New FTC Geolocation Ruling Will Force Retail Data Changes

Written by Mark Rasch
April 18th, 2013

Attorney Mark D. Rasch is the former head of the U.S. Justice Department’s computer crime unit and today is a lawyer in Bethesda, Md., specializing in privacy and security law.

On Monday (April 15), the U.S. Federal Trade Commission (FTC) cut a deal with some manufacturers whereby they agreed not to include “phone home” software, which would tell the leasing company the address of the computer or other device without the express consent of the lessee. The retail bottom line: All of those apps you’re using to gather shopper information may now legally require very specific notices. That, plus the always-feared opt-out for gathering any geolocation data. Uh-oh.

The FTC consent decree was with about half a dozen of these rent-to-own companies. The underlying cases involve shoppers who lease computer equipment and other devices equipped with GPS tracking or other tracking software. If a consumer fails to make a scheduled payment, or if they default on the terms of the contract, the leasing company would activate the software, which could do things like turn on the cameras on the computer, capture keystrokes on the computer, or use either Internet protocol or GPS tracking to determine the exact location of the computer.

In this way, the retailer would be able to engage in a form of “electronic repossession” of the device, either shut it down completely, or sending someone in to actually physically retrieve the device.

The Federal Trade Commission found, and the rental agencies agreed by consent decree, that activating the software without the consumer’s express consent constituted a fraudulent and deceptive and unfair trade practice.

But retailers and other businesses frequently collect data remotely from consumers. One of the beauties of Web applications, particularly those on mobile devices, is the fact that they are able to collect information about users, their location, their preferences, their friends, colleagues and acquaintances, and transmit that data back to a retailer.

Typically, when such a device is installed on the phone, the developer made sure that the retailers were using an icon that simply asked the question, “This application wants to use your GPS data. Is that okay?” The consumer checks a box once, and he has now given consent for the life of that application.

The consent decree seems to suggest that retailers may need to do more in the future. Depending on the nature of the information they gather from consumers, its sensitivity, and its frequency, the retailer may need to have the “express affirmative consent” of the consumer every time the data is shared with the retail.

This may prove to be unduly burdensome for both the retailer and consumer. If I don’t have a problem with one Starbucks knowing that I’m on my way to pick up my triple latte, why should I have trouble with another Starbucks having the same information? Do I need to sign in each time?

A good rule of thumb for retailers is to think of themselves as a customer. Does the application provide clear and conspicuous notice to the consumer of exactly which information is being collected, by whom, and what it is they plan to do with that data?

If not, you get better specific.

Is the data being collected for the benefit of the consumer, like with Starbucks, or principally for the benefit of the retailer, like in the electronic repossession software? Is there a meaningful way for the consumer to opt in or opt out of the collection of this data either generally, on a case-by-case basis?

There is no one-size-fits-all, but the idea is that the consumer should be able to know that they are transmitting location data to a specific retailer or group of retailers, and that the data will be used for specific purposes and no other. If not, this may constitute fraudulent and deceptive trade practices.

This is particularly tricky when it comes to data aggregation, or other forms of data mining.

I may have no problem telling CVS pharmacy that I am nearby so they can get my prescription ready for me to pick it up, but I may have a problem with them data mining, sharing location data with other stores, or other kinds of analysis that may end up limiting my choices or harming me.

This is a case where more sharing of information about privacy practices is better.

Where the rent-to-own companies went wrong was in installing the software and invoking the GPS when the consumer didn’t know what was going on. Any application that collects personal data from mobile devices should beware the same problem.

If you disagree with me, I’ll see you in court, buddy. If you agree with me, however, I would love to hear from you.


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