By John Scorza, Washington Staff Writer

Some lawmakers are exploring whether new legislation may be needed to protect the privacy of online consumers.

As businesses and individuals increasingly use the Internet, companies collect more and more information about them. But consumers often are unaware that the companies are tracking their Internet activity and gathering other personal information.

The use of that information to target consumers with ads based on their interests is known as behavioral advertising. The Federal Trade Commission (FTC) has been considering how best to protect privacy in the context of behavioral advertising. At this point, the agency is relying on the private sector to regulate itself. The FTC believes self regulation will give companies the flexibility they need to protect privacy without stifling technological innovations.

"The commission's examination of behavioral advertising has shown that the issues surrounding this practice are complex, that the business models are diverse and constantly evolving, and that behavioral advertising may provide benefits to consumers even as it raises concerns about consumer privacy," the FTC's Lydia Parnes testified at a June 9 Senate Commerce, Science and Transportation Committee hearing.

"At this time," Parnes said, "the commission is cautiously optimistic that the privacy concerns raised by behavioral advertising can be addressed effectively by industry self-regulation."

To encourage effective regulation, the FTC has issued a set of four broad proposed principles:

• Companies that collect consumer information should provide meaningful disclosures to consumers about what is collected and a choice whether to allow the collection of the information.
• Companies should provide reasonable security for behavioral data.
• Companies should notify consumers about material changes to data-use policies.
• Companies should obtain express consent from consumers before using sensitive information for behavioral advertising.

The FTC issued the proposed principles last December and is reviewing comments from the public.

Sen. Byron Dorgan (D-N.D.) chaired the July 9 hearing. Dorgan and some other lawmakers wondered whether the FTC's proposed principles go far enough and whether Congress needs to step in to fix the current patchwork of privacy-protection legislation.