Advertising & Marketing

The FTC is seeking public comment on a petition by Sear’s to reopen and modify its 2009 consent order to restrict the broad definition of “tracking application”.

Background.  In 2009, the FTC issued an order settling charges that Sears Holdings Management Corporation (“Sears”) had failed to adequately disclose the scope of consumers’ personal information it collected via a downloadable software application.  While Sears represented to consumers that the software would track their “online browsing”, the FTC alleged that the software would also monitor consumers’ other online secure sessions – including sessions on third parties’ websites — and collect information transmitted in those sessions, “such as the contents of shopping carts, online bank statements, drug prescription records, video rental records, library borrowing histories, and the sender, recipient, subject, and size for web-based emails.”  The software would also track some computer activities unrelated to the Internet.  The proposed settlement called for Sears to stop collecting data from consumers who downloaded the software, and to destroy all data it had previously collected.

The 2009 Sears case is significant, among other reasons, because, the FTC found a violation of Section 5 of the FTC Act notwithstanding Sears’ disclosure, because the disclosure was not sufficiently conspicuous.  Specifically, while Sears did disclose the full scope of the software’s specific functions, the details of such functions were contained on approximately the 75th line of the scroll box containing the privacy statement and user license agreement.  The FTC order stated that because such description was not displayed clearly and prominently, that Sears was being “unfair and deceptive” under Section 5 of the FTC Act.

Petition.  On October 30, 2017, Sears petitioned the FTC to reopen and modify its final order to modify the broad definition of “tracking application”.   Sears states that the current definition should be updated because of changing circumstances over the past eight years which result in the definition unnecessarily restricting Sears’s ability to compete in the mobile app marketplace. Sears states that the requested modification would enable the company to “keep step with current market practices” related to retail online tracking applications.

  • Definition. Paragraph 4 of the consent order defines “tracking application” as:  “any software program or application disseminated by or on behalf of respondent, its subsidiaries or affiliated companies, that is capable of being installed on consumers’ computers and used by or on behalf of respondent to monitor, record, or transmit information about activities occurring on computers on which it is installed, or about data that is stored on, created on, transmitted from, or transmitted to the computers on which it is installed.” 
  • Modification. Sears requests that the following additional language be inserted after the word “installed”: “unless the information monitored, recorded, or transmitted is limited solely to the following: (a) the configuration of the software program or application itself; (b) information regarding whether the program or application is functioning as represented; or (c) information regarding consumers’ use of the program or application itself.”
  • Rationale. Sears states that the proposed modification is necessary to carve out commonly accepted and expected behaviors from the scope of the Order without modifying the Order’s core manage of providing notice to consumers when software applications engaged in potentially invasive tracking.  Sears states subparts (a) and (b) would exclude “activities common to all modern software applications” while subpart (c) would exclude “information tracking that is commonly accepted by consumers and that does not present the type of risks to consumer privacy that the Order was intended to remedy.” Sears further states that the proposed modification mirrors language that the FTC has used to exclude such commonly accepted practices from more recent consent orders.

Solicitation of Public Comment.  On November 8, the FTC issued a release seeking public comment on Sear’s petition requesting that it reopen and modify the 2009 order and definition.  The FTC will decide whether to approve Sears’ petition following the expiration of the 30-day public comment period.  Public comments may be submitted under December 8, 2017.

To view the 2009 FTC Order, click here.

To view Sears’s Petition, click here:

To view FTC’s solicitation of public comment click here.

 

Woman Touching Screen Electronic Tablet Hand.Project Manager Researching ProcessOn November 11, 2016, Facebook announced to USA TODAY that it would no longer allow advertisers to exclude specific racial and ethnic groups when placing ads related to housing, credit or employment, according to a statement by Erin Egan, Facebook’s vice-president of U.S. public policy to USA Today.  According to the news article, Facebook will also require advertisers to affirm that they will not place discriminatory ads on Facebook, and will plan to offer educational materials to help advertisers understand their obligations.

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