This week the Federal Trade Commission (FTC) announced that it is contemplating a settlement agreement with online advertiser ScanScout to bar the company from misrepresenting how it tracks consumers’ online behavior through cookies. ScanScout uses online video advertisements embedded with Flash cookies to track and record consumers’ browsing habits. The company’s privacy policy stated that consumers could opt out of receiving cookies by changing their browser settings to prevent cookies. Yet, as the FTC alleged, changing browser settings did not “remove or block the Flash cookies used by ScanScout.”

As the FTC describes, a cookie is “information that a site saves to [a user’s] computer using [a] web browser.” Cookies track and record a user’s browsing activities, including the sites a consumer visits, the search terms a consumer uses, and whether a consumer clicked on an ad. A Flash cookie, in comparison, uses Adobe Flash technology to store information about browsing activities, including settings and preferences. As the FTC explains, using browser settings to delete cookies “won’t necessarily delete the Flash cookies stored on your computer.” Therefore, consumers who followed ScanScout’s directions to delete cookies were allegedly deceived into believing that they had successfully deleted cookies from their computer.

As part of the settlement agreement, ScanScout must post a disclaimer on its home page stating that it collects information about internet user activities on certain Web sites to send the user targeted ads. The disclaimer must also include a statement explaining that users may opt out of the targeted advertisements, and include a hyperlink to a site which will prevent ScanScout from collecting or distributing user data. Additionally, if a user decides to opt out, ScanScout must honor the request for five years.

The FTC settled a similar case in March of this year, after finding that another online advertising company, Chitika, Inc. continued to track consumers who had already opted out of cookies. In that case, the FTC alleged that Chitika only honored the consumer’s opt-out decision for 10 days before resuming tracking through cookies.

For more information, see Online Advertiser Settles FTC Charges ScanScout Deceptively Used Flash Cookies to Track Consumers Online, http://www.ftc.gov/opa/2011/11/scanscout.shtm.