Federal Trade Commission Chairman Jon Leibowitz has warned the Internet advertising industry that it basically has one last opportunity to prove that it can – and will – protect consumer privacy before the Commission will step in.
"From my perspective, the industry is pretty close to its last clear chance to demonstrate" that it can regulate itself, Chairman Jon Leibowitz said at the Reuters Global Financial Regulation Summit.

Leibowitz’s comments are similar to those he made in February, when the agency issued proposed guidelines for behavioral tracking, which involves tracking the surfing patterns of Internet users and then sending them targeted ads based on visited sites. FTC Commissioner Pamela Harbour also queried whether the Internet ad industry could effectively police itself.
Internet privacy is also on the congressional agenda. Representative Rick Boucher (D-Va.) recently said he intends to introduce an online privacy bill later this year. Congress has made several unsuccessful attempts to pass laws regulating Internet privacy in the past. Despite the failure of Congress or the FTC to regulate the adware industry, enforcement actions by state attorneys general and the FTC, combined with market forces, forced all four major adware companies – Claria, WhenU, Direct Revenue, and Zango – to shutter operations.

The recent emergence of a new adware business model, in which ISPs sell customer data to behavioral ad firms, could push Congress to act. Last year, when it emerged that that ISPs were working with a company called NebuAd on such a business model, some lawmakers suggested that such ad targeting requires opt-in consent from consumers, NebuAd shelved its plans. AT&T, Time Warner, and Verizon also argue that all behavioral targeting firms should seek user consent.

Why it Matters: It remains to be seen whether Congress will pass laws regulating the online ad industry, but it appears that, in the meantime, FTC Chairman Leibowitz is prepared to step in with enforcement actions against behavioral ad companies for any violations of existing consumer protection laws.