The Secure Times

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

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Yesterday at FTC, President Obama Announced Plans for new data privacy and security laws: Comprehensive Data Privacy Law, Consumer Privacy Bill of Rights, and Student Digital Privacy Act

Yesterday afternoon, President Barak Obama gave a quip-filled speech at the Federal Trade Commission where he praised the FTC’s efforts in protecting American consumers over the past 100 years and unveiled his plans to implement legislation to protect American consumers from identity theft and to protect school children’s personal information from being used by marketers.   These plans build upon past legislative efforts and the Administration’s focus on cybersecurity, Big Data, and Consumer Protection.  Specifically, On February 23, 2012, the White House released “Consumer Data Privacy in a Networked World: A Framework for Protecting Privacy and Promoting Innovation in the Global Digital Economy” (the “Privacy Blueprint”) and in January 2014, President Obama asked his Counselor, John Podesta, to lead a working group to examine Big Data’s impact on government, citizens, businesses, and consumers.  The working group produced Big Data: Seizing Opportunities, Preserving Values on May 1, 2014.

In his speech, the President highlighted the need for increased privacy and security protections as more people go online to conduct their personal business—shop, manage bank accounts, pay bills, handle medical records, manage their “smart” homes, etc.—stating that “we shouldn’t have to forfeit our basic privacy when we go online to do our business”.  The President referenced his “Buy Secure” initiative that would combat credit card fraud through a “chip-and-pin” system for credit cards and credit-card readers issued by the United States government.  In that system, a microchip would be imbedded in a credit card and would replace a magnetic strip since microchips are harder than magnetic strips for thieves to clone.   A pin number would also need to be entered by the consumer into the credit card reader just as with an ATM or debit card.  The President praised those credit card issuers, banks, and lenders that allowed consumers to view their credit scores for free.   He also lauded the FTC’s efforts in the efforts to help identity theft victims by working with credit bureaus and by providing guidance to consumers on its website,

The first piece of legislation the President discussed briefly was a comprehensive breach notification law that would require companies to notify consumers of a breach within 30 days and that would allow identity thieves to be prosecuted even when the criminal activity was done overseas. Currently, there is no federal breach notification law and many states have laws requiring companies to notify affected consumers and/or regulators depending on the type of information compromised and the jurisdiction in which the organization operates.  The state laws also require that breach notification letters to consumers should include certain information, such as information on the risks posed to the individual as a result of the breach along with steps to mitigate the harm.   This “patchwork of laws,” President Obama noted, is confusing to customers and costly for companies to comply with.  The plan to introduce a comprehensive breach notification law adopts the policy recommendation from the Big Data Report that Congress pass legislation that provides for a single national data breach standard along the lines of the Administration’s May 2011 Cybersecurity legislative proposal.  Such legislation should impose reasonable time periods for notification, minimize interference with law enforcement investigations, and potentially prioritize notification about large, damaging incidents over less significant incidents.

The President next discussed the second piece of legislation he would propose, the Consumer Privacy Bill of Rights.  This initiative is not new.  Electronic Privacy Bills of Rights of 1998 and 1999 have been introduced.  In 2011, Senators John Kerry, John McCain, and Amy Klobucher introduced S.799 – Commercial Privacy Bill of Rights Act of 2011.   The Administration’s  Privacy Blueprint of February 23, 2012 set forth the Consumer Privacy Bill of Rights and, along with the Big Data Report, directed The Department of Commerce’s The National Telecommunications and Information Administration (NTIA) to seek comments from stakeholders in order to develop legally-enforceable codes of conduct that would apply the Consumer Privacy Bill of Rights to specific business contexts.

The Big Data Report of May 1, 2014 recommended that The Department of Commerce seek stakeholder and public comment on big data developments and how they impact the Consumer Privacy Bill of Rights draft and consider legislative text for the President to submit to Congress.  On May 21, 2014, Senator Robert Menendez introduced S.2378 – Commercial Privacy Bill of Rights Act of 2014.  The Consumer Privacy Bill of Rights set forth seven basic principles:

1) Individual control – Consumers have the right to exercise control over what information data companies collect about them and how it is used.

2) Transparency – Consumers have the right to easily understandable and accessible privacy and security practices.

3) Respect for context – Consumers expect that data companies will collect, use, and disclose the information they provided in ways consistent with the context it was provided.

4) Security – consumers have the right to secure and responsible handling of personal data.

5) Access and accuracy – Consumers have the right to access and correct their personal data in usable formats in a manner that is appropriate to the data’s sensitivity and the risk of adverse consequences if the data is not accurate.

6) Focused Collection – Consumers have the right to reasonable limits on the personal data that companies collect and retain.

7) Accountability – Consumers have the right to have companies that collect and use their data to have the appropriate methods in place to assure that they comply with the consumer bill of rights.

