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Shop.org's Scott Silverman & NRF's Elizabeth Oesterle Talk About Pending Online Retail Regulation

I caught up with Scott Silverman and Elizabeth Oesterle to hear about Shop.org and the NRF's lobbying work on behalf of online retailers. Listen to podcast: Scott_Silverman_Interview.mp3

Alan Rimm-Kaufman:It’s a delight to be here with Scott Silverman of Shop.org, Shop.org’s executive director. Hello, Scott. And also Liz Oesterle who’s the VP of Government Relations Councils at the National Retail Federation. Hey, Liz. There’s some very important legislation pending on the Hill which Shop.org and the National Retail Federation is working on. Liz, can you tell us what’s going on and what online retailers should know? Elizabeth:Sure. I think the most interesting piece of legislation that’s actually pending on Capitol Hill relating to the Shop.org membership is probably the legislation that deals with credit card interchange rates. The processing fees that are associated with credit cards are actually the highest for online retailers, and they can actually come close to four percent per transaction if you’re online. So for instance, if a customer goes on your site, spends $100, you’re gonna give $4 of that back to Visa and MasterCard just in shopping fees. And NRF and Shop.org and several other retail trade associations have been working to get legislation introduced, which was recently introduced by the chairman of the judiciary committee to go after interchange fees from an antitrust perspective. Right now, Visa and MasterCard with the banks that sit on their board, are able to fix the rates without any negotiations with the retail community at all. So it’s an important issue, and it’s one we’re looking at closely. And the other most very important issue for Shop.org members is actually not an issue that’s pending on the hill right now, but it’s something that we’re dealing with the Federal Trade Commission, and that is the same day that the FTC approved the Google/Double Click merger , they came out with some proposed best practices or principles with relation to online behavioral advertising . They defined behavioral advertising very broadly. Not just tracking across websites, but actually tracking that an individual retailer could be doing on their own site with their own customers. So we just submitted comments to the FTC last Friday on that, and we’re hoping that the FTC takes a good hard look at this and doesn’t really try to be too proactive because I don’t think they’ve really gathered enough information on the issue, and we’re looking forward to the opportunity to continue the dialogue with them. Alan:What does it mean when the FTC offers best-practice guidelines? Do those become binding? Elizabeth:It’s interesting. They can bring enforcement actions under the FTC Act, and that’s usually for unfair or deceptive trade practices, and what happens sometimes when there are these sort of suggested principles out there, although they’re not regulatory in nature, if people begin sort of regularly skirting them or violating them, the FTC has used these types of principles in the past to go after people. So although they’re not regulatory in nature, and they would be suggested, they do sort of have a regulatory effect in that people have to be very careful in order not to have any type of action taken against them. Alan:So let’s continue on this for a moment. You were saying that some of this relates to behavioral targeting on the ad networks. But some of it relates to activities on a retailer’s own site. Can you explain what these best practices might be relating to the own site issues? Elizabeth:The way that they defined behavioral advertising, it’s really any tracking that goes on a webpage or a website that could be used then to deliver more marketing or advertising to a consumer, so a retailer on their own site could be doing some tracking of their customer’s behavior and use that information to serve up what would be considered marketing or advertising. I know that Amazon.com is a great example of a site that does that regularly. They are always looking for ways to get merchandise in front of their customers that their customers might be interested. And most retailers do it in that they will send marketing e-mails or things like that to get their customers to come back to their site and shop. So it’s kind of a slippery slope. I think people, when they think about behavioral advertising, they think of sort of tracking across the web and someone kind of watching you go from one site to another and serving up ads based on the things you’re doing on multiple different sites, but really the FTC’s definition is really much broader than that. It goes towards first-party marketing practices. Alan:A lot of retailers want to simply make their website relative to users. Elizabeth:Right. Alan:And say, “You looked at some of this. Maybe you’d like to see more of this.” Elizabeth:Exactly. Alan:And some of those practices would be considered a non-best practice or not appropriate under those guidelines? Elizabeth: Well, they would have to be associated with a higher degree of notice than consumers are given right now. Most retailers do let their customers know in their privacy policies that this type of stuff is going on their sites, and they also let folks know if they are contracting out with any behavioral networks as well that ads could be served off of the site as well. But the FTC really wants more, I guess, notice and