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Google’s New Scourge Strikes A Nerve

CONTACT:Posted byBy WSJ.COM / MARKETWATCH

Fri, May 15, 2009 at 3:20 pm

    In-your-face watchdog gets advice from Microsoft ‘people,’ interest from Verizon

    SAN FRANCISCO, CA — Google Inc. has attracted a number of
    critics over the years, but the Internet search giant hasn’t yet had to
    deal with any as jarringly adversarial as Consumer Watchdog.

    "Their tactics tend to be more confrontational than others’," said Tim
    Little, executive director of the Rose Foundation, an Oakland,
    Calif.-based organization that funds Consumer Watchdog. "But sometimes
    there’s a place for folks being confrontational."

    Since winning a $100,000 grant last year specifically to target Google,
    Consumer Watchdog has publicly skewered the company for everything from
    its privacy policies to its Capitol Hill lobbying. The attacks come at
    a particularly sensitive time, as Google is striving to downplay its
    market dominance in the face of what promises to be stricter antitrust
    and Internet privacy regulation regime under the Obama administration.

    Consumer
    Watchdog has also had ample opportunity to gather input both indirectly
    and directly from traditional Google rivals, such as Microsoft Corp., and companies often on the opposing side of regulatory issues, such as Verizon Communications Inc.

    "I’ve talked to people who are associated with Microsoft," including
    who have worked with the software giant, said John Simpson, an advocate
    with Consumer Watchdog.

    In addition, Simpson said that Link Hoewing, a Washington, D.C.-based
    assistant vice president at Verizon, contacted him after having taken
    note of his pointed exchange with Google Chief Executive Eric Schmidt
    at a public event in November.

    Hoewing wanted to discuss "behavioral advertising," Simpson said.
    So-called behavioral targeting, which Google began testing earlier this
    year, is a method of tracking an Internet user’s browsing history to
    tailor marketing messages. It’s also a particular area of interest for
    regulators at the Federal Trade Commission.

    "We don’t take any kind of funding from these guys or anything, but
    when you’re in a situation where there are people that can pass on
    useful information, you certainly listen," Simpson said.

    A Microsoft spokesman said he is not aware of any support or contact
    between the company and Consumer Watchdog. Hoewing said Verizon is not
    involved with Consumer Watchdog, and that he called Simpson "to find
    out where he was coming from… because I was surprised about his
    comments" to Schmidt.

    A Google spokesman declined to comment for this story.

    ‘Boorstin went ballistic’

    Consumer Watchdog’s benefactor, the Rose Foundation, relies financially
    on settlements won through privacy litigation with banks and
    credit-card companies. As a "neutral trustee" working with the court,
    the Rose Foundation then channels that settlement money to a number of
    groups working on privacy issues.

    In addition to Consumer Watchdog, the Rose Foundation funds organizations including the Electronic Privacy Information Center. 

    While an application for a grant to focus on a specific company like
    Google is rare, it’s not unheard of. "It’s maybe not the predominant
    theme in our funding," the Rose Foundation’s Little said, "but it’s a
    strategy that can be effective."

    Since it was founded in 1985, Consumer Watchdog, formerly known as the
    Foundation for Taxpayer and Consumer Rights, has sharpened its
    adversarial tactics.

    The organization’s founder, Harvey Rosenfield, previously worked for
    corporate crusader and five-time U.S. presidential candidate Ralph
    Nader, and his organization has gained a reputation for an
    aggressiveness similar that used by Nader in confronting the automobile
    industry.

    "It’s a Nader-esque, in-your-face approach, [and] that’s refreshing,"
    said Jeff Chester, executive director at the Center for Digital
    Democracy, a group that has also used Rose Foundation funding to
    criticize Google.

    In January, Consumer Watchdog circulated a press release alleging a
    "rumored" lobbying effort by Google to enable it to sell personal
    medical data stored on its Google Health service. Simpson said the
    organization merely wanted to examine whether Google was trying to
    avoid new regulation under the Health Insurance Portability and
    Accountability Act, or HIPAA, which guards the confidentiality of
    patient data.

    But Google was incensed. "That’s when Bob Boorstin went ballistic,"
    Simpson said, referring to Google’s director of corporate and policy
    communications in Washington.

    Simpson defended the use of hearsay to make public allegations, arguing
    that it was appropriate for an advocate. "I don’t see any obligation in
    particular to call up the other guy and get his side of the story," he
    said, adding, "We don’t lie, but we put out the facts we think are
    interesting."

    Google, however, was prompted to take the unusual step of asking the
    Rose Foundation to reassess its funding for Consumer Watchdog.

    "In 17 years as a grant maker, that’s never happened to me before," the
    Rose Foundation’s Little said. "Nothing Google has done has discouraged
    us from follow-up funding" for Consumer Watchdog, Little said, though
    no decisions have yet been made. He added, "Google would be much better
    off engaging with them."

    Since briefing Consumer Watchdog on its privacy policies last fall,
    however, Google has limited its contact with the group to occasional
    written correspondence.

    ‘Very encouraged’

    Meanwhile Consumer Watchdog has continued to broaden its campaign. More
    recently, the group intervened in Google’s prized legal settlement with
    authors and book publishers.

    The proposed settlement, announced in October, would validate Google’s
    years of work on its book-scanning project, and enable it to harness a
    vast new trove of online content without fearing legal repercussions.
    But Consumer Watchdog began examining the proposed settlement, and sent
    a letter last month to the Justice Department expressing concern that
    it could grant Google "an effective monopoly over digitized books."

    Consumer Watchdog is only one of a number of organizations that have
    criticized the proposed settlement, though Simpson said his group found
    a receptive audience. Roughly a week after sending its letter to the
    Justice Department, he said, "We spent an hour or so on the phone with
    them, and it seemed there was definite interest."

    A Justice Department spokeswoman declined to comment. A hearing on
    Google’s proposed book settlement has been postponed to October.

    More broadly, Simpson said he’s encouraged that Christine Varney, the
    new head of the Justice Department’s antitrust division, earlier this
    month discarded a Bush administration report that advocated a hands-off
    approach to regulating market-dominating companies. Simpson called the
    report "outdated."

    In addition, FTC Chairman Jon Leibowitz has said publicly that the
    current ability of Internet companies such as Google to police their
    own privacy standards for using behavioral targeting for advertising
    may come to an end.

    "I think we could probably avoid regulation, but I am very encouraged
    by the fact that the FTC chairman is talking about this," Simpson said.

    Ultimately, Simpson said, by focusing on a company as influential as
    Google, Consumer Watchdog hopes to affect the entire Internet industry.
    "If we can get them to make advances on privacy concerns, the rest of
    the industry could fall in line," he said.

    So far, however, Google seems intent on avoiding the organization.
    Simpson said he sent yet another letter to the company last Friday,
    asking it to answer some "simple questions."

    "We’ve not heard back from them on that," he said.

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