Purpose of the study
The study looked at the practice of behavioural advertising, in which a computer user's online behaviour is used to target online advertising, and customised pricing, where prices are individually tailored using information collected about a consumer's internet use.
The benefits behavioural advertising may bring to consumers and the concerns it gives rise to have been the subject of much debate. Fears about the potential for targeted pricing to become widespread in the future have also been voiced. Such concerns have the potential to undermine trust in the online market place and so hinder its development.
Through research, we have explored the concerns of consumers and asked them whether these concerns are likely to restrict their use of online services. We have looked at the technologies that are being developed, how they are being deployed at present and how they might be deployed in the future. Mindful of both the benefits and possible harm to consumers, we have evaluated existing regulation, including how existing consumer protection legislation could apply, and the emerging self-regulation. We have considered whether the protection afforded by these means is adequate to address consumer concerns.
Findings and outcomes
We have found that online behavioural advertising has benefits. Our consumer research also suggests there are some concerns about it, mostly relating to privacy and misuse of data, although these seem unlikely to lead to a significant reduction in the use of the internet at present. Consumers have much stronger objections to concealed online targeted pricing and this may undermine confidence in e-commerce if it were ever to become widespread.
We have found that there is existing protection although this is not completely adequate
Market based tools are being developed that allow consumers who are aware of, and concerned by, the collection of information to have greater control. Manufacturers of web browsers are improving functions that allow consumers to block cookies and some browsers have recently added a 'private browsing' mode. Other software solutions which allow internet users to block tracking devices, and even adverts altogether, can also be purchased. However, knowledge of these tools is limited amongst consumers. Firms are also mindful of their reputations - indeed this may have prevented price targeting from emerging.
Self-regulation has emerged in response to the concerns surrounding online behavioural advertising, although this is barely a year old and is still developing. We have made a number of recommendations for improvement.
We have also considered how regulations enforced by the Information Commissioner's Office (ICO) and the OFT could apply to these practices.
We have found that the ICO's Privacy Regulations require firms to inform consumers when a tracking system collects information about them and to give them the opportunity to refuse their continued use. The exact form that the information and consent takes varies according to the situation. In some cases, it is acceptable to put the information in a privacy policy and allow consumers to opt-out but in others, such as behavioural advertising based on deep packet inspection techniques, this is not sufficient. The ICO also enforces the Data Protection Act which provides for the regulation of the collection and use of personal data. In a recent consultation the ICO proposed that information about browsing behaviour should generally be treated as though it were personal data. This means that firms would have to inform consumers about such data collection, keep the data secure and must only use it in a way that is fair to consumers.
We also believe Consumer Protection from Unfair Trading Regulations (CPRs) can be applied to online behavioural advertising. The CPRs may be breached if a consumer alters a transactional decision as a result of misinformation or lack of information. The OFT interprets transactional decision widely and believes it encompasses, for example, the decision to view a website. So not informing a consumer about the collection of information about their browsing behaviour could breach the CPRs if that knowledge would have altered their behaviour, perhaps by dissuading them from visiting that website.
At present, it is not clear that information on behavioural advertising will result in consumers changing their behaviour. Current practices may not, therefore, breach the CPRs, although each case would have to be assessed according to facts, particularly if practices develop further in future. The exception is behavioural advertising via DPI which is also covered by more stringent regulation from the ICO.
CPRs could apply to the use of browsing behaviour in ways that could increase prices to a consumer. Consumer opposition to such practices is very strong, so it is highly likely that the knowledge that data on past online history was being used to target prices would change choices. If so, failing to inform consumers about targeted prices may breach the CPRs. We therefore believe that pricing on the basis of browsing behaviour may be breach the CPRs if consumers are not clearly informed about the practice. Notice in a privacy policy is unlikely to be sufficient. This also covers geo-targeting of prices.
Recommendations
We have found that, for online behavioural advertising, it is proportionate to focus on improving and supporting self-regulation. We welcome the industry's self regulation framework, the Good Practice Principles but we have also identified a number of further areas for improvements. These include:
In addition, the OFT will establish a Memorandum of Understanding with the ICO establishing in which circumstances each party would take enforcement action and so strengthen the effectiveness of regulation. This will increase effectiveness of enforcement which is an important fall-back if self-regulation were to fail or if there were concerns about practices which fell outside its scope. In the event that the MoU covers areas where OFT and Ofcom have overlapping jurisdiction, the OFT and Ofcom would discuss, on a case by case basis, who would be best placed to act.
In terms of targeted prices, consumers regard using data on previous online behaviour to target prices as unexpected and objectionable and we have encouraged the ICO to consider this when finalising their Code on Personal Information Online. We also recommend the ICO intensifies its efforts to ensure the fair collection of information for targeted prices, including formulating a clearer view on when consent is necessary and where notice to individuals suffice. Geo-targeting based on the analysis of an individual's IP address or postcode data entered by a consumer would also constitute the processing of personal data and be subject to the DPA.
Market study details and report
Action following market study
Roundtable
On the 22 June 2010, the OFT hosted a roundtable discussion following the publication of our market study Online Targeting of Advertising and Prices in May 2010. The purpose of the roundtable was to discuss the recommendations made in the OFT market study with industry, trade bodies, regulators and consumer groups.
Background
Contacts
Team leader: Cristina Luna-Esteban (020 7211 8208 / cristina.Luna-Esteban@oft.gsi.gov.uk)
Senior responsible officer: Heather Clayton (020 7211 8826 / heather.clayton@oft.gsi.gov.uk)
Media enquiries: Any media enquiries should be directed to a member of our Press Office.
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