choice , and it kind of raises the question of what are they looking for. How much more notice and choice do they want? Do they want customers to have to consent to certain behavior every time they come back to a site? Would it be a matter of actively opting out of something? It’s very unclear what they want folks to do. I’m sure we’re gonna hear more about it. Alan:You have to click a box that says, “Please make this relevant to me.” Elizabeth:Right. Alan:And what’s the timeframe on all of this? What’s happening, and what should folks be doing in the retail community? Elizabeth:It’s unclear. The comment period was extended after there was a fair amount of pushback from the business community, and like I said, the filing deadline was last Friday. And now it’s sort of up to the FTC as to what they want to do. There’s no clear timeline as to what they want to do. Scott and I attended a meeting with the staff a few weeks ago, and they don’t really seem to know what they want to do next, which sort of left us with the impression is they thought they needed to do something post-Google/Double Click merger to make it look like they were being proactive for consumers, but we’re really just not sure what that something’s going to be. Alan:Interesting. Well, thank you so much, Liz. Elizabeth:Sure. Alan:Scott, can I ask you a couple questions about this issue and how it relates to the Shop.org membership? Scott:Yes, absolutely. Alan:Great. How aware would you say the typical online retailer or typical Shop.org member is of this issue pending in the FTC right now? Scott:Probably less than it should be. I think NRF has to manage this issue all the time, which is there’s always a lot going on in Washington. People are back at headquarters working on their business, and that’s why they have organizations like NRF and Shop.org that can monitor this. And our job, really, is to put together the right people who can provide input on how this would affect their business and try to make sure that there aren’t any economic harm that will be unintended from some of these proposals or suggestions that regulators or people on Capitol Hill with the best intentions are trying to move forward with, and protect consumers. Alan:Are there retailers speaking about this and going on record publicly? Or are folks approaching you privately to share their concerns? Scott:There’s not too many that are speaking publicly about it. I don’t know of any specific retailers submitted their own comments to the FTC. Liz, are you aware of any? Elizabeth:No, I’m not aware of any that did. Scott:Right. So mostly they’re talking to us and having us serve as their voice on this particular issue, and that provides a couple of advantages. And certainly the key among them is being able to represent a larger group of people, more employees. That has more weight with folks in Washington. Alan:So without naming names if folks aren’t on the record yet, do large retailers, household name retailers, is this a concern? Or is this some sort of hypothetical strangeness out of D.C. that will come to nothing? Scott:No, it’s definitely a concern. Shop.org has a policy advisory group which is around a dozen or so of our members, and they have been participating in conference calls. They’ve been reviewing the guidelines. They’ve been reviewing the drafts and providing input on the comments that we submitted to the FTC. And in the middle of May, we are bringing a number of them to Washington to have a discussion on this and hopefully meet with some folks from the FTC and potentially some meetings on Capitol Hill that may touch on this as well. So there are definitely some retailers that are tuned into this, and what they learn is very concerning to them. And we’re doing everything we can to educate a broader group of retailers. We try to use things like our Smart Brief newsletter to educate our members about the issue with newspaper articles, and I’m sure we’ll link this, whatever you do on your blog, Alan, to the Shop.org blog as another way it educate our members. Elizabeth:I’m going to jump off now. I just want to let you guys know that I’m doing that so no one asks questions that go into thin air. Alan:No worries, Liz. Thank you for your time. Scott, if folks wanted to read more and learn more, where should they go? Scott:Well, certainly they can start with going to the FTC’s website and reading the FOIA guidelines and also all of the comments, including Shop.org’s, Google’s, any other group that submitted comments for public consumption. And that should give you a very good perspective of what the FTC is thinking about and how different companies are reacting to this. Alan: And after reading that, if folks wanted to become more involved, how can retailers make their voice heard or help keep these strange best practices? Scott:Well, certainly I’d like them to get in touch with Shop.org. They can, for now, get in touch with me. My e-mail is [email protected]. And if they have a point of view, I’d love to hear what that is and see where we can incorporate their input. Alan:Good stuff. Well, thank you for the update today. It’s great that the NRF and Shop.org keep an eye on things like predatory interchange rates and FTC guidelines meant to help which might actually hurt. Everyone’s so busy. It’s really great to have a trade association that’s sort of minding the details in Washington. Scott:Great. Well, that’s what we’re here for.

Listen to podcast: Scott_Silverman_Interview.mp3

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