A big question for small businesses is whether violations of customer's privacy by big online companies will cause consumers to mistrust sites that really are playing by the rules. After all, most small businesses can't afford the sophisticated and expensive technologies it takes to collect really valuable information about customers. But that may not mean they're entirely off the hook.
"Customers now have certain expectations and perceptions about what's happening to them on line," says Dave Steer, a spokesperson for TrustE, one of the organizations that provides a seal-of-approval for privacy policies on many major Web sites. "Regardless of whether they're collecting the same information a large one does, there's still the perception that they are or they might be."
Part of the problem is that seal-of-approval systems like TrustE's don't seem to be taking off. But Steer insists the programs are gaining steam. "The crux of the issue is about building trust," Steer says. "Most sites that mean business are looking to seal programs to help them out." But even though TrustE's 1,000 members attract a large number of visitors, they represent a small percentage of the sites collecting information on the Web.
And for a while now, TrustE has been an organization under siege by consumer groups and the media. Recent brouhahas have shown that organizations like TrustE have succeeded in raising awareness about consumer privacy, but have failed to enforce their own rules.
"You know that you're doing your job well when you attract so much negative attention," Steer says. "What we've seen are situations completely blown out of proportion to what the reality was. There's a lot of fear out there, and a lot of misperception."
TrustE's problems came to a head last Fall when RealNetworks, one of TrustE's members, was caught tracking the behavior of customers who used their RealPlayer software. Real Networks got off: TrustE's agreements only cover Web sites, Steer says,- though it's now planning a pilot program for software. But TrustE's failure to punish the company left the self-appointed privacy-police looking feckless and strengthened the case for government involvement in privacy issues.
In fact, Steer says that while TrustE exists in part to prevent "prohibitive government intervention," turning program participants over to the Federal Trade Commission is a primary form of punishment under the contract it makes them sign. So far TrustE has not yet done this, or kicked companies out of the program, or sued them for contract violations (other possible remedies), but "we've come pretty close," Steer says.
But if TrustE really is toothless, its seal is worthless. And if it does start levying serious penalties, any company planning to violate customers' privacy would be foolish to join it. Despite TrustE's well-placed intentions and positive efforts so far, more government intervention seems inevitable.