understand what the loss of reporting institutions means for the country’s democratic future.  And we should enact new laws and regulations which help save what is left,  allowing those who really care to own and operate these outlets.  And we require new policies which can help spur the emergence of a new generation of sustainable digital news services.