Cookies have long been a key means for online companies to track a consumer’s web browsing activities. Most browsers allow the consumer to block conventional cookies from accessing their computer. To get around this obstacle, marketers have increasingly employed “flash cookies” , which use a different approach for storing a consumers online behavior and are not as easily blocked as conventional cookies. The Federal Trade Commission (FTC) has voiced increasing concern about the use of tools by companies to engage in online behavioral advertising without the consumer’s knowledge or consent. This has led to the issuance of self-regulatory guidelines as well as increasing scrutiny of the use of online advertising tools by advertisers.

Last week, the FTC announced a settlement with online advertiser ScanScout on charges that it deceptively claimed in its privacy policy that consumers could opt out of receiving targeted ads by changing their computer’s web browser settings to block cookies. In actuality, ScanScout used flash cookies, which consumers could not block through their browser settings. The settlement requires Scan Scout to make certain prominent disclosures regarding its information collection activities as well as provide an effective opt-out mechanism. ScanScout was required to place the following notice on its home page: We collect information about your activities on certain websites to send you targeted ads. To opt out of our targeted advertisements, click here.” The hyperlink must take the consumer directly to an opt-out mechanism that allows the consumer to prevent the company from (a) collecting information that can identify them or their computer; (b) redirecting their browser to third parties that collect data without their approval; and (c) associating any previously collected data with them. ScanScout is also required to provide an similar opt-out mechanism on any display advertising it serves up to the consumer.

The FTC imposed additional disclosure requirements next to the opt-out mechanism. ScanScout is required to clearly and prominently disclose that it collects information about users’ activities on certain websites in order to deliver third-party advertising targeted to users’ interests; that if the user implements the mechanism,ScanScout will not collect this information for the purpose of delivering advertising targeted to the user’s interests; the current status of the user’s choice (e.g., “not opted out” or “opted out”); and any circumstances that, if initiated by the user, would disable the mechanism or require the user to implement the mechanism again in order to maintain the user’s choice (e.g., use of a different browser, use of a different device, or deletion of cookies).

This settlement shows the FTC’s clear interest in providing consumers’ clear notice and control over the information collection activities of online advertisers. It is advisable for companies to carefully review their policies to ensure they are in compliance with them with respect to cookies, and to consider making adequate disclosures of their use of all types of cookies, including flash cookies, and how consumers can opt out of their use by the advertiser.