What do you need to know about the FTC’s report on privacy

January 18, 2011 by Blaine Lyerla

Our guest blogger this week is Kristen Mathews of Proskauer Rose LLP.

Hear more from the head of the Privacy & Data Security Group and a member of the Technology, Media & Communications Group at Proskauer Rose LLP, Kristen Mathews, during our next webinar, How Policy Will Shape Data Privacy in 2011, coming up this Thursday, January 20th at 2pm ET.

Last week, we blogged about the FTC’s report released in December, “Protecting Consumer Privacy in an Era of Rapid Change.” But if the FTC’s recommendations become requirements, how would they change what the typical company is doing today?

  • They apply both online and offline. Many companies have privacy policies that apply to the information they collect online, but make no promises to consumers about the information they collect offline, for example in stores, at events, on the phone, via loyalty programs, through registration cards, and the like.   The FTC’s report recommends that companies have privacy policies that apply offline as well.
  • They apply to what many companies think of as non-personally identifiable information, such as static IP addresses and other information that identifies a particular computer or device, but not necessarily a particular individual. This means that many companies’ privacy policies will need to be revised.
  • They propose that consumers be given a choice, at the time and place that they provide their information to a company, about the use of their data by the company in unexpected ways (i.e., ways other than “commonly accepted practices”).   For example, if the company will share the consumer’s data with a third party for the third party’s marketing purposes, the consumer should be given a choice about this at the time that they provide the information to the company, and on the Web page on which they provide the data to the company. (Yes, we mean no more burying consumer choice notices in a privacy policy.) Other examples of when consumer choice would be required are when data will be sold to a data broker or other third party that is unknown to the customer, or shared with others for behavioral marketing purposes.
  • Consumer choices could no longer be obtained using the good old pre-checked consent box.
  • When data collected in a brick-and-mortar store will be used by the company in one of these “non-accepted” ways, the FTC proposes that the sales associate communicate the consumer’s choices to the consumer orally.
  • When a consumer opts out of a certain use of his or her data, that preference would be durable, and not subject to repeated additional requests from the company. (The FTC did not say this, but we presume this would mean, for example, that the FTC prefers an opt-out method that is not dependent on cookies that could inadvertently be deleted by the consumer, and that opt-out preferences not expire.)
  • FTC proposes that data sharing with an affiliate is to be treated like data sharing with an unaffiliated third party, unless, possibly, the affiliate relationship is clear to consumers through common branding or similar means.
  • The FTC proposes that companies provide consumers with reasonable access to the data that they have about consumers. (Until now, U.S. law has not required this.)
  • The FTC proposes that companies obtain affirmative express consent from consumers before collecting, using or sharing sensitive information about consumers (such as financial or medical information, or precise geolocation data), or information about “sensitive” consumers such as children and possibly teens.
  • The FTC’s recommendations cover companies that do not have direct relationships with consumers, such as data aggregators, and propose that these companies allow consumers to access and correct the information they have about consumers.
  • The FTC proposes that companies take steps to ensure the accuracy of the data that they have about consumers, especially if the data is being used to make decisions about consumers. A good example of this is a company that provides identity or age verification services to other companies.
  • The FTC proposes that companies only collect the data they need for their specific business purposes, and that they dispose of it (securely) when it no longer serves that purpose.  (In other words, don’t collect it or retain it “just in case it comes in handy for something later.”)
  • The FTC endorses a universal consumer “Do Not Track” option, whereby a consumer can set his or her web browser to instruct Web sites not to engage in behavioral marketing on that consumer. (More on this when/if the required technology becomes available.)
  • The FTC proposes that companies assign personnel to oversee privacy issues.
  • The FTC proposes that companies have comprehensive privacy programs, and review them periodically to address changes in data risks and other circumstances. (Did you just finish your comprehensive written data security program? Time to start on your comprehensive written privacy program.)
  • The FTC proposes “privacy by design.” In other words, companies should consider privacy issues relating to new products, services and business models in the early stages of their development. (As an example, no more sending new products to legal review the last minute before launch.)
  • The FTC proposes shorter and more comprehensible privacy policies. The FTC might provide a model form privacy notice for this purpose. If you still want to include all the details in a shorter policy, the FTC suggests the “layered” policy approach, in which each policy layer links to more detail in the next layer.
  • You should have been honoring this for years, but, once again, companies cannot make material adverse retroactive changes to their privacy policies without robust notice to, and consent from, consumers. So when you are shortening your privacy policy, beware of inadvertent substantive changes that provide for lesser privacy protections than before.