Earlier this week, the Federal Trade Commission announced that it has reached a settlement with Chitika, Inc., an ad network that tracks a user’s online activities in order to deliver advertising targeted to the individual user’s interests.  In its complaint, the FTC claimed that Chitika made statements that (1) users could opt out of targeted advertising by clicking on an “Opt-Out” button and (2) users who clicked on the button “are currently opted out.” The FTC also alleged that Chitika’s cookie-based opt-out mechanism lasted only 10 days, and that Chitika did not inform users about the duration of the opt-out.  The FTC claimed that Chitika’s statements constituted a representation that Chitika’s opt-out will last for a “reasonable period of time,” and that because 10 days is not a reasonable period, its statements were deceptive. 

As part of the settlement, Chitika must include a hyperlink in every targeted ad that takes consumers to a clear opt-out mechanism.  User opt outs must be effective for at least five years. 

The settlement may help inform industry’s ongoing development of innovative opt-out tools for consumers to control whether information is used for targeted advertising.  The Consent Order not only suggests that five years is a “reasonable” period of time for a user’s opt-out selection to last, but it also reaffirms that cookie-based opt-out methods are an acceptable means for allowing consumers to opt out of targeted adverting.   Importantly, the Consent Decree carves out from the five-year effective period scenarios where a user deletes his or her cookies or takes deliberate action to disable the mechanism. 

News outlets are reporting that the White House will appoint FTC Commissioner Edith Ramirez to lead the Commission.  She would replace current FTC Chairman Jon Leibowitz, who announced his resignation in January.  Ramirez’s appointment to chair the Commission would leave it evenly split between Democrats and Republicans, with one empty seat until another person is nominated to fill her vacated seat.

Commissioner Ramirez has voted with Chairman Leibowitz on important privacy decisions, including adoption of the March 2012 FTC privacy report and a number of high profile consent decrees and settlements, such as those with Google, Twitter, and advertising network Chitika, Inc., among others.   A few highlights from Commissioner Ramirez’s activity on privacy issues are as follows:

  • Commissioner Ramirez has said that the Commission’s recent reforms to the Children’s Online Privacy Protection Act rules were “measured and balanced.”   She commented that the expansion of the COPPA rules to cover mobile apps was “critical if COPPA is to remain relevant as the world goes mobile.”
  • In 2011, Commissioner Ramirez testified before the House Commerce Subcommittee on Commerce, Manufacturing and Trade that Representative Mary Bono Mack’s (R-CA) data breach notification legislation did not go far enough since it lacked a specific deadline for companies to evaluate whether consumer notification is required and provide that notice to consumers.
  • Commissioner Ramirez was personally involved in developing the APEC Cross-Border Privacy Rules System, which sets out a voluntary enforcement scheme to promote cross-border privacy.  She applauded the development as holding promise “to bridge the gaps between different legal systems and privacy regimes.”  As recently as November 2012, she has spoken about the importance of cross-border coordination and privacy.  She said:  “Despite the differences in privacy and legal regimes across the vast Asia-Pacific region, APEC members have developed a system that reflects a consensus on what constitutes sound cross-border data protection. This approach – of agreeing on common rules to which companies can pledge their adherence that are then enforceable across jurisdictions – has immense potential.”

President Obama first nominated Ramirez to serve as a Commissioner to the FTC in November 2009, and she has served in that role since 2010.