New California Requirements Regarding "Do Not Track" Transparency and Advertising to Minors Have Substantial Effects on Advertisers, Ad Tech Companies, Website Publishers and App Developers

California recently enacted two laws regarding "Do Not Track" Transparency and Advertising to Minors that will have a significant impact on companies that operate commercial websites, host mobile applications or provide advertising or analytics technology services.

The first, A.B. 370, requires certain companies to add a "do not track" disclosure to their privacy policy.  This law was sponsored by California Attorney General Kamala Harris and takes effect on January 1, 2014. The second, S.B. 568, prohibits marketing certain products and services to minors and will take effect one year later, in January 2015.  Nevertheless, advertisers, advertising platforms and ad technology companies should begin thinking about compliance plans for S.B. 568 now.

A.B. 370: "Do Not Track" Transparency

A.B. 370 amends California’s Online Privacy Protection Act (CalOPPA), which requires companies to post a privacy policy that describes the company’s data collection and use practices, to also require companies to disclose how they respond to browser-based “do not track” signals.  Specifically, companies that collect “personally identifiable information about an individual consumer’s online activities over time and across third-party Web sites or online services” must disclose how they respond to browser “do not track” signals or “other mechanisms that provide consumers the ability to exercise choice regarding such collection.”  Sites and online services, including mobile applications, must also disclose whether other parties may collect “personally identifiable information” about an individual’s online activities over time and across different sites when a consumer uses their website or service.

While the bill has been described as a “do not track” transparency bill, it appears to provide websites and operators an alternative to disclosing how they respond to browser-based “do not track” signals by instead providing a hyperlink “to an online location containing a description, including the effects, of any program or protocol the operator follows that offers the consumer that choice.”

Many companies have questions about whether the law applies to their collection, or their partners’ collection, of data for advertising purposes.  For example, when is a company required to disclose its own response to “do not track” headers, as opposed to information about third-party collection of information on the company’s sites and services?

Others question whether the law even applies to “tracking” based only on randomly generated cookie identifiers.  CalOPPA defines “personally identifiable information” to include “any [...] identifier that permits the physical or online contacting of a specific individual,” in addition to name, address and other “traditional” PII.

Finally, many companies question whether they can point to platform-level settings such as Apple’s IDFA and Google’s Advertising ID or cookie-based opt outs, such as those available on aboutads.info, rather than disclose how they respond to “do not track” signals.  The answers to these questions depend on the company’s specific data collection and use practices.  Companies should consult with counsel to understand how A.B. 370 affects them; the law will require many companies to update their privacy policies. 

S.B. 568: Advertising to Minors

Much attention has been paid to S.B. 568’s so-called “eraser-button” requirement, which provides minors the ability to delete information they post on social networking services.  Less attention has been paid to the law’s effect on advertising practices with respect to minors.  Unlike the Children’s Online Privacy Protection Act (COPPA), which provides methods of obtaining parental consent before engaging in certain data collection and disclosure practices, S.B. 568 simply makes certain advertising practices illegal, with no method of obtaining consent for such practices.  Also, unlike COPPA, S.B. 568 regulates advertising to “minors” (defined under S.B. 568 as persons under 18 years of age who reside in California) and not simply “children” (defined under COPPA as those under 13).  A summary of S.B. 568’s requirements follows.

First, operators (a) of online sites, services or applications “directed to minors” and (b) those with “actual knowledge” that the minor uses the site, service or application; is under 18 years old; and resides in California are forbidden from marketing a laundry list of products and services “if the marketing or advertising is specifically directed to that minor based on information specific to that minor,” such as profile, activity, address or location information sufficient to contact the minor. The 19 restricted products and services include alcoholic beverages; firearms, ammunition and other weapons; tanning devices; dietary supplements containing ephedrine group alkaloids; lottery tickets; fireworks; permanent tattoos; drug paraphernalia; and tobacco products.  Operators comply with the law if they take reasonable, good faith steps to avoid marketing or advertising in a restricted manner.    

Second, operators of online sites, services or applications directed to minors, or with actual knowledge that a minor is using their site, service or application, are forbidden from “knowingly” using, disclosing, compiling—or allowing a third party to use, disclose or compile—a minor’s personal information “with actual knowledge that the use, disclosure, or compilation is for… marketing or advertising [any restricted] products or services to that minor.”

These restrictions do not apply to the “incidental placement” of products or services embedded in content if the content is not distributed by or at the direction of the operator primarily for the purposes of marketing and advertising of the restricted products or services.

Operators of online and mobile sites, services and applications that are directed to minors, or who have registered users who are minors, and who engage in marketing or advertising, or work with third parties to provide advertising, should carefully review the new law to help ensure compliance with its requirements.  Similarly, ad networks and other ad technology companies should review their contracts and policies to help ensure that ads for the restricted products and services are not served to minors or on sites, services or applications directed to minors.