The online marketing industry has been shaken by a new report from the Federal Trade Commission (FTC). The FTC has issued the proposal of a framework for balancing consumer privacy and innovation online. The proposal includes a "do not track" mechanism, which the FTC says would likely be a persistent setting on consumers’ browsers, so consumers can choose whether to allow the collection of data regarding their online searching and browsing activities.

The proposal comes in the form of a report called, "Protecting Consumer Privacy in an Era of Rapid Change: A Proposed Framework for Businesses and Policymakers."

"Technological and business ingenuity have spawned a whole new online culture and vocabulary – email, IMs, apps and blogs – that consumers have come to expect and enjoy," said FTC Chairman Jon Leibowitz. "The FTC wants to help ensure that the growing, changing, thriving information marketplace is built on a framework that promotes privacy, transparency, business innovation and consumer choice. We believe that’s what most Americans want as well," 

"This proposal is intended to inform policymakers, including Congress, as they develop solutions, policies, and potential laws governing privacy, and guide and motivate industry as it develops more robust and effective best practices and self-regulatory guidelines," the FTC says.

It is ‘reasonable for companies to engage in certain practices – namely, product and service fulfillment, internal operations such as improving services offered, fraud prevention, legal compliance, and first-party marketing,’ the FTC’s report says. "By clarifying those practices for which consumer consent is unnecessary, companies will be able to streamline their communications with consumers, reducing the burden and confusion on consumers and businesses alike."

Whlie consumer protection is certainly a good thing, there is concern throughout the industry that the government doesn’t understand how things work well enough to propose such guidelines. There is no doubt that the guidelines would have huge ramifications throughout the industry if they were to be implemented, though it’s important to note that this is just a proposal of guidelines for potential legislation at this point. 

"While many companies may publicly welcome better consumer privacy protection, the ideas in the report go against most of the targeting and data collection practices in use today," says industry analyst Greg Sterling. "Most of them (with some notable exceptions) rely on consumer ignorance."

"The new framework would place burdens on online ad networks, data vendors and others in the advertising value chain that most would find unwelcome," he adds. "And more information disclosures and consumer control over data would probably mean more consumers opting out of much of online tracking and targeting."

Cynthia Boris at MarketingPilgrim notes that online advertisers are already working on a self-policing program, but that "it looks like the federal government is going to have their say and their say trumps anything from the private sector."

The FTC’s proposal is open to public comment (of which I’m sure there will be more an incredible amount) until January 31. The proposal covers much more than just the "do no track" mechanism, calling for better privacy practices and transparency from businesses in general. More from the FTC here.