Direct marketing companies had better develop ways to protect consumer privacy or lawmakers will soon step in, say prominent government officials who attended a Washington conference on the subject.
The conference, sponsored for the fifth year in a row by the Center for Social and Legal Research, underscored the growing tension between the government and the private sector over how to protect consumers' privacy.
The financial services industry was singled out by Becky Burr, a senior policy adviser in the Commerce Department, as "not doing enough on self- regulation."
The debate is reaching a crescendo as the Federal Trade Commission becomes increasingly exasperated with the private sector's initiatives on self-regulation. In addition, discussions between United States and European government officials over privacy laws enacted in October are nearing an end.
"We are at a critical juncture on privacy," said FTC Commissioner Mozelle W. Thompson in a speech at the conference. "We want to see progress, and I think some people in this room would concede that progress has not been as quick as it should be."
Mr. Thompson said concerns about privacy and security are the chief reasons why only 5% of Internet users make purchases on-line.
On the European front, privacy experts are scrambling to reach an agreement over how to respond to the European Union Directive on Data Protection, which took effect Oct. 25.
Though there is still no firm deadline for companies to comply with the directive, some privacy experts expect an agreement between the United States and the Europeans in the first quarter.
The directive requires companies doing business in Europe to provide "adequate" protections of Europeans' privacy. The directive stipulates that data on European consumers may not be transported out of the continent by a company that does not meet the directive's standards.
John F. Mogg, European Commission director general, said: "Legislation has been the way forward for many countries, but that doesn't mean self- regulation won't work."
Mr. Mogg, who is negotiating with senior U.S. officials over the European directive, said discussions are not "out of the woods yet."
Ira Magaziner, who in the next few days will leave his post as senior adviser to President Clinton on Internet commerce, delivered an update from the administration's viewpoint.
He said European and American negotiators disagree on the most effective means of enforcing privacy policies. "Enforcement will be more effective without government involvement," he said. The Europeans want the government to play a more active role.
The negotiators appear to agree on the use of privacy "seals of approval" for Web sites. Organizations that review Web sites and offer endorsements to those that meet their standards include the Better Business Bureau, whose certification mark is "BBB On-line," and TRUSTe, a Palo Alto, Calif., nonprofit.
"We view 'BBB On-line' as one of the most promising remedies, but it will fail if it doesn't reach a membership of several thousand next year," Mr. Mogg said.
Mr. Magaziner said the administration views such seals as the answer to ensuring and enforcing consumer privacy on the Internet. He said the government should launch a major education campaign, informing consumers "to be careful if they use a Web site without a seal on it."
Banks' efforts to ensure Internet privacy have improved, said Amy Friend, assistant chief counsel of the Office of the Comptroller of the Currency. Nearly 80% of the largest banks have posted privacy policies on their Web sites.
However, she said, the numbers "go way down with the small- and medium- size banks."
In October the OCC said banks without easily viewed privacy policies could face some sort of punishment.
The findings of a privacy survey conducted by Louis Harris & Associates Inc. and released at the conference show "distrust by consumers and an awareness of an absence of policies protecting consumers," said Alan F. Westin, publisher of Privacy & American Business. The newsletter is published by the conference sponsor, the Center for Social and Legal Research.
Among 1,008 adults surveyed, 41% said their privacy had been invaded by a business.
Ninety-two percent said they considered it important to be able to see the information collected about them by organizations such as banks, department stores, and telephone and credit card companies.
