Rep. Jackie Speier (D-California) introduced a bill Friday that would require online-tracking firms to allow citizens to opt out of tracking, or else face stiff fines.

The bill, known as the Do-Not-Track-Me-Online Act, intends to let people choose a no-tracking setting in their browser and have companies obey that setting. The rules would mainly apply to companies whose primary business is collecting and analyzing data, but has loopholes for companies that collect data to improve their own services. Under those provisions, the FTC could rule website-analytics software to be legal.

The FTC asked browser makers in December to include a Do-Not-Track button in their browser, and called on online-advertising companies to agree to obey the settings. The setting is already available in beta builds of Firefox, and will soon be integrated into Chrome and IE as well.

Speier’s legislation seems directed at behavioral-tracking companies that track users around the web — usually without their knowledge — in order to create marketing profiles about users. The info is then used to serve targeted ads, which can be sold at a premium to advertisers.

The proposed legislation, H.R. 264, (.pdf) exempts state, local and federal governments from having to obey the Do-Not-Track setting, and gives the FTC the authority to allow other exemptions for currently accepted business practices.

Without such an FTC exemption, nearly anyone who has a mildly successful website — with more than 15,000 visitors per year — could face stiff fines for using even the most basic website-analytics software, which generally records the IP address, browser and operating system of a visitor’s computer.

Currently, the FTC can levy a fine only if a company publicly agrees to obey the setting, but doesn’t. But with the legislation, the government would be able to force companies — and perhaps bloggers who break the 15,000 visitor mark — to obey the setting.

The FTC has warned online-advertising companies that they have one last chance to get self-regulation right, arguing that the industry has played fast and loose with customer data privacy for years, despite repeated pledges to self-regulate.

Speier’s bill also aims to require data-collection entities to follow fair data-collection practices, namely giving people notice when data is collected, letting people opt out, telling people what they do with the data, and allowing people to see the data that is collected about them.

With a few notable exceptions, online-advertising and tracking companies generally only follow one of these practices — allowing people to opt out through the little-known Network Advertising Initiative website.

Oddly, the proposed law would not likely affect the profiling practices of Facebook, which is becoming the leader in online targeted ads. That’s because the company collects information from users when users are logged into their accounts, focusing on what users tell the company about themselves, rather than doing what Google’s DoubleClick ad system does — watching what people do around the web.

Speier, a second-term Democratic lawmaker, spent years in California’s legislature championing privacy rights for individuals.

The bill was introduced Friday and will have to pass through committee before coming to a floor vote.

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