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FTC Slaps Down Retail Use Of Tracking Software

Written by Mark Rasch
October 15th, 2012

Attorney Mark D. Rasch is the former head of the U.S. Justice Department’s computer crime unit and today serves as Director of Cybersecurity and Privacy Consulting at CSC in Virginia.

In a case that has potentially significant consequences for NFC and RFID applications, the U.S. Federal Trade Commission is cracking down on so-called “phone home” technologies being used by computer rental companies to monitor consumer behavior. When contemplating the use of any technology that provides use, location or other information about a product, retailers should be careful to ensure consumers know—or are at least able to know—exactly what the product is doing.

Don’t be so quick to conclude that your people aren’t doing any of this, though, as it extends way beyond rent-to-own. Many current—and many more future—devices will have technology that enables post-purchase information capture. For example, RFID tags that aren’t disabled before the customer leaves the store might enable retailers, marketers or others to capture data from those devices without the consumer’s knowledge or effective consent. Embedded NFC tags or other devices make it possible to track consumers wirelessly, even after they leave the store. Smart appliances can communicate with both the electrical grid and retail outlets, so the power company knows the toaster is making Pop-Tarts or the

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grocery store knows when that yogurt on the top shelf has gone bad (can yogurt really go bad?).

We already have electronic books that tell publishers what page we are on; streaming movies and songs that post our playlists to Twitter and Facebook; and apps that tell our friends when we are at Walmart, what we are buying and even how much we are paying. These capabilities are not intrinsically evil. But when hardware or software is collecting information about consumers, the deceptive trade practice rules essentially mean the consumer should be advised of this fact—and given some way to either opt in or opt out. And you thought the only people who thought their appliances were spying on them wore aluminum foil hats.

Rent to own. The FTC case arose out of a software product made by a company called DesignerWare LLC. DesignerWare sold its product to a bunch of “rent to own” centers that, in addition to renting furniture and electronics, also rent things like PCs and laptops. These companies included Aaron’s Rent-A-Center, ColorTyme and Premier Rental Purchase. What people renting computers from these places didn’t know was that, if they didn’t return the computers on time or didn’t pay for the lease (and, of course, often even if they did), the software was equipped with two different modes. One operated as a remote “kill switch,” effectively giving the rental center a “self-help” remedy for an alleged breach of contract and a way to render the computer inoperable. Imagine giving a presentation to a client on a computer the rental company just thinks you haven’t made the most recent payment on.

This practice is more common than you might think.


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