FTC Releases Draft Privacy Report Outlining Best Practices, Possible New Requirements Under Section 5 of the FTC Act, and Expressing Support for a “Do Not Track” List

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On December 1, 2010, the Federal Trade Commission (FTC or Commission), by a vote of 5-0, released its long-awaited staff report on privacy, Protecting Consumer Privacy in an Era of Rapid Change.1

Based largely on themes and concepts developed through a series of privacy roundtables held by the Commission over the past year, the report sets out an expansive proposed framework for how companies should protect consumers’ privacy. Although the Commission set out to develop a framework for applying its existing authority under Section 5 of the FTC Act to modern privacy practices, the report falls far short of that ambition. Rather, while breathtaking in its scope and detail, it leaves more questions than answers. Most importantly, the Commission’s report is long on recommendations but short on which of those recommendations amount to requirements under Section 5. Comments are due by January 31, 2011, and the Commission expects to release a final report, which may be more concrete, later in 2011.

The proposed framework embodied in the report consists of three major elements repeatedly touted by Commission officials in recent months: (1) “privacy by design,” (2) simplified consumer choice, and (3) greater transparency. (We discuss each of these elements below.) That said, several key points deserve highlighting...

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