UK: New OFT Report Into Online Behavioural Advertising

Last Updated: 27 May 2010
Article by Susan Barty and Susie Carr

The OFT has today published the findings of its study into online behavioural advertising (OBA) and targeted pricing practices.

The report acknowledges the key benefits of OBA (reduced costs for consumers and being more likely to receive ads which interest them) as well as the key concerns (privacy issues, misuse of data, inappropriate/embarrassing ads being shown on shared computers).

The OFT praised the Good Practice Guidelines produced by the IAB (the trade association for online advertising) but found that these could be improved, for example, by working with the industry to provide clear notices alongside behavioural adverts with links to information about opting out.

The report also considers the impact of these practices on the Consumer Protection from Unfair Trading Regulations 2008 and on the privacy Regulations.

The document is expressed as being only the OFT's "current views". Their current position is to focus on "improving and supporting self-regulation." They will be holding a roundtable meeting to discuss the findings of the report in June 2010 and have invited further debate on the issues. As such, the opportunity remains to provide feedback on any thoughts on the report, should interested parties wish to do so.

To view the article in full, please see below:



Full Article

The OFT has today published the findings of its study into online behavioural advertising (OBA) and targeted pricing practices. The report is said to have explored the concerns of consumers, looked at the current technologies and how they might be deployed in future, and considered the adequacy of the current regulation.

OBA targets advertisements to individual internet users' interests by tracking their online activity with cookies based on searches they have conducted, the websites they have visited and the content they have viewed. This kind of profiling technology has been adopted by many brands as a highly effective marketing tool. However, it has also been the source of controversy with some branding it as "spyware". Of particular concern has been the level of consumer choice and potential privacy issues. It was hoped that the study would provide some certainty to advertisers and consumers alike. (To see our earlier law-now on the announcement of the studies please click here ).

Targeted pricing practices track purchasing habits of consumers, for example, offering price discounts only to new customers to a site and retracting those offers from consumers who are identified as having visited the site already, or showing a restricted range to some consumers.

The report acknowledges the key benefits of OBA (reduced costs for consumers and being more likely to receive ads which interest them) as well as the key concerns (privacy issues, misuse of data, inappropriate/embarrassing ads being shown on shared computers). Their study found mixed views of consumers about OBA: 40% neutral; 28% dislike it; 24% welcome it.

The report accepts that the market has responded to consumer concerns about targeting by developing tools which allow the consumer greater control, for example, being able to set browsers to reject all cookies. However, they do not consider these tools, by themselves, to be sufficient.

The OFT Good Practice Guidelines produced by the IAB (the trade association for online advertising) but found that these could be improved, for example, by working with the industry to provide clear notices alongside behavioural adverts with links to information about opting out, providing clearer guidelines on sensitive personal data and to include non-industry, independent stakeholders on the Board which deal with complaints. ( click here to see our law-now on the IAB's current Good Practice Principles. Note the policy has since been updated to prevent members from using "flash cookies" which cannot be deleted by browsers.)

The Privacy and Electronic Communications (EC Directive) Regulations 2003 (Privacy Regulations) requires companies to inform consumers when using a tracking system to store data about them on their computer, and to give them the opportunity to refuse their continued use. The exact form for the information and consent depends on the situation, but it is common to allow such information to be set out in a privacy policy. Companies using cookies are required by law to inform consumers about the purpose of cookies and to provide people with an opportunity to opt out. The report states that companies should provide "a clear and simple explanation as far as possible of how such data is collected and used and the result of this (for example for targeting advertising)" and that data must be secure. The report also encourages the ICO to task the industry with finding "better ways of explaining complex online information collection and analysis to consumers."

The report highlights that the OFT considers the Consumer Protection from Unfair Trading Regulations (CPRs) to apply in this area. It is a breach of the CPRs if a commercial practice alters a transactional decision as a result of misinformation or lack of information. It is clear from the report that the OFT interprets 'transactional decision' widely and believes it encompasses, for example, the decision to view a website. It considers that not informing a consumer about the collection of information about their browsing behaviour may breach the CPRs if that knowledge would have altered their behaviour, perhaps by dissuading them from visiting that website or buying a product from a website.

The study also raised concerns about potential price discrimination as a result of tracking purchasing habits of consumers. The OFT's view on this is that such information must be treated as personal data and, as such, consumers must be informed that information about them is being collected and used to support price targeting. Further, the OFT believes that consumers who know that targeted prices are being applied might change their behaviour, meaning that any failure to inform consumers about the pricing practice could also breach the CPRs.

However, the OFT found that price targeting is currently "a possibility but not yet a reality in the UK – except in the form of largely innocuous discount offers" and, as such, it is an area which they are keen to discuss further.

The report considers in detail circumstances in which it believes a breach of the CPRs may occur.

The OFT will devise a Memorandum of Understanding to establish in which circumstances the ICO or the OFT should be the body to take enforcement action.

In general, the report is well balanced and rational, and takes into account the various views on these issues. The document is expressed as being only the OFT's "current views" and that, because the area is still evolving, it was not considered appropriate to set out "definitive views" at this time. The OFT has invited further debate on the issues and will be holding a roundtable meeting to discuss the report in June 2010. As such, there appears still to be opportunity to feedback any thoughts on the report, should interested parties wish to do so. The OFT's current position is, however, to focus on "improving and supporting self-regulation."

Click here for the OFT's report in full.

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.

The original publication date for this article was 25/05/2010.

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