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On the Heels of Finding Unexpected Data Tracking Unfair and Deceptive, the FTC Issues Guidance on Cross-Device Tracking

Alerts / March 14, 2017

We recently discussed the Federal Trade Commission’s (FTC’s or Commission’s) expanded application of its unfairness authority and exercise of its deception authority in bringing a complaint against a maker of smart TVs that tracked program and commercial viewing, sold that data to advertisers and others, and often appended other data and tied consumer profiles to their other devices. The Commission alleged that TV viewing data was sensitive and its tracking unexpected, and thus tracking and sharing of that data without sufficient consumer transparency and choice were unfair practices that resulted in cognizable harm not outweighed by benefits to consumers or competition. That case settled with an agreement to pay $2.2 million, destroy previously collected data, and provide notice and obtain express consent to tracking going forward. For more information, see our analysis here. The FTC has also turned its attention to another data collection and use practice it describes as potentially intrusive and unexpected – tying individuals and households to associated devices and tracking device usage behavior to create consumer profiles that can be used, among other things, to send targeted advertising, known as cross-device tracking. This blog post discusses a recent FTC staff report on cross-device tracking and what it may mean for publishers and advertisers.

Access to the internet has expanded far beyond personal computer browsers. Now we browse the internet on our TVs, our phones, and even our watches, and from many different devices in a single day. The ubiquitous nature of our access to the internet has pushed companies to move beyond simple cookies to track a single PC browser to adopt cross-device tracking to associate consumers across the many devices they use. This linking is accomplished through one of two methods or a combination of both. The first is deterministic and ties multiple devices to a persistent identifier (e.g., Facebook ID) whereas the second is probabilistic and makes many inferences using various algorithms and passively collected information to tie a consumer to various devices. A more in-depth description can be found in our previous blog post.

Cross-device tracking works so well that consumers may be surprised when, after a search for a particular product on their mobile device, they are inundated with advertisements for the same product on their personal tablet and work desktop. This concern and others are what led the FTC to explore the topic through a workshop in 2015 (see our previous blog post).

In response to the workshop, the FTC recently produced a staff report that highlights four concerns about the use of cross-device tracking:

The report also provides recommendations on how companies can appropriately address these particular concerns. While these recommendations are not regulations, they indicate how the FTC interprets the legality of certain practices. Companies should consider these recommendations as they implement cross-device techniques as a publisher, an advertiser or a data broker.

We should note that the FTC isn’t the only watchdog concerned with cross-device tracking. The Digital Advertising Alliance (DAA), a self-regulatory program, also has a list of principles on how companies should handle cross-device tracking. The FTC’s staff report commended the DAA for the advances it has made but also noted that the DAA could strengthen efforts to address cross-device tracking.

Transparency

Transparency is a particular concern for the FTC in cross-device tracking. In addition to the workshop, the FTC performed a study on how widespread cross-device tracking was. The study found that cross-device tracking was pervasive and that many companies do not discuss cross-device tracking in their privacy policy. The report concluded that because cross-device tracking is a newer technology with very little disclosure being given about it, many consumers are unaware of its potential scope and uses.  The FTC expressed similar concerns regarding the unexpected nature of TV viewing data, and the lack of transparency regarding that practice, to justify the establishment of the deception and unfairness claims in its Vizio case enforcement action.  Accordingly, lack of transparency regarding cross-device tracking and targeting could generate an enforcement action under a similar theory.

Indeed, in the report, the FTC recommends that companies disclose cross-device tracking. The FTC staff believes that both the consumer-facing companies and the companies behind the scenes that do the tracking should provide “meaningful information” that will help consumers decide whether to use any available opt-out tools, silo their activities, or simply stop using the related applications or sites. The long-established FTC standard for meaningful notice is that it must be clear, conspicuous, understandable to consumers, and proximate to the statements or activities at issue. This creates challenges where so much of what goes into digital advertising is not readily apparent to consumers.

The FTC further recommends that the disclosure includes the categories of data collected. As the Vizio case demonstrates, unexpected collection or use of certain data is particularly concerning to the FTC. As to cross-device tracking, the FTC is particularly concerned about emails and usernames. Many times cross-device tracking uses email addresses, log-in credentials, usernames or other personally identifiable information (often in a hashed format) as a persistent identifier to tie multiple devices together. The FTC warns, however, that even hashed email addresses and usernames can be vulnerable to re-identification by hackers. Therefore, the FTC warns that disclosures should not refer to cross-device data as anonymous or aggregate data. Furthermore, the staff report suggests that companies shouldn’t make blanket statements that they don’t provide personal information to third parties when personally identifiable information, even if sent in a hashed format, is being shared with third parties through cross-device tracking. In other words, if a company is engaging in cross-device tracking, not only should its privacy policy explain this activity, but the company should take care not to suggest that such activity is less intrusive than it really is, and it should ensure that more general privacy statements are appropriately qualified to account for this new activity.

DAA standards are in line with much of the FTC recommendations. According to the DAA, entities collecting cross-device data should have a notice on their website describing their data-collecting practices, uses and sharing. The DAA also requires that disclosures explain what choices are provided to the consumer and how the choices work. Moreover, the DAA requires a link to the choice mechanism that provides control, or at least a list of the third parties that are engaging in the collection of the cross-device tracking data.

