Updated: Company Tracking Consumers by Phone Settles FTC Charges it Misled Consumers About Opt-Out Ability | Practical Law

Updated: Company Tracking Consumers by Phone Settles FTC Charges it Misled Consumers About Opt-Out Ability | Practical Law

In a Federal Trade Commission (FTC) first, the FTC charged Nomi Technologies, Inc., a company that tracks consumers' in-store movements, with deceptively misleading consumers. Nomi used in-store sensors to track mobile devices searching for WiFi networks. Nomi advertised that consumers would be notified of the tracking and would be able to opt out of the tracking at the retail location. The FTC complaint alleged no in-store notice or opt-out ability existed. Nomi has since agreed to settle the charges with the FTC.

Updated: Company Tracking Consumers by Phone Settles FTC Charges it Misled Consumers About Opt-Out Ability

by Practical Law Commercial Transactions
Law stated as of 04 Sep 2015 • USA (National/Federal)
In a Federal Trade Commission (FTC) first, the FTC charged Nomi Technologies, Inc., a company that tracks consumers' in-store movements, with deceptively misleading consumers. Nomi used in-store sensors to track mobile devices searching for WiFi networks. Nomi advertised that consumers would be notified of the tracking and would be able to opt out of the tracking at the retail location. The FTC complaint alleged no in-store notice or opt-out ability existed. Nomi has since agreed to settle the charges with the FTC.
Nomi Technologies, Inc., a company that tracks consumers' in-store movements using sensors that pick up mobile devices searching for WiFi networks, settled Federal Trade Commission (FTC) charges that it misled consumers and violated the Federal Trade Commission Act (FTC Act). The FTC complaint, the first of its kind, alleges that Nomi misled consumers by telling retailers that their customers would be informed when their in-store location was being tracked and would be able to opt out of the tracking service at the retail location. The complaint alleges these statements were untrue because customers were not alerted when tracking was initiated and were not given the choice to opt out of the service at the retail location.

The Nomi "Listen" Service

Nomi uses mobile device tracking technology to provide analytics to retail stores through its "Listen" service. Nomi collects consumer information by placing sensors inside its clients' retail locations that detect and obtain information from mobile devices searching for WiFi networks. Nomi collects information on the:
  • Mobile device's:
    • media access control (MAC) address broadcast when it searches for a WiFi network;
    • signal strength; and
    • manufacturer.
  • Location of the sensor or WiFi access point observing the mobile device.
  • Date and time the mobile device is observed.
Nomi uses the information it collects to provide analytics to its clients (the retailers) about aggregate customer traffic patterns, including the:
  • Percentage of consumers passing by versus entering the store.
  • Average duration of a consumer's visit.
  • Types of mobile devices used by consumers visiting the location.
  • Percentage of repeat customers within a given time period.
  • Number of customers that have also visited another location within the client's chain.

The FTC Complaint

The FTC Complaint states that Nomi disseminated, or caused to be disseminated, privacy policies on its website that claimed to allow consumers to opt out of Nomi's service on its website or at any retailer using Nomi's technology. However, consumers were not provided any means to opt out at the retail locations and were not notified that the Listen service was even being used.
In its complaint, the FTC alleged that Nomi violated the FTC Act by misrepresenting that consumers:
  • Could opt out of Nomi's Listen service at retail locations using the service, creating a false or misleading representation.
  • Would be given notice when a retail location was utilizing Nomi's Listen service, constituting unfair or deceptive acts or practices in or affecting commerce in violation of Section 5(a) of the FTC Act.
For more information on the FTC Act see Practice Note, Advertising: Overview: The Federal Trade Commission Act.

The Settlement

Notably, Nomi agreed to a consent order and will no longer represent in any manner either the:
  • Options or extent consumers can exercise control over the collection, use, disclosure or sharing of information collected from or about them or their computers or devices.
  • Extent consumers will be provided notice about how data from or about a particular consumer, computer or device is collected, used, disclosed or shared.
The consent order also imposed certain record keeping and reporting obligations on Nomi. This type of FTC consent order carries the force of law. Each subsequent violation may result in a civil penalty of up to $16,000.

Practical Implications

The complaint and consent order are examples of the federal government's push to take control over how digital security and privacy is presented to consumers. The complaint is the first of its kind, showing the FTC's willingness to safeguard consumers from products that acquire their information through digital means, without notice or consent.
Counsel should take note of the agency's new focus on companies tracking and gathering consumer's retail information and continue to monitor the FTC for similar developments. Additionally, counsel should review their in-store tracking and advertising policies to ensure compliance with acceptable market practices.
For more information on consumer protection see Practice Note, Consumer Protection: Overview.

Update

On August 28, 2015, the FTC approved the final order against Nomi, prohibiting the consumer-tracking company from misrepresenting:
  • How information about consumers (or their computers or devices) is collected, used, disclosed or shared.
  • The extent to which consumers will be notified about the use of their information.
  • The ability to opt-out of Nomi's tracking service.
On the same day the FTC also released its: