In Order, FTC Recognizes Lower Notice Requirements for “Consumer-Expected” Data Collection

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Last week, the Federal Trade Commission granted a petition by Sears Holding Management seeking modification of a 2009 Commission Order. The notable 2009 Order settled allegations that Sears had improperly failed to provide notice regarding data collection by certain software the company offered to consumers. Sears argued that the 2009 Order placed it at a “competitive disadvantage” in the mobile application marketplace. The now-modified Order enables Sears to conduct certain “consumer-expected” forms of data collection and use without requiring heightened notice or consent under the 2009 Order.

The 2009 Order required Sears to offer “clear and prominent” notice regarding data collection activities and collect “consumers’ express consent” before distributing any “Tracking Application” from Sears. In granting the petition, the Commission appeared to credit Sears’ contention that “disclosure requirements are not in consumers’ interest where the data collection by a mobile application is expected and benefits the application’s function.” In its modification, the Commission recognized that excessive notice and consent related to expected activity does not benefit and in fact “may be confusing” to consumers.

In light of these arguments, the Commission agreed to modify the definition of “Tracking Application” in the 2009 Order. In particular, the modified definition of “Tracking Application” excludes information monitoring, collection or transmission limited solely to “(a) the configuration of the software program or application itself; (b) information regarding whether the software program or application is functioning as represented; or (c) information regarding consumers’ use of the program or application itself.” As a result, for these “consumer-expected types of tracking,” Sears’ is not required to meet the heightened notice and consent requirements of the 2009 Order.

Beyond the importance of the modified Order for Sears, the Order may hold broader significance for companies which collect information via mobile applications and other platforms. The modified Order clarifies that the Commission generally does not expect heightened notice regarding data use relating to application functionality “in performing a service the consumer expects.”  However, in its opinion granting Sears’ petition, the Commission distinguishes such application functionality from other forms of data use, such as “passive tracking, cross-application tracking, or third-party tracking.” For these activities, and for the “collection and use of sensitive information,” the Commission appears to favor heightened forms of consumer notice and consent.