The Federal Trade Commission (FTC) recently announced plans to develop a “nutrition label” for data collection. Essentially, the label will function as a template that websites can customize to succinctly tell consumers what kind of data they are collecting and how they are using it. Once developed, the FTC intends for this mechanism to become a commonly recognized aspect of websites so that consumers will be more likely to understand the activities of websites that they visit.

The announcement was made at the Wired For Change conference late in October by FTC Chairman Jon Leibowitz. Leibowitz reportedly said that the agency’s chief technologist and the Bureau of Consumer Protection are working to identify “five essential terms” that should be included in these standardized privacy policies. The template would be modeled on the nutrition labels found on food and beverages with the hopes that consumers will recognize this easy to read format and become more aware of the ways in which their data is being used online.

The announcement is in line with recent discussions by regulators and consumer groups, which have focused on encouraging companies to create privacy policies that are accessible and easy to understand for the average consumer. In the FTC’s recent Commission Report on Protecting Consumer Privacy, one of the primary ideas was a push for greater transparency on privacy disclosures. Under this focus area, the Commission Report advocated shorter, clearer privacy policies and encouraged companies to permit consumers to have reasonable access to stored data. See Arent Fox’s update on this Report, here. The “nutrition label” signifies the FTC’s decision to help website operators to comply with their recommendations.

Rather than implement regulations that may limit technical advancement, regulators have also supported industry standardization through technical mechanisms. For example, it was only a year ago that the Do Not Track policy was heavily debated and discussions surrounding Do Not Track mechanisms continue. The policy — which promotes the development of technical mechanisms to enable users to opt out of websites’ collection of information regarding their online searching and browsing activities — suffered heavy objections initially even though regulators, including the FTC, were in strong support. Now, a year later, Do Not Track tools have become more commonly found technical mechanisms available through multiple Internet service providers and offer consumers some control over the data collected from them while they are on the web.

Similarly, almost eighteen months ago, several big marketing groups, including the Direct Marketing Association and the Association of National Advertisers developed a program requiring participating companies to display an “advertising option icon” within or in close proximity to advertisements and web pages that allow data to be collected for behavioral advertising. Upon clicking on the icon, a consumer is redirected to a web page that describes the company’s data collection procedures and how they may be used for behavioral advertising. See Arent Fox’s alert on this icon, here.

The FTC’s recent announcement of the nutrition label may be in line with these other initiatives and the larger push to heighten consumer awareness about the data collected about them online, which may end up influencing businesses to consider and develop clear and concise disclosures to address data collection, storage and use. At the October Wired For Change event, Leibowitz commented that the FTC uses its “[enforcement] stick when companies fall below a certain standard of care, but the most important thing to do is set rules of the road going forward.” He went on to say that, “We can go after bad actors and companies that go over the line inadvertently, and we will, but what’s important is that consumers have choices, and the only way to do that is by working together [with the industry] and making guidelines.”

Arent Fox is monitoring this issue. For more questions, please contact Sarah L. Bruno or Eva J. Pulliam.