Congress wrestles with kids' Internet privacy

WASHINGTON -- Seemingly harmless surveys, contests and electronic pen-pal websites are cleverly disguised marketing tools being used by sales people to generate billions of dollars in revenue each year, experts have told Congress.

Lawmakers are now grappling with how to protect the privacy rights of consumers -- especially children -- who unknowingly forfeit personal information when contacting these websites. Lawmakers are being placed in the precarious position this year of crafting untested regulations that will not interfere with free enterprise in cyberspace.

"The ability of the Internet to gather information and slice and dice it ... we have not seen anything like this before," said Robert Pitofsky, chairman of the Federal Trade Commission (FTC).

Sen. Richard Bryan, D-Nev., is championing legislation that would regulate how websites collect market data from children, and surprisingly he appears to have industry backing -- at least in theory -- for his proposal.

The Children's Online Privacy Protection Act would require online companies to obtain parental permission before they solicit information from children under 13 years of age who contact their websites.

"Children by their very nature, are honest and trusting," said Bryan, D-Nevada. "When approached on the Internet by their favorite cartoon characters or offered a chance to win a prize, children will freely provide information."

The United States is far behind other countries when it comes to privacy issues, said Ethan Katsh, director of the Center of Information Technology and Dispute Resolution at the University of Massachusetts at Amherst.

"I would say what we really need pretty quickly is widespread recognition that our privacy is being compromised routinely," Katsh said. "If we don't take some steps very quickly, it will be too late."

The Internet provides an interactive vehicle for teenagers and adults to explore new worlds and obtain information virtually on every subject. And young children are a fast-growing segment of the population that is going online.

A recent report estimates that 16 million children -- about 14 percent of America's 69 million people under the age of 18 -- are frequently surfing the information superhighway either at home or in school. And 6 million are under the age of 12, according to the 1998 Internet User Survey.

Marketers have been quick to capitalize on this new medium, by compiling data collected from children and then targeting them for promotions or to shop their wares. Children are sent catalogs or literature either by e-mail or through traditional postal mail, and they become mini-consumers harassing their parents to make purchases for them.

"It is to easy to be anonymous and exploit kids online," said Kate Delhagen, an analyst for Forrester Research -- a technology research company based in Cambridge, Mass.

Chairman Pitofsky said a recent FTC survey of more than 200 commercial children's websites revealed that in excess of 90 percent were designed to collect information from kids. The web pages ranged from registration pages and contests to guest books, application forms and pen-pal outlets.

The FTC report found that only 54 percent of the children's websites provided some form or statement about their practices and only 23 percent of the sites directed children to seek parental permission before submitting personal information. Only one percent required parental permission prior to collecting such information.

"This is deplorable," Bryan said. "Children 12 and under are not fully capable of understanding the consequences of giving out personal information online. Children often do not comprehend the potential risk posed by their public posting of personal information that may lead to both online or other types of contact by strangers."

The online industry was initially reluctant to support federal regulations but is now working with Congress to craft a law that the industry hopes will allow it broad power to police itself.

The online industry argues that self-regulation is the best way to implement guidelines in the global marketplace.

Arthur Sackler, vice president of Law and Public Policy for Time Warner Inc., is advocating for the United States to implement a strong self-regulatory law that may be used as a model for other countries. Otherwise, he said, countries throughout the world will each establish their own laws, making it difficult to do business.

"A market-driven self-regulatory approach is the model you can sell most effectively overseas and have something similar if not identical in other countries," Sackler said. "We need, at bottom, as much self-regulation as possible to make the global machine as workable as possible."

Time Warner operates more than 200 websites including CNN Interactive, Pathfinder, WB Online and the Cartoon Network. But Sackler said it is Time Warner's policy not to collect personal information from kids under 13 without parental notice.

The online industry and Congress are now revising certain aspects of Bryan's bill to satisfy each side's needs and concerns. But one aspect the industry agrees with is a "safe harbor" clause that would allow companies flexibility with the new regulations, if they are approved by the FTC.

But not everybody believes industry self-regulation is the proper way to address online marketing practices to children. Kathryn Montgomery, president of the Center for Media Education -- a Washington-based public-interest group that monitors electronic media -- said self-regulation does not work.

"My experience with self-regulation is that it is kind of elastic," Montgomery said. "It will be strengthened when there are threats of government regulation or scrutiny -- such as it is now -- but it becomes lax when there isn't."

Delhagen, of Forrester Research, said it becomes "complicated" when companies are left to police themselves.

"Without regulations, certain aggressive marketers will continue to end-run any policy or handshake agreement," she said.

One group steadfast against the bill is the San Francisco-based Electronic Frontier Foundation -- a nonprofit group specializing in free speech and privacy issues on the Internet.

Barry Steinhardt, the group's president, said the foundation opposes the bill because there is information -- particularly pertaining to health and sexuality -- that teenagers might not otherwise be able to access if the bill becomes law.

"While it is a laudable goal to protect the privacy of information, the bill may in effect block minors from getting information they are entitled," Steinhardt said. "The strength of the Internet is that allows teenagers access of important information without getting permission from parents."

Steinhardt also said the bill, if it becomes law, might provide less protection for a parent who would have to reveal information after giving consent to a child.

"It may have the unintended and ironic effect of disclosing information," Steinhardt said.

Congress is just weeks away from adjourning, but Bryan has hopes that the Senate will vote on his bill this year. The Senate Commerce, Science and Transportation Committee is expected to send the bill to the Senate floor next week, Bryan said.

There is no companion bill in the House yet, but Rep. Edward Markey, D-Mass., has expressed interest in authoring a similar measure this year, if not next, his spokesman said.

And a spokeswoman for President Clinton said that the White House also is interested in the legislation, but she would not comment on the president's support for it until a bill comes out of Congress.

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