WASHINGTON -- Federal legislation of Internet privacy is seeming less and less far-fetched each day.

At a

Senate Commerce Committee

hearing Thursday,

Yahoo!

(YHOO)

and other Web sites came under fire for privacy disclosures that senators variously described as confusing, deceptive, "mumbo jumbo" and "an exercise in obfuscation."

At day's end, committee chairman

Sen. John McCain

, R-Ariz., stopped short of advocating a law to protect privacy. But some participants interpreted his comments as a sign that bipartisan support for privacy legislation is growing within the committee. Investors fear that could mean more bad news for stocks such as ad firm

DoubleClick

(DCLK)

, which has lost more than half its value since the privacy issue gained traction this spring.

Truth and Consequences

Online companies have, for the most part, been trying to head off privacy legislation, saying that enforcement of current consumer-protection laws is sufficient to protect Internet users from unauthorized use of personally identifiable information about them, such as whether they've visited the

Victoria's Secret

Web site, or what books they've purchased at

Amazon.com

(AMZN) - Get Report

. Legislation, they say, may have the unintended consequence of stifling the growth of the Internet economy.

Private Eyes
DoubleClick's plunge since rise of privacy talk

Source: BigCharts

On the other hand, supporters of privacy legislation say that the current setup isn't doing the job; they say that consumers aren't shopping as much as they might on the Internet because of their unresolved concerns about Internet privacy. (

Forrester Research

calculated last fall that Net retailers in the U.S. lost $2.8 billion in sales in 1999 -- about 14% of their estimated business -- because of potential customers' privacy concerns.)

Earlier this week, a divided

Federal Trade Commission

reversed its longtime stance against privacy laws and recommended

legislation in conjunction with industry self-regulation.

Profiles in Courage

At the commerce committee hearing Thursday, McCain -- who hasn't yet come out in favor of general Internet privacy legislation -- questioned why consumers shouldn't be able to find out what information Web sites have about them, starting with data they've collected about surfing habits and online purchases.

"Should I have the right to know the profile that is kept on me?" asked McCain, in a friendly yet pointed exchange with witness Christine Varney, a former FTC commissioner who advises the

Online Privacy Alliance

, an Internet industry trade group. "I think I should," McCain said. "That's the right of citizens."

As the senator told

TheStreet.com

after the hearing, "If I can know what's in my

FBI

profile, why in the world can't I know what an Internet company knows about me?"

Long and Confusing

At the hearing, McCain, senators and witnesses also took issue with Internet firms, including Yahoo! and DoubleClick, for posting privacy policies they called too long and too confusing to be of any use to consumers.

For example, both McCain and witness Robert Pitofsky, chairman of the FTC, took aim at the complexity of the procedure that Net users go through before they can pull out of DoubleClick's database of anonymous online profiles. Pitofsky, a former university professor, said he required someone at his side to guide him through the process. "I could never have done it by myself," he said.

DoubleClick public policy director Josh Isay says the company has been working with various federal agencies for a year to write a privacy statement that's both complete and understandable. The company will revamp the opt-out procedure to make it easier, he says.

Yahoo! associate general counsel Jon Sobel says, "For several weeks, independent of whatever proceedings happened today, we have been preparing a privacy policy that will be shorter. With over 80 products and services for users worldwide, we face a unique challenge. We are seeking both clarity and accuracy for a very wide variety of services."

In her testimony, FTC commissioner Sheila Anthony used the example of an unnamed Internet service provider's policy that begins, "Your privacy is very important to us," but allows three pages later that it will disclose personal information about visitors or members and their use of the Internet "for any reason, if, in our sole discretion, we believe that it is reasonable to do so."

A later witness said that the FTC probably didn't currently have the authority to compel Net companies to post privacy policies, nor the authority to oversee the phraseology of those policies.

Gaming the Committee

The question remains whether the committee will proceed with legislation on that and other issues.

Some participants in the hearing say the odds of that have improved. "There's a real groundswell of support from at least a majority of committee members for taking legislative action, which I've not seen before," says Daniel Weitzner, head of technology and society activities for the

World Wide Web Consortium

, an international nonprofit group that sets core technical standards for the Web.

Jerry Berman, executive director of the nonprofit civil liberties group

Center for Democracy and Technology

, said, "The chairman's probing of the issue and strong comments about privacy and skepticism in his questioning indicate that he's moving to a 'We-need-legislation-on-privacy-rights' " position.

But one-on-one with

TheStreet.com

after the hearing, McCain shied away from such a characterization, going as far as to say that he felt "spurred on to further hearings."

In other words, Internet privacy will continue to be a very public issue.