Order Code RS21221
May 21, 2002
CRS Report for Congress
Received through the CRS Web
Privacy Protection for Online Information
Gina Marie Stevens
American Law Division
This report focuses on one aspect of online privacy – collection, use, and dissemination
of data via the Internet, and discusses related federal privacy laws and selected legislation.
This report will be updated as developments warrant.
At the end of the 19th century, a seminal law review article was published that
developed the basic principle of American privacy law – the “right to be let alone.” The
article was written in response to invasions of personal privacy caused by the
technological innovations of mass printing (newspapers) and the portable camera
(photographs). Following this article, American common law jurisprudence developed
four distinct tort remedies to protect personal privacy: false light; misappropriation; public
disclosure of private facts; and intrusion upon seclusion. With the late 20th century
technological innovations of the Internet and the World Wide Web, the collection, use,
and dissemination of electronic personal information is potentially much more invasive.
The unique aspects of information collection via the Internet, the ability to create detailed
profiles of Internet users, and the capability of computer networks to quickly and
inexpensively compile, analyze, share, and match digitized information, are some of the
reasons that online privacy1 has become the subject of so much concern.
Background. Individuals and businesses increasingly rely upon computers and
computer networks for personal and business transactions. This has resulted in the
creation of vast amounts of individually identifying personal information. Online users
may voluntarily disclose personally identifying information, for example, to an Internet
service provider for registration or subscription purposes, to a Web site, to a marketer of
merchandise, in a chat room, on a bulletin board, or to an Email recipient. Privacy
The term “online privacy” includes several different subjects such as government surveillance
of online activities, the rights of employers to monitor employee activities, the collection, use,
and dissemination of data via the Internet, and computer security issues. This report focuses on
one aspect of online privacy – collection, use, and dissemination of data via the Internet. For
information on other internet privacy issues, see CRS Report RL31408, Internet Privacy:
Overview and Pending Legislation; CRS Report RL31377, The USA Patriot Act: A Legal
Analysis; CRS Report RL30322, Online Privacy Protection: Issues and Developments.
Congressional Research Service ˜ The Library of Congress
advocates typically object to the misuse of this “actively collected” information.
Information about online users is also collected, sometimes without the user’s knowledge
or consent, by Web sites through technology that routinely tracks, traces and makes
portraits of every interaction with the network. This is accomplished through the use of
passive collection technologies such as cookies or clear graphic interchange formats
(GIFs). Technology like data-mining software and the practice of online profiling2
facilitate the use of online personal information for commercial purposes. Privacy
advocates have expressed a great deal of concern over the collection, use, or
dissemination of personal information online, and over the fact that the common law
remedies for invasion of privacy generally do not provide adequate protection of personal
privacy on the Internet. The inadequacy of common law remedies for redressing privacy
“wrongs” has led to efforts to seek government regulation of data collection through new
legislation and existing statutes.
Accidental or intentional invasions of privacy by an Internet Service Provider, an
online service provider, or an online advertiser might result in Federal Trade Commission
enforcement actions, state attorneys general investigations, private lawsuits, negative
publicity, deflated stock prices, or diminished revenues. The courts have recently
addressed many online privacy issues in cases brought by individuals alleging that various
online activities have violated the privacy rights of Internet users.3 The cases illustrate
some of the challenges courts face as they apply statutory and common law concepts of
privacy to these new technologies. With respect to federal claims, plaintiffs have alleged
violations of the Electronic Communications Privacy Act, the Computer Fraud and Abuse
Act, and the Federal Wiretap Act. State law claims are based upon Unfair Trade Practices
Acts, consumer protection acts, invasion of privacy torts, and trespass.
Federal Privacy Laws, and Online Privacy Laws. There are three major
privacy laws that regulate nongovernmental use of personal data that are applicable to the
online environment. The Electronic Communications Privacy Act, the Computer Fraud
and Abuse Act, and the Children’s Online Privacy Protection Act. The Electronic
Communications Privacy Act of 1986 (“ECPA”), 18 U.S.C. §§ 2701 et seq., prohibits
electronic surveillance, possession of electronic surveillance equipment, and use of
information secured through electronic surveillance. The ECPA regulates stored wire and
electronic communications (such as voice mail or electronic mail), transactional records
access, pen registers, and trap and trace devices. The ECPA prohibits unauthorized access
to stored electronic communications and prohibits the provider of an electronic
Online profiling refers to the practice of aggregating information about consumers’ interests,
gathered primarily by tracking their movements online, and using the profiles to create targeted
advertising on Web sites. See Federal Trade Commission, Online Profiling: A Report to
Congress (Pts. 1 and 2)(2000),
See In re DoubleClick, Inc. Privacy Litigation, 154 F. Supp. 2d 497 (S.D.N.Y. 2001); In re
Intuit Privacy Litigation, 137 F. Supp. 2d 1272 (C.D.Cal. 2001); In re American Online, Inc.
