The strategy is expected to be unveiled in a report being issued by the U.S. Commerce Department in coming weeks, these people said. The report isn't yet final and could change, these people said.
In a related move, the White House has created a special task force that is expected to help transform the Commerce Department recommendations into policy, these people said. The White House task force, set up three weeks ago, is led by Cameron Kerry, the brother of Sen. John Kerry (D., Mass.) and Commerce Department general counsel, and Christopher Schroeder, assistant attorney general at the Department of Justice.
The initiatives would mark a turning point in Internet policy. Recent administrations typically steered away from Internet regulations out of concern for stifling innovation. But the increasingly central role of personal information in the Internet economy helped spark government action, according to people familiar with the situation.
The Wall Street Journal has been examining this online information-gathering industry in its "What They Know" investigative series.
Privacy issues are bubbling up on Capitol Hill. Rep. Joe Barton (R., Texas), co-chairman of the Congressional Privacy Caucus and ranking member of the House Energy and Commerce Committee, said he welcomed the administration's privacy initiative.
"Better late than never," Mr. Barton said. "I am glad more and more folks, in the government and otherwise, are beginning to realize that there is a war against privacy."
Yet the administration faces significant obstacles to enacting its privacy agenda. While the Republicans who now control the House of Representatives generally support privacy, they are unlikely to support any bill to expand the enforcement powers of the Federal Trade Commission, GOP congressional aides say. Privacy advocates will be reluctant to back legislation that lacks enforcement and is perceived as toothless.
There is no comprehensive U.S. law that protects consumer privacy online. Internet privacy issues generally are policed by the FTC, which can take action only if a privacy-violating action is deemed "deceptive" or "unfair."
That means the recent privacy crackdowns on Facebook Inc. and Google Inc. were led by Canada, Germany, the U.K. and other countries that have stronger privacy laws.
The central issue in writing federal privacy legislation is whether the Internet industry's efforts to police its own behavior has been effective enough. Proponents of legislation argue the industry is a Wild West where consumer data are gathered and sold without restrictions. Opponents of legislation say the industry is committed to providing tools to give consumers better insight into and control over data about themselves.
Commerce's draft report doesn't recommend specific legislation, but does indicate that self-regulation isn't robust enough, these people said. The administration would seek to guide the legislative debate through its new privacy office.
In remarks in Jerusalem in late October, U.S. Commerce Department Assistant Secretary Lawrence E. Strickling said that Internet privacy needs to be strengthened for the industry to sustain users' trust.
"It's difficult for consumers to act in their own interest if the law doesn't meet their basic expectations," Mr. Strickling said. He cautioned that the coming report isn't a final position statement, but rather the beginning of a "dialogue" that would lead to an official administration policy on information privacy.
A spokesman for the Commerce Department said the administration is "committed to promoting policies that will preserve consumer privacy online while ensuring the Web remains a platform for innovation, jobs, and economic growth. These are complementary goals, because consumer trust in the Internet is essential for businesses to succeed online."
The Federal Trade Commission is also expected to issue a report on Internet privacy by the end of the year. It is expected to call for the industry to develop a so-called do-not-track tool that people could use to remove themselves from online surveillance by marketers and others.
The prospect of new laws raised hackles at the Interactive Advertising Bureau, which represents the online-ad industry. "We believe we are living up to consumer-privacy expectations and are very advanced in privacy protections and innovation," said Mike Zaneis, senior vice president, who said he wasn't familiar with the report's contents.
Some privacy advocates expressed disappointment that Commerce isn't going further. "While [the report] gives lip service to legislation and fair information practices, its framework is based on industry self-regulation," said Jeff Chester, founder of the Center for Digital Democracy, who has met with Commerce officials about the report.
In 1999 President Bill Clinton appointed Peter Swire as chief counselor for privacy in the Office of Management and Budget. Mr. Swire helped craft privacy guidelines for the use of consumer medical and financial data. The new office would be similar but have more resources, and would engage other countries in privacy discussions and negotiations.