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FTC Will Not Seek New Internet Privacy Laws
(By Jonathan Krim, Washington Post Staff Writer)
Friday, October 5, 2001; Page E01

The Federal Trade Commission yesterday outlined a new agenda for protecting consumer privacy that will focus on tougher enforcement of existing laws rather than new legislation sought by the agency under the Clinton administration.

FTC Chairman Timothy J. Muris announced at a forum in Cleveland that the agency will increase the size of its enforcement staff by nearly 50 percent to combat the growing problems of identity theft, unscrupulous telemarketing, online fraud and unwanted e-mail solicitations.

He said new legislation spelling out privacy protections was not needed now in part because private industry had made great strides in protecting consumers and their information, and users will gravitate toward companies that provide the best protections.

Two of the five FTC commissioners took issue with that assessment, along with some key members on both sides of the aisle in Congress, who vowed to continue pushing for new privacy laws.

"I'm disappointed that the new FTC chairman has taken a 180-degree turn against Internet privacy legislation," said Senate Commerce Committee Chairman Ernest F. Hollings (D-S.C.). "This flies in the face of five years of FTC studies and analyses that clearly demonstrated that such legislation is necessary."

Among the enforcement initiatives Muris is proposing is a crackdown on the practice of "pretexting," in which "information brokers" call financial institutions and obtain personal account information by posing as customers.

Muris also vowed to curb unsolicited e-mail advertising by creating and operating a national list of people who do not want receive the material. Under the proposal, companies that ignored the list could be prosecuted for violating FTC rules.

And the agency will more aggressively monitor and take action against companies that violate their privacy policies, whether they do business online or not.

Overall, the plan would increase the enforcement staff for privacy-related actions from 35 to 52, according to an agency spokeswoman. Muris said the agency has received additional funding from Congress and that money will not be diverted from other FTC functions.

Muris also said his plan does not preclude the agency from seeking new legislation in the future, but that more time is needed to evaluate whether existing laws are sufficient.

Republican commissioner Orson Swindle, who has long argued for market-based solutions, hailed the plan. So did the marketing industry, which called it a sensible approach that recognized private-sector solutions are working to protect privacy.

But that assertion was disputed by an independent financial consulting group, which earlier this month released a report saying that consumer fears about divulging personal information over the Internet are growing and could result in $15 billion in lost online commerce this year.

"He just poured gasoline on the privacy fire with that announcement today," said John C. McCarthy, director of research for Forrester Research Inc. of Cambridge, Mass. "They acknowledge there's a problem, but they haven't told business what's acceptable behavior."

FTC Commissioner Mozelle W. Thompson, a Democrat, said the Muris plan does nothing to address the fundamental loophole in existing law, which is that not all Web sites are required to post policies stating how they will use information gathered from customers.

Thus, a company without a policy cannot be subject to enforcement for violating it, he said.

Shiela F. Anthony, the other Democrat on the commission, applauded Muris's plans for greater enforcement, but said that without legislation establishing firm privacy requirements, "it is unlikely that consumers' privacy can be adequately protected from identity theft, commercial harassment and hucksterism."

For many years, the FTC under former chairman Robert Pitofsky believed that industry could adequately regulate itself. But that view changed in the past two years.

David Medine, who headed the office that worked on privacy issues for Pitofsky, said that in a survey completed last year, fewer than half of Web sites gave adequate notice of their privacy policies or sufficient choice in how consumer information could be used.

Thomas B. Leary, another Republican member of the commission, had supported the need for legislation requiring companies to have privacy policies. But he said Muris's approach was more practical now because Congress will be largely focused on issues surrounding the Sept. 11 terrorist attacks.

On Capitol Hill, several members of Congress acknowledged that passing legislation in the current climate might be difficult, but said they would not give up. Rep. Joe Barton, a Texas Republican and one of four key members of the bipartisan Congressional Privacy Caucus, said that existing laws governing financial and health records need to be tightened and that Web sites should be required to post privacy policies.

Another member of the caucus, Rep. Edward J. Markey (D-Mass.), said the Muris decision is a "back-to-the-future" privacy policy.

"We've already been down this road and we know that relying solely on voluntary online protections will leave consumers' personal information vulnerable to abuse," Markey said.

But others, such as Sen. George Allen (R-Va.), said they support the FTC's plan. Allen said that existing laws governing financial records have resulted in "consternation, confusion and costs" associated with compliance, and that now is not the time to enact more laws and regulations.