WASHINGTON (CNN) -- Commerce Secretary William Daley issued a blunt warning to on-line retailers and other E-business firms Monday: Be careful with the private information of consumers or risk having government set the rules for you.

Daley opened a workshop on so-called "Online Profiling" by admonishing E-commerce firms to develop protections for the private information of web users. "If a web firm fails to protect a consumer's privacy, if they fail to disclose, if they fail to give consuemers choice," Daley said, "I guarantee you that governments will be forced to react."

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On-line profiling is a practice in which software used by some web advertisers tracks a web user's on-line viewing habits. This enables the advertisers to better understand a user's interests so they can e-mail targeted advertising to them. Some consumers may like this practice but others may find it annoying.

"It's not Big Brother that consumers fear, anymore, and it's not even big businesses that they fear," Daley said. "They fear businesses they have never heard of having information about them and using it for purposes that they don't even understand."

Last week, the non-governmental Electronic Privacy Information Center (EPIC) called for the Federal Trade Commission to halt on-line profiling and establish legally binding protections for consumers. Today's workshop at the Commerce Department attempts to focus the issues, such as how to balance the privacy rights of consumers with the rights of companies trying to do business on the internet.

Most on-line privacy protections are self-regulated by the industry, but EPIC does not believe sufficent safeguards against abuse are in place. EPIC said in a recent statement that such profiles "could result in far-reaching invasions of privacy."

But the federal government appears to prefer giving self regulation a try before turning to legislation. Federal Trade Commission Chairman Robert Pitofsky told the Commerce Dept. workshop, "I was pleased to learn, just in the last few days, that leaders of industry and on-line privacy have agreed to provide consumers with more control over the creation of on-line profiles. We've had a good experience to date with self regulation and other areas of on-line commerce."

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