What you need to know:

• Peak industry groups are mounting counteroffensives to the Attorney General's proposed privacy reforms, saying they are "unworkable".
• The IAB's policy lead Sarah Waladan says the proposed definition of what constitutes personal information and explicit consent required for geo-location targeting and trading of personal data was a "massive, massive problem".
• The digital advertising and marketing industry "has a small window" to convince government to "narrow its scope", per UNSW Business School Professor Peter Leonard. 
• Loyalty schemes and the the data they provide to much of the ad industry for customer matching and targeting may face particular pressure, per Leonard.
• ADMA's Head of Regulatory Sarla Fernando urged industry to compile use cases to show the practical implications of the proposed reforms to government to to head off what industry deems most problematic.
• But Dr Katharine Kemp, of UNSW's Law & Justice faculty, suggests it is "quite strange" industry has been resolute "for years" that consumers want personalisation, but now claim their business models will be destroyed if those same consumers are given the choice to opt out.
• Industry has until the end of March to respond to the Privacy reform proposals – Peter Leonard suggests there could be a two-phase legislative agenda in which proposals that gain broad consensus will go through, with more contentious areas legislated later.   

Nervous energy

Sweeping reforms proposed by the Australian government are unworkable, per IAB Australia Directory of Policy and Regulatory Affairs, Sarah Waladan. She said the definition of what constitutes personal information – widened under the 116 proposals published last month by the Attorney-General alongside explicit consent requirements for geo-location tracking and for the trading of personal data, while allowing consumers to opt out of targeting but outlawing denial of service – poses “a massive, massive problem.”

The IAB – which represents platforms including Google and Facebook, local publishers, Nine and News Corp as well as adtech companies – is planning a cross-industry counteroffensive in a bid to wind back key proposals. One of the digital ad industry’s key objectives is to lobby for “a more reasonable definition [of personal information] … it doesn’t seem workable,” per Waladan.

She said proposals to prevent business from denying service to people that do not opt-in to allow data tracking and targeting risk threatening their economic viability should large numbers of users refuse consent. “That is a discussion we have to have with government,” Waladan told last week’s Programmatic Summit in Sydney.

Sober counsel

Peter Leonard, Professor of Practice, UNSW Business School and Principal, Data Synergies, said the ad industry has a small window to convince government to narrow its scope. While the ACCC’s digital platforms inquiry has rumbled on “tortuously” for years, he predicted a two-speed approach for privacy rule changes, with the first tranche likely to land far more quickly.

Either way, changes deemed highly disruptive by enough vocal businesses may win a stay of execution.

“There are some really important changes afoot … There is a good chance government will respond to the comments it gets over the next few weeks and put up two lists: What are the things that everybody seems to sign off on; what are the things that seem very controversial? It may then take a two-phase legislative approach where the first round of changes happen pretty quickly – and the others further down the track. So there are a lot of things in play.”

Attitude adjuster

Leonard told digital ad industry delegates to “reframe the debate” in terms of what would convince a privacy advocate, and therefore Canberra lawmakers, “that these changes if made would affect the products and services that [people] are offered, result in less choice, less compelling content”.

He flagged that loyalty schemes – and the data they provide to much of the ad industry for customer matching and targeting – may face particular pressure from the proposals.

“I'm pretty sure, reading some pretty unclear words in this report, that the people in Canberra think that [use of loyalty data] is trading in personal information.” That could pose problems not just for loyalty operators but retailers building out media businesses powered by that data.

Awkward customer

Forbidding firms to deny services for those that opt-out of targeting compounds that challenge. IAB’s Waladan said the proposal raises issues of “commercial viability” for loyalty operators and beyond.

“If everyone opts out – or a substantial number of people opt out – and a business still has to provide the relevant service to those individuals, at what point is the business not commercially viable?” said Waladan. “That is a legitimate question and discussion that we have to have with government.”

Leonard suggested lawmakers are deliberately forcing businesses to allow opt-outs while still providing services.

“This is not an unintended effect of what is proposed. The government clearly intended that the law be extended in this way. So we are now trying to get them to wind back something that they actually think that they understand.”

He said the proposals “go further than any privacy regime that I am aware of… further than GDPR … much further than California. So at least we can say to government ‘you are on your own’. But it is going to be hard work to get them to reframe it.”

Restrictions around precise use of location data for tracking could also require some business models to “fundamentally change” under proposals requiring explicit opt-in consent, per Leonard.

Appeal to reason

Leonard also called for a narrowing of the ‘fair and reasonable’ test proposed by government – or risk a flood of litigation.

“There should be an overarching requirement of reasonableness, but that's completely different to an overarching requirement of fairness,” said Leonard.

“We'll never please everyone that digital advertising practices, digital advertising is fair. If there is a legal requirement, coupled with planning, class actions, chasing this industry argument that everything is unfair, that will be a catastrophe.”

The panel also flagged potential unintended consequences of a broadened definition of personal information that could disincentivise use of ‘privacy enhancing technologies’ such as clean rooms, and raised questions over whether standard industry practices such as segmentation and creating ‘lookalikes’ for targeting would be caught by the proposals.

Sarla Fernando, Head of Regulatory & Advocacy Advisory, ADMA, urged industry to show the practical implications of the proposed law changes, “to pull use cases together” in a bid to wind back proposals deemed problematic. “It is really only us [the digital ad industry] that can tell the government that kind of stuff. And they are listening,” she suggested.

Credibility problem

Privacy advocates suggest industry risks undermining its own arguments for profiling, tracking and targeting.

“It’s quite strange,” said Katharine Kemp, UNSW Law & Justice faculty academic.

“What we have been hearing for years from the ad industry is that consumers want personalisation. But now the report says we are going to let people opt out of targeting, the response is ‘no way – everyone will opt out and it will destroy the business model.’”

Kemp suggested the “surveillance” business model is “a dinosaur … that is harmful to society. The innovators in advertising are not those trying to hide what they are doing [and defend it to government]. They are the ones that come up with new business models. That is what strikes me in all of this. There is huge concern to preserve a business model that is not the business model of the future.”

Ethics gradient

Kemp said industry concerns around how to explain complicated data and advertising practices to consumers in simple terms in order to gain consent are legitimate – because businesses don't fully understand the complexities of their own data management and use, let alone explaining it to consumers. She pointed to the Facebook document leaked last year, in which engineers compared its ingestion and use of data to a “bottle of ink poured into a lake” and said they lacked “control and explainability over how our systems use data and therefore can’t confidently make controlled policy changes or external commitments”.

“So it is not just consumers that don’t understand what is going on, but some of the ad businesses themselves. That is part of the danger of the business model.”

Kemp also questioned industry claims that unintended policy consequences risk disincentivising use of privacy enhancing technologies, or PET, such as clean rooms.

“So-called privacy enhancing technologies … have been sometimes referenced as [enabling] de-identified information … it might be pseudonymised, but it is not de-identified. There have also been references to ‘privacy safe solutions’ that aren’t,” said Kemp. “So what is being jeopardised here is not necessarily a privacy enhancing technology, in truth.”

Kemp also questioned calls by Leonard to wind back fairness requirements or risk opening the floodgates to legal claims that hinge on arguments and interpretations of what is fair.

“Fairness is not such a revolutionary concept in law. We use fairness as a way to regulate various other interactions, including in financial services and under Australian Consumer Law,” said Kemp.

“If you leave it as a matter of reasonableness alone it is likely to focus too much on business interests and too little on consumer interests.”