WASHINGTON -- There were more than a few references to the third time being a charm today as a House panel rolled out anti-spyware legislation that the U.S. House has twice passed only to be twice rejected by the Senate.

The Spy Act (H.R. 964) would require an opt-in, notice and consent regime for legal software -- often known as adware or spyware -- that collects personally identifiable information from consumers.

The bill also would prohibit surreptitious keystroke logging, browser hijacking and the unauthorized removal or disabling of security software installed on a computer. Violators would face civil penalties of up to $3 million per violation.

"We all know this is round three. This legislation ought to be an automatic-passage bill," Rep. Joe Barton (R-Texas), the former chairman and current ranking member of the House Energy and Commerce Committee said. "We are all here today because the Senate has twice failed in the last two Congresses to act on this bill for reasons that are absolutely a mystery to me."

Consumer and privacy advocates have long advocated congressional action to provide consumers with greater disclosure about the programs that report back Internet traffic patterns to advertisers and generate unwanted pop-ups. The software can also slow or totally disable a computer.

The Spy Act passed the U.S. House by nearly unanimous votes in 2004 and 2005, but opposition from the advertising industry halted the legislation in the Senate. Thursday, advertising industry executives again voiced opposition.

"The combination of strong industry guidelines, anti-spyware technologies and enforcement of existing laws over the past two years has limited pernicious software downloads," Jerry Cerasale, senior vice president for government affairs for the Direct Marketing Association (DMA), said.

While Cerasale said the DMA still believes industry self-regulation is the most effective means for combating spyware. "Where once, just two short years ago, pop-up ads, drive-by downloads and software that hijacked computers were on the rise, consumers in 2007 experience fewer such unwanted practices," he said.

Like Cerasale, Morgan said advances in anti-spyware software and beefed-up enforcement by the Federal Trade Commission (FTC) have reduced the need for national legislation.

"Extreme measures such as prescriptive notice and consent regimes were important two years ago given the pervasiveness of malicious spyware and the lack of clear guidelines for downloadable software," he said. "Given the advances…such regulatory restrictions may no longer be warranted."

Lawmakers and other witnesses, however, were unconvinced despite Cerasale's and Morgan's assurances that the online advertising industry has cleaned up its act.

Schwartz endorsed the bill but added the CDT remains convinced the long-term solution to spyware requires action on baseline privacy legislation for all businesses engaging in online commerce.

"General privacy legislation would provide businesses with guidance as they deploy new technologies and business models that involve the collection of information," he said. "If we do not begin to address privacy issues more comprehensively, the same players will be back in front of this committee to address the next emerging threat to online privacy."

Perhaps the most surprising endorsement of the Spy Act came from Zango, once known as 180solutions. The controversial adware distributor paid $3 million last year to settle FTC charges of unfair and deceptive trade practices.

Former FTC Commissioner Christine Varney, who now represents Zango, said the company already fully complies with the provisions of the Spy Act. "The time has come for all online marketers to embrace and implement these standards as Zango has, but unfortunately not all will. Federal legislation is needed to protect Internet users from spyware."

Rep. Cliff Stearns (R-Fla.) urged the panel to move swiftly to approve the bill. "This side [Republicans] is ready to move to markup. It's the same bill as passed last year."

If the House does pass the Spy Act again, the only question will be is the third time a charm or is it more like three strikes and you're out?


Stocks Sag on Fed Fears
Stocks Shake Off Stagflation Fears