Version 5.0 Software Litigation, 2001 U.S. Dist. LEXIS 6595 (S.D. Fla. April 19, 2001); In re
Real Networks, Inc. Privacy Litigation, Docket No. 1329, 2000 U.S. Dist. LEXIS 1458 (J.P.M.L.
Feb. 10, 2000).; Supnick v. Amazon.com, No. C00-0221P, 2000 U.S. Dist. LEXIS 7073 (W.D.
Wash. May 19, 2000); In re Toys ‘R Us, Inc., Privacy Litigation, Docket No. 1381, 2000 U.S.
Dist. LEXIS 18658 (J.P.M.L. Dec. 20, 2000); In re Pharmatrak, Inc. Privacy Litigation, Docket
No. 1400, 2001 U.S. Dist. LEXIS 5228 (J.P.M.L. Apr. 18, 2001)
communication service from disclosing the contents of stored communications. The
ECPA includes both civil and criminal penalties, authorizes private lawsuits and provides
for the recovery of economic and in some cases punitive damages as well as costs and
attorney fees. The federal wiretap statute, 18 U.S.C. §§ 2510 et seq. addresses disclosure
of the contents of electronic mail, radio communications, data transmission and telephone
calls. The Computer Fraud and Abuse Act (CFAA), 18 U.S.C. §§ 1030 et seq., pertains
to federal and interstate computer crimes. It applies to any unauthorized access to
computers of “federal interest.” Essentially it applies to any computer when access is
provided through the Internet. The CFAA provides both civil (economic damages only)
and criminal penalties, and authorizes private lawsuits where damages exceed $5,000.
The Children’s Online Privacy Protection Act of 1998 (COPPA), 15 U.S.C. § 6501,
applies to children under 13 years of age and requires parental consent to collect a child’s
age or address online, and requires sites collecting information from children to disclose
how they plan to use the data. COPPA specifies that operators of websites or online
services directed to children, must among other things, (1) provide parents notice of their
information practices; (2) obtain prior parental consent for the collection, use, or
disclosure of personal information from children; and (3) provide a parent, upon request,
with the ability to review personal information collected from his/her child. The Act
authorizes the Commission to bring enforcement actions for violations as unfair and
deceptive trade acts or practices under section 5 of the Federal Trade Commission Act.4
COPPA also authorizes state attorneys general to file federal actions.
There is no omnibus federal privacy statute that protects online personal
information.5 Rather, a patchwork of industry-specific federal laws exists to protect the
privacy of certain personal information.6 The Privacy Act of 1974 (5 U.S.C. § 552a)
protects the privacy of personal information collected by the federal government, and
places limitations on the collection, use, and dissemination of information about an
individual maintained by federal agencies. Congress has enacted the following laws for
the protection of credit, education, bank, video, motor vehicle, health, and financial
information: the Fair Credit Reporting Act of 1970 (15 U.S. C. §§ 1681 et seq.) regulates
the credit industry;7 the Family Educational Rights and Privacy Act of 1974 (20 U.S.C.
§ 1232g) governs access to and disclosure of education records; the Right to Financial
Privacy Act of 1978 (12 U.S.C. § 3401 et seq.) regulates the disclosure of bank records
For information on FTC enforcement action under COPPA, see Three Web Operators Agree
to Pay Civil Penalties to Settle Violations of the Children's Online Privacy Protection Act,
For information on other privacy statutes, see CRS Report RL30671, Personal Privacy
Protection: The Legislative Response; CRS Report RS20185, Privacy Protection for Customer
Financial Information; and CRS Report RS20934, A Brief Summary of the Medical Privacy Rule.
Note that there maybe constitutional limitations on the ability of the government to regulate
personal privacy. See U.S. West v. FCC, 182 F.3d 1224 (10th Cir. 1999)(held that FTC order
restricting use and disclosure of customer proprietary information by telecommunications carriers
by violated the free speech clause of the First Amendment).
In 1999 U.S. Bancorp settled a complaint for $7 million brought by the Minnesota Attorney
General under the FCRA. The company was accused of sharing credit card information, some
of which was gathered online via the company’s web site, with third party marketing companies.
