The New York Times yesterday posted on article on real time bidding for online advertising that I found interesting. The article cited a petition filed with the Federal Trade Commission by the Center for Digital Democracy, where the CDD alleged that real time bidding, a process where advertising space on web sites is sold via an electronic trading platform, amounts to an unfair and deceptive practice.

Specifically, CDD alleged that electronic trading systems for advertising, where marketers can bid for consumers within milliseconds of a consumer visiting a web page, can unfairly stratify consumers, relegating some to inferior treatment while offering better pricing to others. According to CDD, not only does it resemble a cattle auction while reducing consumers to a “chattel” status, but these trading systems also threaten consumer privacy because advertisers are using consumer data obtained via data mining practices by third party aggregators. Consumers are not reaping the financial benefits of their very own data while advertisers, web sites, and third-party aggregators reap the profits.

Under section 45(n) of the Federal Trade Commission Act, the FTC applies a standard of proof and other public policy considerations when determining if an act is unfair and deceptive. There has to be, under the Act, a showing of substantial injury to a consumer from the party exhibiting bad behavior. The substantial injury must be a kind that is not reasonably avoidable by the consumer and not outweighed by countervailing benefits to the consumer and competition.

When reaching its conclusion on whether an action is unfair or deceptive, the FTC may consider, on a secondary basis, public policy.

I think the primary public policy consideration the FTC needs to take is whether a transaction has taken place where consumers are seeing degradation in their welfare. First of all, real time bidding does not directly involve the type of consumer that CDD is apparently concerned about. Consumers visiting web sites may not be interested in purchasing anything. Even if a consumer has a fetish for Gucci handbags and as a result of real time bidding finds her looking at ads for designer accessories, that’s not a deceptive act. It would be as if she walked into her favorite store and the attentive clerk who is aware of her penchant for these items lets her know that the store has some in stock. It’s simply information being shared.

Real time bidding gets information to a consumer faster because it leverages the history of the consumer’s tastes, desires, and ability to pay to get product in front of the consumer that she, based on these consumer characteristics, may be interested in. Back in my merchant days, we called this good marketing. The consumer’s welfare is also increased because she is receiving information that she can take into the market place and use when the time is right for her to make a purchase.

Also, the FTC needs to stay mindful that as households who have not yet adopted broadband continue to see other households take advantage of goods and services marketed directly to them based on their perceived tastes and desires, these unconnected households may choose to join the 21st century and get connected to e-commerce via broadband access. Following CDD’s lead and tainting cyberspace as a scary space to transact in will only delay the closing of a digital divide too many households are still facing today.

The Federal Trade Commission yesterday issued comments to the Federal Communications Commission on the issue of cramming on wireless services. Cramming refers to charges on a wireless service customer accounts that come from a party other than the carrier itself.

According to the FTC, in 2011, the agency received approximately 1800 complaints about cramming. The FTC would like to see legally mandated measures that would allow consumers to block charges from up on their accounts and inform consumers on how to block these charges.

Cramming has historically been a problem with wireline services and it appears it is becoming an increasing problem with wireline.

A legal mandate would of course add to a carrier’s cost of providing service. A mandate, as opposed to industry-preferred voluntary monitoring, may have a negative impact on relationships between wireless carriers and third-party vendors. Otherwise, I don’t see a negative impact on the quality of service carriers would provide if they also had to abide by additional consumer protection requirements.

After reviewing AT&T, Verizon, and Sprint’s 8-Ks, 10-Qs, and 10-Ks, I couldn’t conclude that the carriers were concerned about any specific cost increases that would result from this proposal being implemented.

Far be it from me to like regulation, but the only positive I see is that consumers may feel a little more comfortable adopting mobile broadband if wireless carriers allowed consumers to block third-party charges.

Federal Trade Commission Chairman Jon Leibowitz yesterday signaled the FTC’s preferences for future online privacy policies before the House Sub-Committee on Commerce, Manufacturing, and Trade. Chairman Leibowitz would like to see a best practices for protecting consumer online privacy; an acceleration of self-regulation within the online industry; a consumer privacy bill of rights which is heavily endorsed by the Obama Administration, and further developments in a do not track mechanism that would protect consumers visiting certain websites.

Chairman Leibowitz also recommended that Congress enact general privacy legislation. The legislation should require that companies implement reasonable measures and notify consumers of certain security breaches while providing consumers access to information maintained on them by information data brokers.

I can understand consumer concerns about the leakage of certain pieces of information, i.e., financial and medical information. Unfortunately sensitive information can be used against consumers during job searches or legal proceedings. Consumers should have this assurance especially if we want to promote broadband adoption among 100 million households over the next decade.

Investors and businesses should not be too overly concerned that the best practices proposed by the FTC are overly intrusive. The FTC appears to be saying before the consumer goes past Checkpoint Charlie, agree on the information that he is going to share and assure him of how it is being used and who else may be seeing it. Once he passes Checkpoint Charlie, however, the flow of commerce should be left uninterrupted. Delays in information flow will only drive up business costs by creating a false scarcity of information and added uncertainty in decision making.

According to The Wall Street Journal, Facebook may be entering into a settlement agreement with the Federal Trade Commission regarding when Facebook subscribers are notified about the changes in the use of their personal information. Facebook will allegedly submit its privacy practices to an outside audit for 20 years.

Mr. Zuckerberg would, according to the article, like to make it easier for subscribers to control how much of their personal data is released to the public.

If I were investing in Facebook, LinkedIn, or Twitter, and read Mr. Zuckerberg’s last statement about making user control over privacy easier, I’d dump the stock. It’s like a cattle rancher telling his herd, I’ll make it easier for you to escape.

The information that Facebook collects is the raw resource that it converts into ad and other sales. The more information that he can package for sale to advertisers and other data aggregators, the better it is for Facebook and other social media firms. Better meaning greater profit.

By failing to get in front of regulators, all he has done is driven up the cost of acquiring his most important factor input: personal information. A good cattle rancher knows how to head of the herd at the pass.

Thanks to the czarina of tech news, Cecilia Kang at The Washington Post, for herarticle on the settlement agreement between Google and the Federal Trade Commission.

The FTC, who I think was unfairly described as a regulatory lapdog by the Center for Digital Democracy, got Google to agree to rework its privacy policy and audit itself periodically. If not, then the company is looking at a fine of $16,000 per violation.

That’s a lot of cheese given Google’s size and blonde ambition for some of Facebook’s market share in the “we’re making money off of free consumer-provided content” industry.

But that’s the thing about free. Social media and social networking is free, at least access wise, for the consumer. The consumer gets to add followers on Twitter like Jesus added disciples in Galilee. Consumers add so many friends on Facebook that shows like “Living Single” and “Friends” would have never got on the air in the first place if social networking were around in the 1990s. All this networking for free.

In the legal world parlance, if a consumer is getting this unprecedented access to people who would otherwise walk past them without speaking, where is the consideration due to Facebook, Google, and Twitter? Why shouldn’t they get something for all they have invested into making the consumer feel like they are putting together their very own virtual mafia family?

Sure one can argue equity for the social network consumer who wants to know how much information about him is being put out there. The real problem, however, is the consumer’s unwillingness to educate himself about the basics of a medium that to this day its power he doth not appreciate.

The bottom-line is that concerns about privacy in the digital age are being blown out of proportion. If you don’t want it out there, keep it to yourself. Otherwise, learn how to leverage and make a market for the content you put out there.