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Viewing a website is a 'transactional decision', says OFT's behavioural ad study

Out-Law Analysis | 27 May 2010 | 2:47 pm | 4 min. read

OPINION: The OFT has endorsed the UK ad industry's self-regulation of behavioural advertising. But its conclusion was based in part on a curious reading of consumer protection regulations, coupled with research that departs from similar studies.

The Office of Fair Trading is the Government's consumer and competition authority. That it sees no need for Government regulation in behavioural advertising is great news for online publishers and advertisers. In my view, that is good for consumers too, because it helps to keep content free.

The biggest change demanded in the report is that ads selected according to someone's browsing behaviour should be labelled. That's a sensible step, and one that UK trade body the Internet Advertising Bureau (IAB) was taking already.

What surprised me more was another, less significant feature of the report: the OFT says that viewing a website is a transactional decision for the purposes of the Consumer Protection (Unfair Trading) Regulations, known as the CPRs.

The CPRs came into force in 2008. They say that if a consumer changes its mind in relation to a transaction as a result of misinformation or lack of information, there can be an offence, punishable by anything up to two years in prison for the directors of the company.

The report says:

"The OFT interprets transactional decision widely and believes it encompasses, for example, the decision to view a website. So not informing a consumer about the collection of information about their browsing behaviour could breach the CPRs if that knowledge would have altered their behaviour, perhaps by dissuading them from visiting that website."

The OFT is not just saying that its worried about information or a lack of information influencing a decision to buy something on a website; it's talking about it influencing a decision just to visit a site, whether the site sells things or not.

In my view, this goes further than the CPRs intended. The CPRs define "transactional decision" but the definition is focused, as you might expect, on transactions.

Here's what you find in the CPRs:

“transactional decision” means any decision taken by a consumer, whether it is to act or to refrain from acting, concerning—
(a) whether, how and on what terms to purchase, make payment in whole or in part for, retain or dispose of a product; or
(b) whether, how and on what terms to exercise a contractual right in relation to a product.

I don't see how that can be interpreted to include a decision to view a website, especially if the site isn't selling anything.

Only a court can decide for sure, but still, the fact that the OFT has taken this view is noteworthy. Will it influence OFT policy in other areas, beyond behavioural advertising? At this stage, we don't know.

Does this mean that sites failing to label their behavioural ads – i.e. most big websites – are presently breaching the CPRs in the view of the OFT? Apparently not.

The report suggests that to hide a profiling disclosure in a privacy statement could breach the CPRs "if consumers would have taken a different decision, such as visiting or buying from other websites, had they known about it." But the OFT stops short of alleging a massive breach of the CPRs because most people, according to its research, are not upset by unlabelled behavioural ads.

Its report says:

"At present, with the exception of behavioural advertising via DPI [Deep Packet Inspection – which nobody is doing at present in the UK], it is not clear that information on behavioural advertising will result in consumers changing their behaviour. Current practices may not, therefore, breach the CPRs, although each case would have to be assessed according to facts, particularly if practices develop further in future."

So consumer attitudes were key to its findings. The OFT's research found that only 28% of consumers dislike behavioural advertising. The outcome could have been very different: other recent studies reported very different attitudes. They put the figure at 38%, 46% and 84% respectively.

Clearly the wording of the questions asked will influence results. Asking "Do you want more relevant ads?" will elicit different answers from "Do you want to be secretly tracked by advertisers?" But on the face of it, the four studies asked questions more similar than their results would suggest.

The OFT elicited the lowest figure when it asked: "On balance, to what extent do you think that online targeted advertising is a good or bad thing for internet users such as yourself?" (28% said 'Fairly Bad' or 'Very Bad')

Consumer group Which? ran its own study of over 1,400 people and reported this month that 38% of respondents "are uncomfortable with websites showing them adverts relevant to their assumed interests, based on the websites their computer has visited."

The Future of Privacy Forum asked over 2,600 US users: "How comfortable are you with information about the websites you visit across the Internet being used to decide what ads you see?” (46% said 'Very Uncomfortable' or 'Uncomfortable'.)

A group of US university researchers asked 1,000 US users: "Please tell me whether or not you want the websites you visit to show you ads that are tailored to your interests" and calculated an 84% objection rate.

Who you ask and the context of the question will also be relevant. I think it's safe to conclude that some people don't like behavioural advertising but there is no consensus on how many. Fortuitously, though, this fickle question was answered in the OFT study in a way that, coupled with its interpretation of the CPRs, avoids regulatory interference with the UK market, at least for now.

So the UK industry must now hope that Europe takes a similar approach. Last year the European Union's then-Consumer Affairs Commissioner said that she, too, would monitor behavioural advertising.

"If we fail to see an adequate response to consumers’ concerns on the issue of data collection and profiling, as a regulator, we will not shy away from our duties nor wait for a cataclysm to wake us up," warned Meglena Kuneva.

I'm guessing that means more statistics are coming.

By Struan Robertson, editor of OUT-LAW.COM. The views expressed are Struan's and do not necessarily represent those of Pinsent Masons. You can follow Struan at Twitter.com/struan99.