FTC settles with online ad agency for privacy violation

The Federal Trade Commission said Monday that it settled with online advertising provider Chitika for allegedly tracking online activities of users who had opted out of the company’s service.

The consumer protection agency had been investigating Chitika for deceptive practices, it said. Between May 2008 and February 2010, the company allegedly placed cookies on the Web browsers of consumers who had explicitly asked to bar the tracking service from collecting information to be used for behavioral advertising.

Chitika had stopped tracking those users for just 10 days and then resumed placing cookies on their browsers to target ads, the FTC said. Chitika says it delivers 3 billion ad impressions a month and acts as a go-between for Web sites and advertisers. It buys ad space on Web sites and contracts with advertisers to place cookies, or small text files, on those Web sites. The cookies are used to collect information about users, such as the searches they perform, items purchases and sites visited.

The announced settlement comes during a rush by Web site publishers and retailers to come up with voluntary privacy measures to avoid new legislation or rules that would curb their ability to target ads to Internet users. The FTC has called for a Do Not Track mechanism that would clearly allow users to opt out of online tracking.

In a settlement agreed to unanimously by the FTC, Chitika agreed to stop making misleading statements about the extend of its data collection and to extend to five years the period it is barred from tracking users to opt out of its service.

Highlights from the settlement:

- Every targeted ad by Chitika must include a hyperlink that takes consumers to a clear opt-out mechanism.

- Chitika must destroy all identifiable user information collected about users who had opted out of the service.

- Chitika must alert consumers who previously tried to opt out that their attempt was not effective and advise those users to opt out again to avoid targeted ads.

“The FTC investigated Chitika as part of its ongoing efforts to protect consumers’ privacy online,” the agency said in a release. “The FTC charged Chitika’s claims about its opt-out mechanism were deceptive and violated federal law.”

Cecilia Kang is a senior technology correspondent for The Washington Post.

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