The White House urged Congress on Wednesday to approve a "consumer privacy bill of rights" to govern the collection and use of personal data on the Internet.
Assistant Commerce Secretary Lawrence Strickling called for the legislation at a hearing on online privacy held by the Senate Committee on Commerce, Science and Transportation.
"The administration urges Congress to enact a 'consumer privacy bill of rights' to provide baseline consumer data privacy protections," he said.
Strickling said authority to enforce privacy protections should be given to the Federal Trade Commission (FTC), whose chairman, Jon Leibowitz, has advocated a "Do Not Track" mechanism that would allow Internet users to opt out of having their activities monitored.
"The large-scale collection, analysis, and storage of personal information is becoming more central to the Internet economy," said Strickling, the White House's top communications policy advisor.
"These activities help to make the online economy more efficient and companies more responsive to their customer needs," he said.
"Yet these same practices also give rise to growing unease among consumers, who are unsure about how data about their activities and transactions are collected, used, and stored," Strickling said.
In his opening statement, committee chairman Senator Jay Rockefeller, a Democrat from West Virginia, said it was time for Congress to act.
"There is an online privacy war going on, and without help, consumers will lose," Rockefeller said. "We must act to give Americans the basic online privacy protections they deserve.
"Self-regulation, by and large, has been a failed experiment," he said. "The majority of consumers are uncomfortable being tracked online and it is time the law gave Americans a choice in the matter."
Senator John Kerry, the former Democratic presidential candidate from Massachusetts, said he is already drafting online privacy legislation and the "status quo cannot stand."
"We cannot continue to allow the collectors of people's information to dictate the level of privacy protection Americans get when they engage in commerce," Kerry said.
Senator Claire McCaskill, a Democrat from Missouri, questioned, however, whether privacy controls might have a chilling effect on online advertising and Internet commerce.
"What is the cost going to be in terms of the economic vibrancy of the Internet?" she asked. "How will we draw the line between what kind of behavioral marketing is fair and what kind of behavioral market invades privacy?"
"I just think we have to be very careful about the unintended consequences," McCaskill continued. "I just want to make sure that we don't kill the goose that lays the golden egg here under the very laudable goal of privacy."
"The sky won't fall down on Internet commerce," replied the FTC's Leibowitz, who also addressed the committee. "It's going to continue.
"And indeed, if consumers have more trust in the Internet there's going to be more business on the Internet too," Leibowitz said.
"We think most consumers don't mind being tracked," he added. "We just think they should have the option of opting out of that tracking."
Strickling said the Obama administration had found "a strong level of support among industry" to create the privacy protections and proposed "working with all stakeholders to develop appropriate codes."
"We think we can get to a regime that will greatly improve privacy for consumers and still meet the needs of businesses who want to continue to see the growth of the Internet," he said.
The Center for Democracy & Technology welcomed the Obama administration's call for online privacy legislation.
"This is a historic announcement, marking the first time the White House has called for a baseline consumer privacy bill," CDT president Leslie Harris said.
Explore further: Britain's UKIP issues online rules after gaffes