The year 2010 has shaped-up to be a decisive year for issues concerning Internet advertising, privacy and regulation.

Baseline privacy standards for the handling of consumers’ personal data over the Internet and uniform data breach legislation are the subject of great debate internationally. For example, proposed legislation in the United States would require businesses holding sensitive consumer information to implement a data security program and to notify individuals affected by a data breach. However, the need to regulate Internet-based businesses that gather consumers’ personal information must be balanced with the e-commerce model and an open marketplace.

Aggressive data privacy legislation has been a top priority for Congress this year and, of course, is being scrutinized closely by those in the Internet advertising industry. Online advertisers and marketers rely heavily upon data-collection to drive their businesses.

Internationally, the trend seems to be moving toward giving consumers clear and concise information about what information a website collects about them, how it is used, how it is stored, how long it is stored, what happens to it when it is no longer stored, and whether it is given or sold to third parties. Proposed legislation in the United States includes provisions that companies would have to offer a consumer the choice to opt-out of first-party use of their information and the ability to opt-in to third-party uses.

The latter approach is of great concern to those in the Internet marketing business. Critics of the respective proposed opt-in and opt-out requirement on data sharing believe that such a significant change in traditional Internet marketing models raise very serious concerns because such legislation would fundamentally destroy the revenue model of Internet marketing and e-commerce. Recent studies, in fact, have shown that more than 70 percent of all online advertising is dependent on some kind of targeting techniques or technologies.

Despite the foregoing debate, leaders in the online advertising industry advocate a self-regulation model, including an increase in the transparency of its data-collection activities, consumer control, data security, and accountability. Privacy advocates remain dissatisfied with industry-self regulation and seek comprehensive legislation to protect consumers.

Until the foregoing issues are resolved via comprehensive legislation or regulatory policy, it is prudent for every e-commerce website that collects and maintains information from end-users consult with an Internet lawyer to tailor a compliant privacy policy that provides specific information regarding its use, retention, and data collection processes pertaining to consumer information.

The importance of treating consumers’ information properly cannot be understated. Internet-based businesses should take every reasonable precaution to safeguard personal data in a way that is fair, promotes increased trust and relationships with consumers, minimizes the risk of security breaches and consumer complaints, and litigation.

Reassuring customers that your Internet business takes privacy and data protection seriously goes a long way towards gaining a competitive advantage in today’s online marketplace.