A bill that would direct the U.S. Federal Trade Commission to create a mechanism to allow consumers to opt out of online tracking efforts tops a list of proposals that would be bad for the Internet, according to e-commerce trade group NetChoice.

Representative Jackie Speier's bill, introduced in February, would hurt both businesses and consumers, said Steve DelBianco, executive director of NetChoice, whose members include Aol, Yahoo and eBay. The Do Not Track Me Online Act and four other bills on NetChoice's latest iAWFUL (Internet Advocates' Watchlist for Ugly Laws) list "strike right at the heart" of the revenue model of online publishers and advertisers, DelBianco said.

"Our 2011 iAWFUL list catalogues the disturbing willingness of legislators to micromanage how consumers and businesses communicate," DelBianco said. "The continued evolution of free online services is imperiled by state and federal legislators tripping over themselves to jump on the privacy bandwagon."

The do-not-track legislation would lead to less targeted and less effective advertising online, forcing online advertising networks and publishers to find other sources of revenue, or to lay off employees, DelBianco said. Speier's bill would make it easy for all Internet users to opt out of all online tracking and targeted advertising campaigns.

"If people have a default global opt-out, then how do companies induce people to relax the opt-out?" DelBianco said. "With a default setting established, it's extremely difficult to get people to change the default."

Speier, a California Democrat, said last month that online users are demanding more control over what personal data Internet companies collect. There are currently no limits on the personal information websites and advertising networks can collect, she said during a February press conference.

The lawmaker isn't concerned about being included in NetChoice's iAWFUL list, said Tim Schlittner, her communications director.

"Having our do-not-track legislation listed as awful by a coalition of advertisers who profit off of online spying is a badge of honor," he said. "By contrast, every major consumer group has endorsed do-not-track as a critical tool to protect consumers' Internet privacy. We're proud to put privacy over profit any day of the week."

The remaining bills on the NetChoice list are state bills.

A New York bill would go further than the Speier bill by requiring websites and online advertising networks to get permission before collecting customer data. The bill would fine a website US$250 per violation, leading potentially to multimillion-dollar fines, DelBianco said. A threat of big fines could hurt website customization, he added.

Bills in four states, including Washington and Indiana, would restrict Internet and some other companies from collecting recurring payments without customer permission each month. Many subscription-based services would be hurt by those bills, DelBianco said.

Grant Gross covers technology and telecom policy in the U.S. government for The IDG News Service. Follow Grant on Twitter at GrantGross. Grant's e-mail address is grant_gross@idg.com.