U.S. Bancorp subsequently settled a similar complaint with the attorneys general of 38 states and
the District of Columbia, [http://www.ag.state.mn.us/consumer/Privacy/PR/pr_usbank_0609]
to the federal government; the Video Privacy Protection Act of 1988 (18 U.S.C. § 2710)
regulates the use and disclosure of personal information collected in connection with
video rentals; the Driver’s Privacy Protection Act of 1994 (18 U.S.C. § 2721) regulates
the use and disclosure of personal information from state motor vehicle records; the
Health Insurance and Portability and Accountability Act of 1996 (P.L. 104-191, §§ 262,
264, 45 C.F.R.§§160-164) regulates the use and disclosure of individually identifiable
health information; and the Gramm-Leach-Bliley Act of 1999 (15 U.S.C. §§ 6801 et seq.)
regulates the privacy of personally identifiable, nonpublic financial information. Other
federal privacy laws address particular types of communications media:
telecommunications privacy is addressed in the Communications Act of 1934 which
limits the use and disclosure of customer proprietary network information by
telecommunications service providers (47 U.S.C. § 222); cable privacy is addressed in the
Cable Communications Policy Act of 1984, which limits the disclosure of cable television
subscriber names, addresses, and utilization information (47 U.S.C. § 551); and telephone
privacy is addressed in the Telephone Consumer Protection Act of 1991, which requires
telephone solicitors to maintain do not call lists (47 U.S.C. § 227).
Although it is not a privacy statute, section 5 of the Federal Trade Commission Act
(the "FTC Act"), 15 U.S.C. §§ 41 et seq., has been successfully used to address a
company’s failure to comply with its stated information privacy practices. The FTC Act
prohibits unfair and deceptive practices in and affecting commerce, and authorizes the
Federal Trade Commission to seek injunctive and other equitable relief, including redress,
for violations. The Commission has brought enforcement actions to address deceptive
online information practices. In 1998, GeoCities, agreed to settle Commission charges
that it had misrepresented the purposes for which it was collecting personal identifying
information from children and adults through its online membership application form and
registration forms. The settlement prohibits GeoCities from misrepresenting the purposes
for which it collects personal identifying information, requires GeoCities to post a privacy
notice on its site, and to establish a system to obtain parental consent before collecting
personal information from children.8 The Commission also entered into a consent
agreement with Liberty Financial Companies, Inc., operator of the Young Investor Web
verifiable consent before collecting personal identifying information from children.9 In
January 2000, the FTC settled a complaint against Reverseauction.com, Inc., alleging that
it had improperly obtained the email addresses, user identification names and feedback
ratings of various eBay customers, and then allegedly sent out unsolicited emails to those
customers.10 The FTC also settled charges against Toysmart.com that the company had
violated Section 5 of the FTC Act by misrepresenting to consumers that personal
information would never be shared with third parties and then disclosing, selling, or
offering that information for sale in violation of the company's own privacy statement.11
In July 200l several online pharmacies settled charges that they had violated their privacy
In re GeoCities, Docket No. C-3849 (Feb.1999),
In re Liberty Financial, Case
FTC v. Reverseauctions.com, Inc., Civil Action No. 000032 (D.D.C. 2000),
FTC v. Toysmart.com, LLC, and Toysmart.com, Inc. (Civil Action 00-11341-RGS) (D. Mass.
policies.12 A February 2000 complaint filed with the FTC charged DoubleClick, Inc. with
violations of the Federal Trade Act.13 In response to market pressures and pending
lawsuits, DoubleClick discontinued its allegedly unfair and deceptive trade practices.
Legislation. Notwithstanding the existence of many federal privacy laws (and
several state initiatives and laws), there is a perception held by consumers, privacy
advocates, and some legislators and regulators that there is a need for a federal online
privacy law to regulate the collection, use, and disclosure of online personal information.
The crux of the online privacy debate is whether industry self-regulation of online
personal information through implementation of privacy policies is effective or whether
a uniform national law to regulate the privacy of online personal information should exist.
The Federal Trade Commission has extensively studied this question, and issued a series
of reports to Congress.14 Initially the Commission preferred a self-regulatory approach
to online privacy through adoption and adherence to privacy policies. In its 2000 Report
to Congress, however, a majority of the Commission (3-2) concluded that notwithstanding
measurable gains, self-regulation alone was unlikely to provide online consumers with an
adequate level of protection, and recommended that Congress consider online privacy
legislation to supplement self-regulatory methods. In 2001, the new FTC Chairman
Timothy Muris announced a new pro- privacy agenda including greater FTC regulatory
efforts to enforce both online and offline privacy promises. In April 2002, Chairman
Muris wrote that enactment of broad, general legislation governing online privacy issues
is premature at this time in light of the FTC’s new pro-privacy agenda.15
Online privacy legislation based upon core fair information practice principles
attempts to provide solutions to privacy problems posed by online personal information.