Control

Another concern the FTC had was the lack of choices for consumer control. Many consumers turn to ad blocking software due to the lack of control choices. Therefore, the FTC recommends that companies offer choices on how their cross-device activity is tracked. The companies also need to describe how the choice tools work and articulate any material limitations these tools have. The FTC does discuss the infeasibility of a single opt-out option or tool that works across all devices for the individual consumer but encourages companies to continue to reassess technical limitations and simplify the consumer choices whenever possible.

The DAA approaches this issue with its Consumer Control Principle of the Self-Regulatory Principles for Online Behavioral Advertising. This principle generally requires companies to provide consumers with the ability to opt out of the collection or transfer of data to a third party for the purpose of online behavioral advertising. Application of this principle to cross-device tracking requires that a consumer’s choice to opt out on one device prevent that device from receiving behavioral advertising and prevent data from that device from informing behavioral advertising on other devices. This opt-out choice would apply only to the device on which it was made. Other devices would continue to collect or transfer data until a choice to opt out is exercised on those devices.

Sensitivity

The FTC is concerned about sensitive information. Many consumers do not expect so much of their daily lives, activities and preferences to be collected and commercialized when they use digital media. The recent Vizio case is one example. For instance, how many consumers would expect the download of an application, in the privacy of their home, related to a medical condition to result in the placement of advertising related to that condition on other devices? The FTC recommends that companies refrain from engaging in cross-device tracking on sensitive topics without consumers’ affirmative express consent. Such topics are related to health, finances, precise location, children and, now in the wake of Vizio, possibly TV viewing activities and other activities where tracking is not well known, such as the evolving internet of things.

The DAA also requires opt-in consent before using consumers’ sensitive data or precise geolocations, but it defines “health information” narrowly. The FTC report expressly disagrees with the DAA’s narrow definition. Under the DAA definition, visiting an AIDS education website or using a diabetes app is not considered health information. The FTC believes that this type of information is sensitive and therefore should be protected.

Security

Whenever a large amount of data is created, it becomes a target for hackers, and, as mentioned above, even hashed data is subject to re-identification. Therefore, the FTC recommends that companies keep only that data necessary for their business purposes. The data limitation principle is somewhat in conflict with the entire underpinnings of big data but consistent with concepts of privacy-by-design adopted by other jurisdictions, like the EU and Canada, and recommended by the FTC. Furthermore, the FTC requires companies to maintain reasonable security, and it has a rich history of using its Section 5 authority to prosecute lack of security and overstatements as to data protection. The DAA likewise requires organizations to provide appropriate security for, and limited retention of, data collected and used.

Analysis

The FTC puts strong emphasis on disclosure and control, pointing to its cross-device study as support. The study considered 100 websites, consisting of the 20 most popular from each of the following categories: games, sports, news, shopping and reference. The FTC found extensive third-party collection that could be used for cross-device tracking. Of those 100 websites, the median site connected to an average of 37.5 third-party domains during the tests, and over a third of the websites sent data to one or both of the top two companies known to specialize in probabilistic cross-device tracking. Unfortunately, it is difficult to determine whether cross-device tracking actually occurred. Sending data to third parties does not mean those parties used that data to track across devices, but it does indicate that they could.

Despite the extensive sharing of information with third parties, the FTC found that only three privacy policies out of the 100 websites reviewed actually mentioned cross-device tracking. The FTC doesn’t stop there, though, and wants to make sure that the disclosures are also properly articulated. The uses of “anonymous” or “aggregate” in their wording, and the blanket statements that no personal information is provided, are areas of particular concern for the FTC when sites are engaging in cross-device tracking, because the FTC thinks that engaging in common cross-device activities makes such statements potentially deceptive. Finally, the FTC is disturbed that current control options, where even available, many times have only a limited effect on cross-device tracking. The disclosures regarding tracking control options, the FTC recommends, need to fully describe those limitations.

The FTC criticizes the current U.S. digital advertising self-regulatory approach. The FTC’s recommendations go beyond the recommendations made by the DAA. The FTC chided the DAA for lax enforcement on cross-device tracking issues. The DAA put out its recommendations on cross-device tracking at the end of 2015 and only started enforcement in February 2017. Many companies relying on the DAA recommendations may be questioning if they are enough. The posture the FTC is making may diminish the role that self-regulatory organizations have in the field. These recommendations also hint that the FTC intends to play a larger role in regulating cross-device tracking and that companies relying on the DAA recommendations may need to go above and beyond these standards. Although these are merely recommendations – essentially best practices – the threat of enforcement looms large over the report, especially given the recent Vizio case. Indeed, the FTC backed up each recommendation with actual examples of similar cases where it has acted on similar behavior.

Conclusion

As consumers continue to move to more devices, companies will begin to rely more on cross-device tracking in order to reach them. With more internet-connected devices and the general growth of the internet of things, companies need to be particularly aware about what disclosures are made to consumers, what data is being collected, how it is being used and protected, and what controls are being offered to the consumers. Furthermore, they need to provide transparency and choice to data subjects regarding these activities.

BakerHostetler’s Privacy and Data Protection and Advertising, Retailing and E-Commerce practices regularly counsel clients on privacy and data protection issues regarding big data, including interest-based advertising. For more information, contact the authors.

Authorship credit: Alan L. Friel and Benjamin S. Barnes


Baker & Hostetler LLP publications are intended to inform our clients and other friends of the firm about current legal developments of general interest. They should not be construed as legal advice, and readers should not act upon the information contained in these publications without professional counsel. The hiring of a lawyer is an important decision that should not be based solely upon advertisements. Before you decide, ask us to send you written information about our qualifications and experience.

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