As we described in a prior Alert (Flash Cookies: Marketing Tactic Raises Privacy Concerns), the online marketing/behavioral advertising technique of installing Adobe’s “Flash cookies” in user’s computers to assist with targeted Internet advertising has attracted the attention of legislators as well as class action lawyers. On December 3, 2010, online advertising companies Quantcast Corp. and Clearspring Technologies Inc., along with several media companies (popular television networks, a major movie studio and a major record label) settled proposed class action lawsuits against them arising out of their use of “Flash cookies.”

Under the settlement, the defendants made no admission of liability, but agreed to stop using Flash cookies and make a payment of $2.4 million to cover the costs of the settlement. Interestingly, the defendants also agreed to make efforts to lobby relevant self-regulatory bodies to revise industry guidelines and ban the use of Flash cookies within the online advertising industry.

News of this settlement arrived within days of the Federal Trade Commission’s release of a preliminary staff report (www.ftc.gov/os/2010/12/101201privacyreport.pdf) supporting the creation of a browser setting disallowing user tracking, and encouraging companies to make it easier for consumers to see the data collected about them.

This settlement and the FTC’s staff report highlight the need for companies engaged with behavioral advertising to ensure that any data collection techniques used by agencies with which they do business comport with their privacy policies. Companies are also advised to follow and implement the self-regulatory standards promulgated by the various industry trade groups and self-regulatory bodies [IAB (www.iab.net), NAI (www.networkadvertising.org)], and stay up to date on Congressional and FTC activities and statements around data collection, data privacy and behavioral advertising.

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