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PIP is arguably the most important issue facing the growth and prosperity of EC. A director of IBM's Global Trust and EC services unit has been quoted as saying that privacy and security are the largest inhibitors of progress for EC today.
In his excellent study on Privacy in the Information Age, F.H. Cate adopted the definition of privacy as 'the claim of individuals, groups or institutions to determine for themselves when, how and to what extent information about them is communicated to others.' This definition is interesting because it allows for flexibility in discussing privacy within the context of the Internet. Whereas many people worry about divulging personal information electronically, other people seem more than willing to give it away, trading their personal information for personal benefits such as free shipping and coupons.
'Carders' buy and sell credit card numbers stolen from the Internet using Internet chat rooms. The carders announce a list of cards with accompanying personal information including billing address and phone number. The credit card numbers with accompanying information are usually purchased in short order. Possible uses of these numbers includes identity theft.
Failed Internet companies such as Boo.com, Toysmart.com and CraftShop.com have either sold or have tried to sell customer data that may include phone numbers, credit card numbers, home address and statistics on shopping habits, even though they had previously met Internet privacy monitor Truste's criteria for safeguarding customer information privacy. The rationale for the selling was to appease creditors. The defunct political portal Voter.com announced intentions to sell 170,000 e-mail addresses together with party affiliations and issues of interest.
On September 9, 1999, Privacy Times published the equation 'Good Privacy = Good E-Commerce (& Vice Versa).' As events continued to unfold, it became increasingly clear that privacy concerns were plaguing EC. Wall Street began to revalue Internet companies that accumulated customer personal information to target marketing efforts. The FTC told a Senate panel that there were more than 300 online privacy bills-to limit the collection and 'mining' of personal data- pending before state legislatures and Capitol Hill. Business Week called the privacy backlash 'the privacy penalty.' Consumer reaction included an unwillingness to click on Web site banner ads, which in turn led to advertisers becoming dissatisfied with Web portal effectiveness.
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