FTC Releases Final Consumer Privacy Report | Practical Law

FTC Releases Final Consumer Privacy Report | Practical Law

On March 26, 2012, the Federal Trade Commission (FTC) issued its final report on consumer privacy protection with recommendations for best privacy practices for companies. The FTC's report, Protecting Consumer Privacy in an Era of Rapid Change, also recommends that Congress consider enacting legislation addressing general privacy, data security and breach notification, and data brokers' collection and use of consumer information.

FTC Releases Final Consumer Privacy Report

Practical Law Legal Update 4-518-6623 (Approx. 4 pages)

FTC Releases Final Consumer Privacy Report

by PLC Intellectual Property & Technology
Published on 26 Mar 2012USA (National/Federal)
On March 26, 2012, the Federal Trade Commission (FTC) issued its final report on consumer privacy protection with recommendations for best privacy practices for companies. The FTC's report, Protecting Consumer Privacy in an Era of Rapid Change, also recommends that Congress consider enacting legislation addressing general privacy, data security and breach notification, and data brokers' collection and use of consumer information.
This week, the Federal Trade Commission (FTC) issued its final report advising businesses on best practices to protect consumer privacy and provide consumers with greater control over the collection and use of their personal data. Through its report, Protecting Consumer Privacy in an Era of Rapid Change, the FTC urges companies and self-regulatory bodies to adopt the report's best practices, which are organized into a three-part framework including:
  • Privacy by design, meaning building privacy into a company's products and practices at each stage of development.
  • Simplified choices for consumers.
  • Greater transparency for data practices.
The report also calls on Congress to enact baseline privacy legislation based on the FTC's framework covering data security, breach notification and data brokers' collection and use of consumer information.
In the next year, the FTC will promote the framework's implementation by focusing its policy-making efforts on five main issues:
  • Mobile apps. The FTC report urges companies that offer mobile apps to work toward offering improved privacy protections. The FTC would like companies to develop concise mobile app privacy disclosures that tell users what data will be collected, how it will be used and how it will be shared. The FTC staff will hold a workshop to address mobile app disclosures.
  • Consumer choice on data collection and use. The FTC intends to make the collection and use of consumer information more transparent and provide consumers with access to their data. The FTC report outlines guidance for companies about when to provide consumers with choice about how their data is used. Under the FTC's framework, companies do not need to provide consumers with choice before collecting and using information for practices that are:
    • consistent with the transaction's context;
    • consistent with the consumer's existing relationship with the company; or
    • required or specifically authorized by law.
  • Do Not Track. The report calls on companies to allow consumers to control the collection and use of their online browsing data by developing and supporting an online Do Not Track mechanism. The report states that the FTC will work with certain groups to implement a system, including browser vendors, the Digital Advertising Alliance and the World Wide Web Consortium. In particular, the report cites heightened privacy concerns about the extent to which online consumer activity is tracked by internet service providers, operating systems, browsers and social media companies.
  • Data brokers. The FTC also recommends that Congress should consider legislation to increase oversight of data brokers and make their practices more transparent. In essence, data brokers buy, compile and sell highly personal consumer information. The report notes that consumers are often unaware of the data brokers' existence, or why they collect and use consumer data. To increase the transparency of data broker practices, the report:
    • recommends legislation aimed at providing consumers with access to information held by data brokers; and
    • calls on data brokers to explore creating a centralized website where consumers could get information about their practices and their options for controlling data use.
  • Promoting enforceable self-regulatory codes. The FTC also plans to work with industry stakeholders to develop sector-specific codes of conduct. If strong privacy protection codes are developed, the FTC explains that it will view adherence to them favorably in its law enforcement work under Section 5 of the FTC Act. As part of the FTC's policing of unfair or deceptive practices, it will also police a company's failure to abide by any self-regulatory programs that it joins.
The FTC received over 450 public comments in response to its preliminary report. In addressing these comments, the FTC refined certain aspects of the basic principles included in its preliminary report, for example:
  • Reduction in scope. The final report made two important modifications as to scope:
    • companies that collect non-sensitive data from fewer than 5,000 consumers per year and do not share the data with third parties are exempted from the scope of the final report; and
    • while both the preliminary and final report only cover information that is reasonably linked to a specific consumer, computer, or other device, the final report clarifies that data is not “reasonably linkable” if a company takes reasonable measures to ensure that the data is de-identified, publicly commits not to try to reidentify the data and contractually prohibits downstream recipients from trying to re-identify the data
  • Circumstances that do not require choice. In its preliminary report, the FTC proposed a principle providing that companies do not need to provide consumers with privacy choices before collecting and using their data for commonly accepted practices, such as product fulfillment. In the final report, the FTC refined this principle to state, as discussed above, that consumer choice is not required when reasonable given the context of the transaction or relationship with the customer, or required or specifically authorized by law.
  • Affirmative express consent. Both the preliminary and final report specify that a company should give consumers choice when the company's practices are inconsistent with the context of a particular transaction or the business relationship with the consumer. In the final report, the FTC specifies that companies should obtain affirmative express consent before:
    • using consumer data in a materially different manner than claimed when the data was collected; or
    • collecting sensitive data for certain purposes
    The change addressing material retroactive changes is consistent with the FTC's recent voluntary consent orders, for example its November 2011 settlement with Facebook.
    With respect to sensitive data, the FTC noted that because whether a particular piece of data is sensitive is often a subjective determination. Therefore, companies should be certain to implement all of the framework's components, including the ability to access and, if appropriate, correct or delete, data.