How the proposed EU directive on cookies will hamper innovation and have long–term devastating impacts on the online industry in Europe
By Osman Bangura | 25-06, 2010
The European Online advertising industry is faced with one of the most complicated Telecommunication Regulations since the inception of the internet. With the new EU ePrivacy and Telecommunication Regulation hanging over its head, alongside shrinking ad revenues in the industry, the new cookie regulation as described in the directive will have devastating long-term impacts on the industry if fully implemented in every member state. Not only will it affect web surfing and the way ads are served online in Europe, this yet to be implemented harsh law will kill innovation, deteriorate user experience, change online business models, and companies at the centre of all this drama maybe forced out of business.
Since its enactment by the EU Council on the 26th of October 2009, the European Telecommunication Directive on cookies has increasingly drawn concern from a number analysts and critics; speculating the impacts it will have on the online industry after implementation into national law of member states. In November 2009, the National Regulatory Frame Work was accepted by the EU, and it calls for the review of a number of directives that need changes for the purpose of: Better Consumer Protection and Internal promotion of the EU market. Measures in the directive according to Art 66 states that: The storage of information on a user’s computer and access to stored information on that computer is only allowed if the user have been provided with clear and comprehensive information and has given his/her consent. Permission for the storage of and access to information on a user’s pc can be done through browser settings; and the interpretation of this directive is at the discretion of the member states. Thirteen EU member state including France signed a declaration stating that the browser settings for the purpose of permission should be enough. The Netherlands failed to sign this declaration.
The Dutch Dilemma
To give a clearer insight of what is about to happen, we will use The Netherlands for our analysis. On the 15th of April, 2010, the consultation version of this new directive was published by the Dutch Ministry of Economic Affairs and it is expected to have been implemented into Dutch law by the 25th of May 2011. According to the Dutch consultation version of the new directive, the existing Opt-out law on cookie will be replaced by an Opt-in law. It says: “Cookies can only be stored on a computer, or accessed from that computer, if a user has explicitly given his or her consent after having been provided with clear and comprehensive information” Even though the EU directive makes provision for the browser settings option, the Dutch law makers however adopted a stronger interpretation of this directive; different from the other member states. This of course was met with very strong remarks from the Interactive Advertising Bureau in the Netherlands. In a white paper released by the IAB, Marco Derksen, Head of IAB NL said “a change in the existing Opt-out law is unwise”. This change is an aggravation of the European directive that allows for an Opt-out law. He further stressed that an Opt-in law will lead to deterioration in internet user experience, and the economic interest of the industry will be severely damaged by this new law. “The IAB is open for every regulation that contributes to more transparency on the use of cookie as long as it’s practically implementable; and in which the long-term interest of users as well as the industry are accounted for, he continued”. The 4 leading organizations: The Dutch Dialogue Marketing Association (DDMA), Dutch Publishers Association (NUV), The Confederation of Netherlands Industry and Employers (VNO-NCW), together with the IAB and other concerned representatives have vehemently criticized these proposed changes by the Dutch law makers. They drafted a proposed alternative that was sent to the law makers. Whether further adjustments will be made based on the alternatives the industry placed forward is still unknown. However, the industry eagerly awaits their response.
Access to view a website will be denied if a user fails to give his / her permission for cookie storage.
Its implications
The change of the existing Opt-out law to Opt-in and the use of the phrase Prior Informed Consent, the Dutch law makers have made the yet to be implemented EU directive even stricter, making it even harder to be integrated in the existing online business models.
Is the new regulation in the interest of internet users?
In the proposed Opt-in law, whenever a user visits a website that makes use of cookies, he or she will be confronted with tens of windows from website owners and third parties requesting his/her consent to store and access earlier placed cookies on the user’s computer. On average, a new site stores 10 cookies. Let’s assume a user visits 10 websites during a surfing session, multiply that by 10 = 100 clicks (Permission to store cookies). This will irritate users and consequently render this proposed regulation useless as they will automatically click away without reading.
An implementation of the Opt-in Law will severely damage the Dutch online industry; placing the Netherlands behind other European States in innovation, competition, and developments.
Possible Alternatives
Keeping the current Opt-out law in which, website operators and third parties may store and access cookies on a user’s computer except in the case where the user does not allow that. Most of the existing internet browsers offer users the possibility to reject cookies or customized cookie placement on their computer for both first and third party cookies based on their preferences without the need for any further intricate regulation.
Another simplified possibility will be an Opt-in law through a user’s internet browser. In this case, cookies may only be placed or access from a user’s computer if he/she has explicitly given permission for that. Such permission should occur once, and the granted permission should cover all other websites that uses cookies.
However, the Dutch proposal for the new Opt-in regulation in which prior informed consent is explicitly required from the user will only hinder internet usage as users will continuously have to grant permission to website operators and third parties during each surfing session for the placement of cookies before content on the operator’s websites can be viewed. This procedure will be repeated over and over; which will only annoy the user as a large percentage of his or her time spent online will be used in repeating these un-thoughtful procedures.
Conclusion
By taking into account the personal preferences of users, internet cookies contribute largely in optimizing user experience. Therefore, an implementation of an Opt-in law with prior consent before cookies can be placed on a user’s computer, have far-reaching consequences and will ravage web surfing. This backward regulation is a big threat to the entire European online advertising industry. It will lead to unfair competition due to differences in interpretation by member states, and the sole purpose of behavioral targeting, which in its entirety largely promotes user experience will be hindered, as a result.
DQ&A is fully aware of these issues and developments. Together with partners and the IAB, we are closely monitoring every step as we seek alternatives that will eventually sustain the interest of both our clients and users.Updates regarding the decision of the lawmakers will be published on our blog. Stay tuned!
What changes to the current Opt-out law will be mutually beneficial for users in the Netherlands and the EU as a whole? Take into consideration the long-term impacts that any change to the current opt-out law will have on online business models.
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