Fair information practice principles were first articulated in the United States Department
of Health, Education and Welfare's 1973 report entitled Records, Computers and the
Rights of Citizens. Since then, a canon of fair information practice principles has been
developed.16 Fair information practice codes include five core principles: (1)
Notice/Awareness; (2) Choice/Consent; (3) Access/Participation; (4) Integrity/Security;
and (5) Enforcement/Redress. The most fundamental principle is that consumers should
be given notice of an entity's information practices before any personal information is
collected. The second widely accepted core principle is consumer choice or consent,
which means giving consumers options as to how any personal information collected from
them may be used. Access is the third core principle, and refers to an individual's ability
both to access data about herself, and to contest that data's accuracy. The fourth principle
is that data be accurate and secure. The fifth principle is that an effective enforcement and
FTC v. Sandra L. Rennart, et al., Civ. Action No. CV-S-000861-JBR (D. Nev. July 6, 2000),
S e e
E P I C
D o u b l e C l i c k
C o m p l a i n t ,
See, U.S. Federal Trade Commission, Privacy Online: A Report to Congress, June 1998; SelfRegulation and Online Privacy, July 1999; Privacy Online: Fair Information Practices in the
Electronic Marketplace – A Report to Congress, May 2000,
Letter From Chairman Muris to the Senate Committee on Commerce, Science, and
Transportation (April 24, 2002), [http://www.ftc.gov/os/2002/04/sb2201muris.htm].
See also The European Union Directive on the Protection of Personal Data (1995); and
Canadian Standards Association, Model Code for the Protection of Personal Information (1996).
redress mechanism exist to enforce the privacy principles. The alternative approaches are
industry self-regulation; legislation that would create private remedies for consumers; or
regulatory schemes enforceable through civil and criminal sanctions.
In the 107th Congress there are several bills which regulate online personal
information. Differences among the bills relate to: the requirements established for
sensitive vs. nonsensitive personal information; the type of notice required; whether
individuals have the opportunity to opt-in or to opt-out of disclosures; whether opt-out or
opt-in depends upon whether the disclosure is for financial consideration; whether or not
individuals are given a right to sue for violations; whether the bill applies to online
businesses alone, offline businesses, or both; whether federal preemption applies, and if
so, whether the bill preempts all state privacy laws or only state statutes but not state
common laws; whether enforcement is through the FTC and state attorneys general, or
through industry self-regulation and redress; whether compliance with other federal
privacy laws provides a safe harbor; and the effect of foreign privacy laws on U.S.
businesses. The bills vary on notice, consent, access, security, and enforcement.
For example, H.R. 4678 (Rep. Stearns) applies to both online and offline entities –
except government agencies, small businesses, and nonprofit groups – that collect, sell,
disclose for consideration, or use personal information. It requires consumer notice,
information, a self-regulatory program with appeal to the FTC, no private right of action,
harmonization with other federal privacy laws, preemption of state privacy laws, identity
theft prevention measures and remedies, GAO study on the effect of foreign privacy laws
and whether they result in discriminatory treatment of U.S. businesses; and
harmonization of international privacy laws. S. 2201 (Sen. Hollings) requires notice of
collection and use practices; requires online entities to obtain consent prior to collecting
sensitive information (opt-in); requires entities to post privacy notices on Web sites;
requires companies to give user’s the option to request that nonsensitive information not
be collected (opt-out); authorizes user access and correction, preempts state statutes on
Internet privacy; permits individuals to sue for actual damages or $5,000; authorizes FTC
and state attorneys general enforcement and enforcement to by other federal regulators for
certain classes of information. The Senate Commerce Committee mark-up of S. 2201
began May 16th. The bill manager’s amendment was approved by the Committee 14-9,
and would, among other things, restrict the private right of action to improper disclosures
of sensitive information only, and direct the FTC to develop a rule to apply the bill to
offline businesses. For information on other online privacy bills, see CRS Report
RL31408, Internet Privacy: Overview and Pending Legislation.
Some stakeholders believe that online privacy legislation is premature, and will have
a chilling effect on the Internet economy; others view the legislation as unfair to
industries regulated by other privacy laws.17 Industry representatives worry that the
private right of action may result in class action lawsuits. Privacy advocates generally
favor online privacy legislation with the right to sue, application to online entities, and
opt-in consent for information disclosures. Many believe that absent a legislative solution
problems surfacing today will get worse in the future.
See Hearings on S. 2201 Before the Senate Comm. On Commerce, Science and Transportation
107th Cong., (Apr. 25, 2002), [http://www.commerce.senate.gov/hearings/hearings0202.htm].
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