DoubleClick Celebration May Be Short as Privacy Battle Beckons

DoubleClick (DCLK) investors may be confident the company's privacy predicament is over, but activists on the other side of the issue say they're ready to take the dispute to court.

Shares in the online-advertising bellwether jumped as much as 13% Friday on the news that an Internet ad trade group, the Network Advertising Initiative, had received the blessing of the Federal Trade Commission for a set of self-regulatory principles to be used to protect consumer privacy.

The FTC's approval of the guidelines means that DoubleClick and other online advertising companies have the go-ahead for creating a database combining people's names and addresses with information gathered about them through their surfing habits.

That clearance is especially important to DoubleClick, which acquired the catalog-marketing firm Abacus Direct as part of a company strategy to build a major database combining online behavior with personally identifiable data. In February, DoubleClick tabled its plans for building such a database of online information following the disclosure that the FTC was investigating the company's privacy policies.

Amid the market downturn for advertising-related Internet stocks, DoubleClick's shares have dropped two-thirds since February. On Friday, its shares rose almost 9% to close at 37 1/7, though the markets were generally in the red.

Not so fast, say privacy advocates, who on Friday complained about the NAI proposal in a letter to the Senate Commerce Committee. The letter, cosigned by Jason Catlett, president of a spam-fighting company called Junkbusters, and Marc Rotenberg, executive director of the Electronic Privacy Information Center, says the plan doesn't give people privacy rights they already have in other areas, such as the ability to access information in the profile or to limit use of the data.

In a conference call, they objected to the guidelines' provision that companies provide "reasonable access" to the personally identifiable information that they have collected about people. "Their idea of reasonable access might be your name and address," says Frank Torres of Consumer Reports publisher, Consumers Union.

Catlett points out that the companies are not supposed to collect "sensitive medical or financial data," but the guidelines don't make clear what medical information is sensitive and what isn't. "It's really not appropriate for these companies to be making this choice," he says.

The privacy advocates are complaining that they were left out of the self-regulatory process for the most part and only allowed a brief look at the guidelines. "We're also reviewing our legal options," says Rotenberg. "We may have the opportunity to go back to the FTC or go into District Court in Washington to challenge the rule that's being put forward."

A spokesman for the NAI declined Friday to comment on the privacy advocates' criticism of the guidelines, saying he hadn't had time to study their analysis.

Judging by comments that the NAI was circulating Thursday, those critics may have more luck in court than they will on Capitol Hill. Several congressmen have already come out in favor of the guidelines, including Sen. Patrick Leahy (D., Vt.), Rep. Billy Tauzin (R., La.) and Sen. Charles Schumer (D., N.Y.).

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