Ballard Spahr LLP

The Federal Trade Commission (FTC) has entered into a proposed consent order requiring digital advertising company Turn Inc. to include a clear and conspicuous notice detailing how it collects, uses, or shares information from users for targeted advertising and how consumers can opt out of it, and to cease making misrepresentations regarding the effectiveness of a consumer's opt-out choice.

Third-party advertiser Turn's business model relied on "cookies," text files on a device that allow a company to recognize when a unique customer's browser connects to a company's servers, and "web beacons," invisible embedded codes in a web page that connect to a third-party advertiser. In addition, Turn used mobile device identifiers to advertise in mobile apps. Beginning in 2013, Turn began using a unique shared identifier provided by Verizon Wireless (called an "X-UIDH header" and also known as a "supercookie"). Synching the supercookie with other data created a permanent linkage between the consumer's browser or device and other demographic identifiers, even if the consumer deleted the cookie or reset her advertising identifier. Consumers could not prevent or disable the tracking conducted by the supercookie.

These actions contradicted Turn's privacy policy, which inaccurately stated that customers could opt out of tailored advertising from Turn by blocking or limiting cookies and web beacons. Turn failed to disclose that, even if a customer opted out of tracking through cookies and web beacons, Turn was still tracking Verizon customers through X-UIDH header information. The FTC alleged in its complaint that Turn's misrepresentations regarding the limiting of cookies and web beacons, and a customer's ability to opt out of tracking, violated the FTC Act. Turn's actions also violated contracts with Apple and Google prohibiting such linking with device identifiers.

The proposed consent order requires Turn to cease making misrepresentations regarding what consumer information it collects or shares. It also requires Turn to create an opt-out option that effectively limits tracking by Turn.

In addition, Turn is required to add a "clear and conspicuous" hyperlink on its homepage to a webpage that explains the type of information Turn collects, the technology and methods used to collect it, and how the information is used in targeted advertising. Turn also must provide a clear and conspicuous notice of its opt-out mechanism for targeted advertising.

Per the consent order, Turn will be subject to FTC supervision for 20 years, during which time it will be required to undertake certain compliance and recordkeeping procedures.

Targeted advertising has been a topic of increasing interest for the FTC, as well as the subject of self-regulation by entities like the Digital Advertising Alliance and the Network Advertising Initiative. This consent order demonstrates the importance of complete and accurate disclosure of tracking practices in general, and advertising purposes in particular, and the need to provide effective opt-out mechanisms relating to digital advertising practices.