FTC Grants Petition to Modify Online Tracking Order

In August 2009, a final order was entered in a matter initiated by the Federal Trade Commission against Sears Holdings Management Corporation. According to the FTC, from 2007 through 2008 Sears utilized a downloadable software application that collected sensitive information from users without disclosing its data collection practices. In part, the order obligated Sears to obtain express consent after full disclosure, going forward.

In October 2017, Sears requested changes that would “align the order with the commission’s more recent consent orders, reports, and guidance materials, which include carve-outs for certain commonly accepted practices.” In doing so, Sears requested that the Commission modify the definition of “tracking application.”

“Tracking Application” shall mean 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, 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.

According to Sears, the proposed modification was necessary as a result of changed circumstances and the ability to fairly compete. Sears stated, a modification would enable the company to “keep step with current market practices” related to retail online tracking applications.

In February 2018, the Federal Trade Commission agreed to modify the order given changed conditions. In doing so, the FTC determined that changed conditions of fact required that the order be reopened and added exceptions to the definition of “Tracking Application.” The modified exceptions exclude software that tracks only the configuration of the software program or application itself; information regarding whether the software program or application is functioning as represented; or information regarding consumers’ use of the program or application itself.

The administrative complaint leading to the 2009 order stated that Sears offered $10 to consumers to install the market research software application on their personal computers. It alleges that Sears deceptively failed to disclose the full extent of the software’s data collection.

Numerous public comments were filed in response to Sears’ petition, all of which opposed modification. Many raised concerns about data collection.

The FTC acknowledged their concerns about maintaining strong protections for consumer privacy. However, it was of the opinion that modifying the order would not negatively impact fulfillment of the goal of maintaining strong protections for privacy. It explained that the “proposed exception better aligns with consumers’ expectations” as to the functionality and use of current mobile apps.

The following modification is notable because it marks the first time for a privacy-related consumer protection order. Changes in technology may very well make order reconsideration more common in the future.

Contact a regulatory compliance and defense law firm at rnewman@hinchnewman.com.

Richard B. Newman is a regulatory litigation, investigations and compliance attorney at Hinch Newman LLP focusing on advertising and digital media matters.

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Richard B. Newman

Richard B. Newman is a nationally recognized FTC advertising compliance, CID investigation and regulatory enforcemetn attorney. He regularly provides advertising counsel and represents clients in high-profile investigations and enforcement proceedings initiated by the Federal Trade Commission, state attorneys general, departments of consumer affairs, and other federal and state agencies with jurisdiction over advertising and marketing practices. Richard is also an ecommerce lawyer and spam defense attorney. His practice additionally focuses upon false advertising defense, data privacy, cybersquatting, intellectual property law and transactional matters relating to the dissemination of national advertising campaigns, including the gamut of affiliate marketing, telemarketing, lead generation, list management and licensing agreements. Richard advises clients on how to minimize the legal risks associated with digital marketing, email marketing, telemarketing, social media influencer campaigns, endorsements and testimonials, negative option marketing models, native advertising, online promotions and comparative advertising,

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