NEW YORK - New York Assemblyman Richard L. Brodsky has drafted a bill designed to limit how companies collect data about Internet users.
Brodsky designed the bill after learning that companies such Google, Microsoft and Yahoo! collect information about Internet users and use it for targeted advertising.
The bill would make it a crime - punishable by a fine to be determined - for certain Web companies to use personal information about consumers for advertising without their consent.
Brodsky said that if the rules are established in New York, the companies probably would have to adjust their rules everywhere, effectively turning the New York legislation into national law.
"Should these companies be able to sell or use what's essentially private data without permission? The easy answer is ‘absolutely not,'" said Brodsky, a Democrat who has represented part of Westchester County since 1982.
In Connecticut, the General Law Committee of the state Assembly has introduced a bill that focuses on data-collection rules for advertising networks, companies that serve ads on sites they do not own.
The New York bill, still a work in progress, aims to force websites to give consumers obvious ways to opt out of advertising based on their browsing history and Web actions.
If passed, the bill would allow Internet users to request that companies like Google, Yahoo!, AOL and Microsoft, which routinely keep track of searches and surfing conducted on their own properties, not follow them around online. These companies would need users' explicit permission to link the anonymous searching and surfing data from around the Web to information like their names, addresses or telephone numbers.
"A law like this essentially takes some of the gold away from marketers," said Joseph Turow, a professor at the Annenberg School for Communication at the University of Pennsylvania. "But it's the right thing to do. Consumers have no idea how much information is being collected about them, and the advertising industry should have to deal with that."
After spending the past few years courting advertising agencies to persuade them to shift their clients' dollars to the Internet, Web companies in the advertising business have begun focusing their attention on Albany.
In recent weeks, Microsoft and Yahoo! have sent lobbyists to meet with Brodsky, and AOL, a unit of Time Warner, is planning a meeting with him.
Unlike most Web companies, Microsoft favors legislation on online privacy and advertising practices, and has lobbied federal lawmakers to establish regulations, said Michael Hintze, associate general counsel for Microsoft.
Microsoft asked Brodsky to broaden his bill to include all sorts of companies that serve ads around the Web, not just those that show ads based on users' behavior. Such a change would create a bill that more clearly includes Microsoft's chief competitor, Google.
Brodsky said he has asked the Web companies whether they would support legislation similar to what he has proposed. Microsoft gave him a firm "yes," but Yahoo! seemed to be opposed to any sort of regulation, he said. Yahoo! declined to comment on its meeting with Brodsky.
Targeted advertising, which is based on consumer data, is one reason why big brands like Coca-Cola and General Motors have been shifting their ad budgets to the Web. The largest Web companies collect data about Web-surfing consumers hundreds of times a month and use the information to help clients show different ads to different people, based on their demographics and interests.
Web companies say more data is always better for effective targeted advertising, but Brodsky said there might be a compromise that enables many ad practices but enhances consumer protection.
"What we have with this new technology is a conflict between the economic model of the Internet and consumers' reasonable expectations of privacy," he said.
Brodsky has sponsored three recently passed laws that relate to Internet security, but the pending bill is his first involving online advertising. He said he became concerned with advertising practices last spring, when privacy activists contacted him about Google's plan to buy DoubleClick, a company that delivers ads to websites. That deal, now worth about $3.2 billion, drew antitrust scrutiny but recently cleared all regulatory hurdles. It was one of many deals that have helped consolidate consumer data in the hands of a few Internet companies.
Executives in the advertising industry say concerns like Brodsky's are unwarranted.
"There has really been no harm shown by behavioral targeting or third-party advertising, so this rush to regulate the Internet is really unnecessary," said Mike Zaneis, vice president for public policy for the Interactive Advertising Bureau, an industry group that represents companies like Google and Yahoo!.
Zaneis said the New York bill threatens to undercut the business model that supports the Web.
"If you take the fuel out of this engine, you begin to see the free services and content dry up," he said.
Another view is that because data collection by online ad companies is already widespread, advertisers have come to expect Web companies to sell them ads based on copious consumer data, and it might be difficult to beat back that expectation.
Some Web executives say the Internet is changing too quickly for lawmakers to keep up.
"Taking a snapshot of what should be the standard today probably will not be a lasting and durable solution," said J. Trevor Hughes, executive director of the Network Advertising Initiative, a group of online advertising networks that voluntarily produced and agreed to a set of privacy standards.
The Federal Trade Commission, which regulates advertising on the national level, has proposed voluntary privacy guidelines and will receive comments about those rules until April 11. A spokeswoman for the commission declined to comment on the bills pending in New York and Connecticut.
Brodsky said he welcomes input about his bill and is working to modify it.
"In the end, I don't have a philosophical objection to targeting if it's done with permission," he said. "But it is absolutely clear that people right now do not understand what they're actually giving up."
Brodsky said he hopes the bill will be up for voting this spring.
