Regulatory Corner

Before the Federal Trade Commission
Washington, D.C. 20580

Comments Of the Direct Marketing Association, Inc.

Children's Online Privacy Protection Rule Amendment
Comment, P994504
(Extension Of Sliding Scale)

Gerald Cerasale
Senior Vice President, Government Affairs
Patricia Faley
Vice President, Consumer Affairs
Direct Marketing Association, Inc.
1111 19th Street, N.W., Suite 1100
Washington, DC 20036
(202) 955-5030

Daniel L. Jaffe
Executive Vice President
Association of National Advertisers
1120 20th Street, NW
Suite 520 South
Washington, DC 20036

Jeffry Perlman
General Counsel
American Advertising Federation
1101 Vermont Avenue, NW
Suite 500
Washington, DC 20005-6306

Ronald L. Plesser
Stuart P. Ingis
Piper Marbury Rudnick & Wolfe LLP
1200 19th Street, NW
Washington, D.C. 20036
(202) 861-3900

November 30, 2001

I. Introduction
The Direct Marketing Association, Inc. ("The DMA"), the Association of National Advertisers, Inc. ("ANA") and the American Advertising Federation ("AAF") are pleased to comment on the Federal Trade Commission's ("the Commission's") proposal to extend the sliding scale approach to obtain verifiable parental consent for the collection of personal information about children contained in its rule implementing the Children's Online Privacy Protection Act of 1998 ("COPPA" or "the Act"). The DMA, ANA, and AAF support the proposal and suggest that it be extended for a period of 10 years.

The DMA is the largest trade association for businesses interested in direct, database, and interactive marketing and electronic commerce. The DMA represents more than 4,500 companies in the United States and 54 other nations. Founded in 1917, its members include direct mailers and direct marketers from 50 different industry segments, as well as the non-profit sector. Included are catalogers, financial services, book and magazine publishers, retail stores, industrial manufacturers, Internet-based businesses, and a host of other segments, as well as the service industries that support them. The DMA member companies have a major stake in the success of electronic commerce, and are among those most likely to benefit immediately from its growth.

ANA is the industry's premier trade association dedicated exclusively to marketing and brand building. Representing more than 300 companies with 8,000 brands that collectively spend over $100 billion in marketing communications and advertising, the Association's members market products and services to consumers and businesses. ANA serves the needs of its members by providing marketing and advertising industry leadership in traditional and e-marketing, legislative advocacy, information resources, professional development and industry-wide networking.

The AAF is the unifying voice for advertising. With headquarters in Washington, AAF is the advertising trade association that represents the ad industry in its entirety. AAF's 130 corporate members are advertisers, agencies and media companies that comprise the nation's leading brands and corporations. AAF's national network of 210 local ad clubs is home to 50,000 advertising professionals. In addition, AAF connects industry with an academic base through its 210 college chapters.

The DMA, ANA, and AAF supported and worked actively with the Commission on the passage of the Children's Online Privacy Protection Act. The DMA, ANA, and AAF supported the legislation because of our belief that children present a special case. Unlike adults, children may not fully understand choices regarding privacy. The legislation mirrored in part existing guidelines of the associations, followed by their members. The DMA, ANA, and AAF continued their active participation in the rulemaking proceeding, including submitting comments and participating in the Commission's workshop. In addition, The DMA and its subsidiary, the Internet Alliance, in a partnership with the Commission published "How to Comply with the Children's Online Privacy Protection Act."

The DMA, ANA, and AAF strongly support the Commission's proposal to extend the "e-mail plus" method of obtaining parental consent. This is based on the belief that the penetration of verification technologies has not changed in a way that alters the Commission's reasoning at the time of issuing the COPPA regulations. Given the pace of adoption of such technologies in the past two years, it is not likely that adoption of verification technologies will significantly change in the near future. Further, where utilized, the e-mail plus consent mechanism for internal uses of information is successfully protecting children's privacy as intended by the Act. Some sites, however, have not committed resources to implement an e-mail plus system given the short time frame of two years of applicability. A longer extension of the sliding scale will result in fuller realization of the sliding scale and its benefits. Businesses will not rely on regulatory structures that may expire in two years. A period of 10 years would allow for business implementation. For these reasons, The DMA, ANA, and AAF recommend that the sliding scale be extended for a period of 10 years, at which time the Commission should review the policy.

II. Verification Technologies Have Not Been Widely Adopted
At the time of promulgating the Children's Online Privacy Protection Rule, the Commission set forth a sliding scale approach to obtaining verifiable parental consent in order to allow time for electronic methods of verification to become adopted. For web sites that collect personal information for internal use only, the Rule allows for the use of an "e-mail plus" method of verification.

The sliding scale is consistent with the purposes of COPPA, whose legislative history recognizes that child safety is a distinct statutory interest from privacy. The Commission's rationale distinguishing between internal uses and disclosure to third parties is that the transfer of information to third parties raises unique safety issues. The use of information for internal purposes through e-mail based consent, on the other hand, does not present an increased potential for harm of children. The rule recognized that a less restrictive means of consent would be effective for internal uses of information and thus provided for e-mail plus until authentication technologies are more widely adopted.

The adoption of authentication technologies does not appear to have changed since the time of the rulemaking, and there is no indication that such adoption will occur in the near future. Although technologies to provide verification and authentication on the Internet continue to develop, the true test of when the sliding scale should be phased out should be when such technologies have been widely adopted by the public. Until such technologies are adopted, the sliding scale should continue.

III. A Change from the Sliding Scale Could Unnecessarily Limit Children's Internet Experience
The approach taken in the sliding scale strikes the appropriate balance between providing parental control and not prohibiting beneficial children's Internet experiences. The interactivity of children's experience on the Internet on this revolutionary medium must be preserved.

A change from the e-mail plus standard for internal use would impose an increased burden on companies that only use information for internal purposes for the benefit of the child's experience on that site. Sites that utilize e-mail plus would be forced to either redesign their offerings through more costly consent mechanisms or limit their offerings.

Likewise, The DMA, ANA, and AAF are not aware of any harm from the use of e-mail plus consent that would warrant an elimination of the sliding scale.

IV. The Sliding Scale Should Be Extended for a Period of 10 Years
The Commission asks whether the proposed extension is an adequate amount of time considering the current development of secure electronic mechanisms and/or infomediary services for obtaining verifiable parental consent. The DMA, ANA, and AAF recommend extending the time period for 10 years, at which time the Commission would undertake another inquiry. A 10-year extension would provide the regulatory certainty necessary for full realization of the benefit of the sliding scale.

The sliding scale has not been fully utilized because companies are hesitant to develop systems of e-mail plus consent that could be phased out in two years. There is a reluctance to use a method that may no longer be legal in such a short time frame.

If the period of the sliding scale is extended for 10 years, thereby providing more regulatory certainty, there may be adoption of a broader range of beneficial e-mail plus mechanisms, effectively expanding kids' use of the Internet. Such adoption will further both the goals behind COPPA and more innovation in the offering of children's sites and services.

V. Conclusion
For the foregoing reasons, The DMA, ANA, and AAF agree with the Commission's proposal to extend the sliding scale, and recommend a duration of 10 years for such an extension.