In the latest gauge of the Clinton administration's stance on privacy, the head of the Federal Trade Commission on Tuesday urged Congress to let on-line companies regulate themselves when it comes to safeguarding customer data.

FTC Chairman Robert Pitofsky and fellow commissioners presented a report to a House Commerce subcommittee to bolster the agency's argument that Internet firms are making great strides on privacy.

The report touts a recent Georgetown University study of 361 commercial Web sites that found 66% posted privacy policies, up from 14% in a similar study last year. Mr. Pitofsky predicted that privacy policies would be nearly universal in 2000. "Because of this progress, the majority of the commission recommends no legislation at this time," he testified.

"That is not to say that all that needs to be done has been done," he added, recommending that Congress maintain the threat of legislation if progress slows down.

Republicans on the telecommunications and consumer protection subcommittee generally supported the recommendation.

"Electronic commerce changes so quickly, I am concerned that a government-mandated privacy policy would stifle innovation," House Commerce Committee Chairman Thomas J. Bliley Jr., R-Va., said. "We would be imposing a static policy on a dynamic and constantly changing industry."

But Rep. Edward J. Markey of Massachusetts, the panel's ranking Democrat, blasted the FTC's conclusions and scoffed at the "B+" grade Mr. Pitofsky gave the on-line industry for its improvement efforts since 1998.

"This industry deserves a big fat F," Rep. Markey said. "The information you have given us today heightens the likelihood that we need to legislate, not undermines it."

In a tense exchange with Mr. Pitofsky, Rep. Markey argued that the 10% of Web sites with posted privacy policies is too low and noted the FTC report says only "a small minority" of Web sites have joined self- regulatory programs. Rep. Markey advocated legislation that would combine self regulation with federal standards on notice, consent, security, and consumer ability to correct errors.

Mr. Pitofsky countered that self-regulatory programs are new and need more time to prove themselves. He added that the FTC would issue a report next year on the quality of privacy policies and the industry's self- policing.

"We are at the dawn of the most impressive new sector of the economy that this country has ever seen," Mr. Pitofsky said. "You want to stay flexible about the nature of regulation."

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