The Secure Times

An online forum of the ABA Section of Antitrust Law's Privacy and Information Security Committee


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Direct Marketing Association Launches “Data Protection Alliance”

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On October 29, 2013, the Direct Marketing Association (“DMA”) announced the launch of a new initiative, the Data Protection Alliance, which it describes “as  a legislative coalition that will focus specifically on ensuring that effective regulation and legislation protects the value of the Data-Driven Marketing Economy far into the future.” In its announcement release, the DMA reports the results of a study it commissioned on the economic impact of what calls “the responsible use of consumer data” on “data-driven innovation.” According to the DMA, its study indicated that regulation which “impeded responsible exchange of data across the Data-Driven Marketing Economy” would cause substantial negative damage to the U.S.’ economic growth and employment. Instead of such regulation, the DMA asks Congress to focus on its “Five Fundamentals for the Future”:

  1. Pass a national data security and breach notification law;

  2. Preempt state laws that endanger the value of data;

  3. Prohibit privacy class action suits and fund Federal Trade Commission enforcement;

  4. Reform the Electronic Communications Privacy Act (ECPA); and

  5. Preserve robust self-regulation for the Data-Driven Marketing Economy.

The DMA is explicitly concerned with its members’ interests, as any trade group would be, and this report and new Data Protection Alliance are far from the only views being expressed as to the need for legislation and regulation to alter the current balance between individual control and commercial use of personal information. Given the size and influence of the DMA and its members, though, this announcement provides useful information on the framing of the ongoing debate in the United States and elsewhere over privacy regulation.

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Privacy and Data Protection Impacting on International Trade Talks

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The European Union and the United States are currently negotiating a broad compact on trade called the Transatlantic Trade and Investment Partnership (“TTIP”). While the negotiations themselves are non-public, among the issues that are reported to be potential obstacles to agreement are privacy and data protection. Not only does the European Union mandate a much stronger set of data protection and privacy laws for its member states than exist in the United States, but recent revelations of U.S. surveillance practices (including of European leaders) have highlighted the legal and cultural divide.

In an October 29, 2013 speech in Washington, D.C., Viviane Reding, Vice-President of the European Commission and EU Justice Commissioner, emphasized that Europe would not put its more stringent privacy rules at risk of weakening as part of the TTIP negotiations. She said in part,

Friends and partners do not spy on each other. Friends and partners talk and negotiate. For ambitious and complex negotiations to succeed there needs to be trust among the negotiating partners. That is why I am here in Washington: to help rebuild trust.

You are aware of the deep concerns that recent developments concerning intelligence issues have raised among European citizens. They have unfortunately shaken and damaged our relationship.

The close relationship between Europe and the USA is of utmost value. And like any partnership, it must be based on respect and trust. Spying certainly does not lead to trust. That is why it is urgent and essential that our partners take clear action to rebuild trust….

The relations between Europe and the US run very deep, both economically and politically. Our partnership has not fallen from the sky. It is the most successful commercial partnership the world has ever seen. The energy it injects into to our economies is measured in millions, billions and trillions – of jobs, trade and investment flows. The Transatlantic Trade and Investment Partnership could improve the figures and take them to new highs.

But getting there will not be easy. There are challenges to get it done and there are issues that will easily derail it. One such issue is data and the protection of personal data.

This is an important issue in Europe because data protection is a fundamental right. The reason for this is rooted in our historical experience with dictatorships from the right and from the left of the political spectrum. They have led to a common understanding in Europe that privacy is an integral part of human dignity and personal freedom. Control of every movement, every word or every e-mail made for private purposes is not compatible with Europe’s fundamental values or our common understanding of a free society.

This is why I warn against bringing data protection to the trade talks. Data protection is not red tape or a tariff. It is a fundamental right and as such it is not negotiable….

Beyond the TTIP talks, the divergence between European and U.S. privacy practices is putting new pressure on an existing legal framework, the Safe Harbor that was adopted after the enactment of the EU Data Protection Directive. A number of EU committees and political groups are either criticizing or recommending revocation of the Safe Harbor, a development that could significantly change the risk management calculus for the numerous companies which move personal information between the United States and Europe.


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Recent FTC Actions and Statements Show Continuing Focus on Privacy

The Federal Trade Commission has long taken a lead role in issues of privacy and data protection, under its general consumer protection jurisdiction under Section 5 of the FTC Act (15 U.S.C. §45) as well as specific legislation such as the Children’s Online Privacy Protection Act of 1998 (“COPPA“) (which itself arose out of FTC reports). The FTC continues to bring legal actions against companies it believes have improperly collected, used or shared consumer personal information, including the recent settlement of a complaint filed against Aaron’s, Inc., a national rent-to-own retail chain based in Atlanta, GA. In its October 22, 2013 press release announcing the settlement, the FTC described Aaron’s alleged violations of Section 5:

Aaron’s, Inc., a national, Atlanta-based rent-to-own retailer, has agreed to settle FTC charges that it knowingly played a direct and vital role in its franchisees’ installation and use of software on rental computers that secretly monitored consumers including by taking webcam pictures of them in their homes.

According to the FTC’s complaint, Aaron’s franchisees used the software, which surreptitiously tracked consumers’ locations, captured images through the computers’ webcams – including those of adults engaged in intimate activities – and activated keyloggers that captured users’ login credentials for email accounts and financial and social media sites….

The complaint alleges that Aaron’s knew about the privacy-invasive features of the software, but nonetheless allowed its franchisees to access and use the software, known as PC Rental Agent. In addition, Aaron’s stored data collected by the software for its franchisees and also transmitted messages from the software to its franchisees. In addition, Aaron’s provided franchisees with instructions on how to install and use the software.

The software was the subject of related FTC actions earlier this year against the software manufacturer and several rent-to-own stores, including Aaron’s franchisees, that used it. It included a feature called Detective Mode, which, in addition to monitoring keystrokes, capturing screenshots, and activating the computer’s webcam, also presented deceptive “software registration” screens designed to get computer users to provide personal information.

The FTC’s Consent Order Agreement with Aaron’s includes a prohibition on the company using keystroke- or screenshot-monitoring software or activating the consumer’s microphone or Web cam and a requirement to obtain express consent before installing location-tracking technology and provide notice when it’s activated. Aaron’s may not use any data it received through improper activities in collections actions, must destroy illegally obtained information, and must encrypt any transmitted location or tracking data it properly collects.

The FTC is also continuing its efforts to educate and promote best practices about privacy for both consumers and businesses. On October 28, 2013, FTC Commissioner Julie Brill published an opinion piece in Advertising Age magazine entitled Data Industry Must Step Up to Protect Consumer Privacy. In the piece, Commissioner Brill criticizes data collection and marketing firms for failing to uphold basic privacy principles, and calls on them to join an initiative called “Reclaim Your Name” which Commissioner Brill announced earlier this year.

Brill writes in AdAge:

The concept is simple. Through creation of consumer-friendly online services, Reclaim Your Name would empower the consumer to find out how brokers are collecting and using data; give her access to information that data brokers have amassed about her; allow her to opt-out if a data broker is selling her information for marketing purposes; and provide her the opportunity to correct errors in information used for substantive decisions.

Improving the handling of sensitive data is another part of Reclaim Your Name. Data brokers that participate in Reclaim Your Name would agree to tailor their data handling and notice and choice tools to the sensitivity of the information at issue. As the data they handle or create becomes more sensitive — relating to health conditions, sexual orientation and financial condition, for example — the data brokers would provide greater transparency and more robust notice and choice to consumers.

For more information on the FTC’s privacy guidance and enforcement, see the privacy and security section of the FTC Web site.