Privacy

Consumers vs Marketers

The single largest reason given by consumers for not shopping or opting into promotions and marketing programs online is loss of privacy. Participation in online activities is significantly different than the same experience in a "brick and mortar" world. Online stores can identify consumers and customize their experience according to their behaviours and preferences the moment they log on, where as in the "brick and mortar" store, the consumer often remains anonymous. Consumers do recognize that when shopping online their privacy is limited, and many are willing to sacrifice their privacy to a degree in order to improve their shopping experiences through the use of personalized sites. What inhibits more consumers from participating in online shopping is the threat of total loss of privacy that will ensue if the data the consumer willingly provides to one company is sold to a third party, resulting in an inundation of unsolicited direct marketing. The impending result of privacy abuse by marketers is clear. Not only will consumers be reluctant to provide personal information to Web sites, thus inhibiting "personalized" and streamlined goods and services that better reflect the needs and wants of the consumer, they may avoid abusive sites altogether. Clearly, in order to be successful on the Web, business must build trust with its consumers to ensure that they make a purchase, return and give good press.

Consumers

Primarily, there are two types of consumer privacy leaks: 

• hidden software actions by third parties, i.e., data shadows, cookies and data interception
• information given freely by consumers to Web sites and newsgroups without their understanding how the information will be used or distributed or without the Web sites having proper security measures in place.

For information on how to protect your privacy, visit Privacytown, the online map to the privacy challenges and pitfalls of today's information age, by the Office of Consumer Affairs.

Firms

A number of industry associations have developed privacy codes. Companies agree to follow the guidelines when conducting business although they are not required to do so by law. Consumers can complain to an association if a company violates the code. For more information, see Voluntary Privacy Codes.

Government Initiatives

The hope that the Internet can police itself on privacy is quickly fading – angry consumers are pushing for privacy legislation that could ban cookies and or force Web-based companies to get permission before they collect personal data.

Canada: 

Bill C-6 – Personal Information Protection and Electronic Documents Act This bill requires an individual's consent before personal information is collected or disseminated to a third party. It also requires organizations to disclose how collected information will be used and limits the use of that information to the purposes identified. The hope is to reduce consumers' fears about conducting transactions online. For additional information on the issues surrounding this document, visit Privacy in the Digital Economy.

United States: 

Currently there are no U.S. laws or regulations controlling the use of information collected from adults on Web sites, whether by direct asking of personal information, tracking programs such as cookies, or tracking devices hidden in downloaded software.

Europe: 

Data Protection Directive imposes strict limits on the collection and use of personal data in the 15 E.U. countries; it bars transmission of this personal data to countries that don't have parallel privacy safeguards

Trustmarks or Privacy Seals

The alternative to government regulation is through self regulation and industry checks. A prime example of this move is visible in "trustmark" or "privacy seal" companies. They try to seek an effective and trustworthy communication medium between consumers and businesses on the Web. Their role is to: 

1. Ensure the proper disclosure of a Web site's privacy and security practices
2. Make sure that the Web site honours its stated privacy policies
3. Provide measures for consumers if privacy is violated
4. Boost consumer confidence in the Web
5. Educate consumers on how to protect themselves on the Web

Examples:  TRUSTe and Better Business Bureau

How to gain the trust of your consumers by protecting their privacy

If your business plans to use any of the personal information it collects about its customers (selling to a third party) get their consent first. Visitors should be given the option of opting out at the very least.

• The option of opting out should be obvious.
• Avoid negative opt outs such as "click here if you do not want your information sold to a third party." These are often missed by consumers, and appear clandestine.
• Fully disclose the type of tracking mechanisms you use and the intended usage of information collected.

Developing a privacy policy

The following sites provide information on how to develop a privacy policy that will assist in building trust between your business and consumers: 

• Privacy Commissioner of Canada
• Canadian Standards Association International Privacy Code
• Canadian Marketing Association: code of ethics and standards of practice.
• TRUSTe: privacy policy wizard

Useful Links

• Internet Privacy [PDF Format, 157Kb] - Discover the importance of having a privacy policy and how PIPEDA, PIPA, and the laws of other countries will affect how you operate your e-business.
• Your Internet Business: Earning Consumer Trust is a guide for online merchants wanting to protect consumers and earn their trust. It was prepared by representatives from business, consumer associations and governments across Canada.
• Special Report:  The Internet wants your personal info. What's in it for you? (BusinessWeek online): An interesting and informative article discussing the importance of protecting consumer privacy from abusive marketing practices.
• The Personal Information Protection and Electronic Documents Act (PIPEDA): This Act will become effective January 1, 2004 and will impact every Canadian business. Each business needs to protect personal information it collects.
• Privacy, Consumers, and Costs: How the lack of privacy costs consumers and why business studies of privacy costs are biased and incomplete.
• Firms Must Have Effective IT Security: News report from the Sunday Business Post Online.

For examples of privacy abuses see: 

• Electronic Privacy Information Center
• TechNewsWorld.Com: An extensive, frequently updated list of articles related to all aspects of privacy on the Internet, including the use of personal information by marketers.
• WiredNews.Com
• Junkbusters Privacy Headlines