Mobile Apps Remain Regulatory Focus as FTC Enforces Data Privacy of Popular Program

by Orrick, Herrington & Sutcliffe LLP
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The provider of the immensely popular “Brightest Flashlight Free” mobile app for Android reached a settlement with the Federal Trade Commission (FTC) over charges that it collected sensitive personal information, including precise geolocation data, and shared it with third parties such as advertising networks, without users’ knowledge. The settlement agreement, announced Dec. 5, 2013, underscores the FTC’s focus on privacy in the mobile space and its continued desire to see companies accurately communicate data practices in their mobile app privacy policies and terms of use. The agreement, which contained a Consent Order, was entered into with Goldenshores Technologies, LLC, and Erik M. Geidl, the company’s managing member.

The FTC’s complaint asserts that the company violated Section 5(a) of the Federal Trade Commission Act by deceiving consumers through inadequate disclosures in its privacy policy and misleading provisions contained in its End User License Agreement (EULA).

Specifically, the company failed to adequately disclose in its privacy policy that the app collected and disclosed precise geolocation information and persistent device identifiers to third parties, including advertising networks. Moreover, the FTC charged that the company misled users into believing they had a choice about how the app would use personal information. After downloading the app, the user was shown a EULA, which restated the privacy policy’s inadequate disclosure of the company’s collection and use of geolocation and device-identifier data. The FTC focused on the fact that the EULA provided the consumer with the option of accepting or rejecting the terms of the EULA, but in fact, the company had already begun collecting information about the consumer’s use of the app as soon as the app was launched and before the EULA was presented to the consumer. So in the FTC’s view, the consumer’s choice was “illusory.”

The consent decree, which lasts for 20 years with audit rights lasting for five years, requires the company to take a number of significant steps:

  • Request explicit, opt-in consent to collect and disclose geolocation information.
  • Provide “just in time” disclosures about the collection, uses and disclosures of geolocation data on a separate screen from the EULA, privacy policy or any other terms of use and request consent before collecting geolocation information. This is consistent with prior guidance on best practices for collection of sensitive data by mobile apps.
  • Disclose to users both what personal information is being collected and further used or disclosed, as well as the degree to which a user can exercise control over such collection and further use or disclosure.
  • Destroy all consumer data previously collected and correct these deceptive practices through more accurate disclosures in its privacy policy and changes to its data collection practices so that the EULA no longer deceives the consumer into believing that their data is not being collected. It is notable that all data, and not just the device-identifier and geolocation data, must be destroyed, so this has both a curative and a punitive element to it.

A few practical tips can be derived from this enforcement action:

  • Mobile apps will be held to the same standards as other online operators in terms of accurately conveying data collection practices. Companies must be accurate and transparent in their privacy policies about what personal information they are processing, especially as it relates to sensitive information such as geolocation and device-identifier data. This requires routine review of privacy policies against current practices, to ensure that as practices evolve, privacy policies keep up with the company’s activities. 
  • The collection of sensitive personal data or data that is collected out of context (such as a flashlight app collecting precise geolocation information) may require more robust, just-in-time disclosures and/or opt-in consent. 
  • All consumer-facing agreements such as Privacy Policy, EULAs and Terms of Service should be harmonized with each other and should accurately reflect the actual practices of the app or online service. 
  • Confirm that if any of the documents purport to provide consumers choice, that choice should be effective and respected.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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