The President next discussed the third piece of legislation he would propose, the Student Digital Privacy Act.  The President noted how new educational technologies including tailored websites, apps, tablets, digital tutors and textbooks transform how children learn and help parents and teachers track students’ progress.  With these technologies, however, companies can mine student data for non-educational, commercial purposes such as targeted marketing.  The Student Privacy Act adopts the Big Data Report’s policy recommendation of ensuring that students’ data, collected and gathered in an educational context, is used for educational purposes and that students are protected against having their data shared or used inappropriately.  The President noted that the Student Digital Privacy Act would not “reinvent the wheel” but mirror on a federal level state legislation, specifically the California law to take effect next year that bars education technology companies from selling student data or using that data to target students with ads.   The current federal law that protects student’s privacy is the Family Educational Rights and Privacy Act of 1974, which does not protect against companies’ data mining that reveals student’s habits and profiles for targeted advertising but rather protects against official educational records from being released by schools. The President highlighted current self-regulation, the Student Privacy Pledge, signed by 75 education technology companies committing voluntary not to sell student information or use education technologies to send students targeted ads.  It has been discussed whether self-regulation would work and whether the proposed Act would go far enough.  The President remarked that parents want to make sure that children are being smart and safe online, it is their responsibility as parents to do so but that structure is needed for parents to ensure that information is not being gathered about students without their parents or the kids knowing about it.  This hinted at a notification requirement and opt-out for student data mining that is missing from state legislation but is a requirement of the Children’s Online Privacy Protection Act of 1998.  Specifically, COPPA requires companies and commercial website operators that direct online services to children under 13, collect personal information from children under 13, or that know they are collecting personal information from children under to children under 13 to provide parents with notice about the site’s information-collection practices, obtain verifiable consent from parents before collecting personal information, give parents a choice as to whether the personal information is going to be disclosed to third parties, and give parents access and the opportunity to delete the children’s personal information, among other things.

President Obama noted that his speech marked the first time in 80 years—since FDR—that a President has come to the FTC.   His speech at the FTC on Monday was the first of a three-part tour leading up to his State of the Union address.  Next, the President also planned to speak at the Department of Homeland Security on how the government can collaborate with the private sector to ward off cyber security attacks.  His final speak will take place in Iowa, where he will discuss how to bring faster, cheaper broadband access to more Americans.

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Senators Kerry and McCain Introduce the Privacy Bill of Rights Act of 2011

Sen. John Kerry (D-Mass.) and Sen. John McCain (R-Ariz.) introduced today a bi-partisan privacy bill, the Privacy Bill of Rights Act of 2011, a bill “[t]o establish a regulatory framework for the comprehensive protection of personal data for individuals under the aegis of the Federal Trade Commission, and for other purposes.”

The Act would apply to covered entities, that is, “any person who collects, uses, transfers, or stores covered information concerning more than 5,000 individuals during any consecutive 12-month period,” and is a person a person over which the FTC has authority pursuant to section 5(a)(2) of the Federal Trade Commission Act , a common carrier, or is a non-profit organization (p.29-30).

The Act would be enforced by the FTC and by State Attorney Generals (p.30-31). However, no simultaneous enforcement by a State Attorney General and the FTC would be allowed. The Act would also prevent private rights of action (p.37).

The FTC would establish rules to be followed by nongovernmental organizations administrating safe harbor programs. Participation in these programs would be voluntary, not mandatory (p. 37-41).

The right of security and accountability

Not later than 180 days after the enactment of the Act, the FTC would initiate a rulemaking proceeding requiring covered entities to implement security measures protecting the coverd personal data information they collect and maintain. These security measures would be proportional to the size, type, and nature of the collected information (p.15). Covered entities would have a duty “to respond to non-frivolous inquiries from individuals regarding the collection, use, transfer, or storage of [their] covered information.”

Covered entities will “in a manner proportional to the size, type, and nature of the covered information that it collects, implement a comprehensive information privacy program.” Such a program would be a “privacy by design program,” which would “incorporate necessary development processes and practices throughout the product life cycle that are designed to safeguard (… ) [individuals’] personally identifiable information based on both individuals’ reasonable privacy expectations in their data  and relevant threats against data privacy (p.17).

The right to notice, consent, access, and correct information

Not later than 60 days after the enactment of the Act, the FTC would initiate a rulemaking proceeding requiring covered entities “to provide clear, concise, and timely notice to individuals” regarding data collection, use, transfer, and storage of covered information, and also regarding the specific purposes of those practices.  Covered entities would have “to provide clear, concise, and timely notice to individuals before implementing a material change in such practice (p.18).

The FTC rulemaking proceeding would also require covered entities:

“to offer individuals a clear and conspicuous mechanism for opt-out consent for any use of their covered information(…);  to offer individuals a robust, clear, and conspicuous mechanism for opt-out consent for the use by third parties of the individuals’ covered information for behavioral advertising or marketing;  to offer individuals a clear and conspicuous mechanism for opt-in consent for (… ) the collection, use, or transfer of sensitive personally identifiable information other than (i)to process or enforce a transaction or deliver a service requested by that individual; (ii) for fraud prevention and detection; or (iii) to provide for a secure physical or virtual environment ( … )”

In case of bankruptcy or if an individual requests termination of a service, a individual would have the right to request that all of his personally identifiable information maintained by covered entity, except for some publicly shared information or information that the individual authorized the sharing of, “be rendered not personally identifiable,” or, if this is not possible, the covered entity will have to stop the use or transferring such information to a third party (p.18-20).

The right to data minimization, constraints on distribution, and data integrity

Covered entities would be authorized to collect “only as much covered information relating to an individual as is reasonably necessary “during a transaction or when delivering a service requested by the individual. However, covered entities could keep such data “for research and development conducted for the improvement of carrying out a transaction or delivering a service” and for “internal operations” such as customer satisfaction surveys (p. 24-25).

Covered entities will have to require by contract that any third party to which they transfer covered information use the information only for purposes consistent with the provisions of the Act, and as specified in the contract (p. 25), unless the covered entity obtains individuals’ consents to such transfers. Data transfers to unreliable third parties would be prohibited (p.27).

Data integrity would be achieved by covered entities by establishing and maintaining “reasonable procedures to ensure that (… ) covered information (… ) is accurate in those instances where the covered information could be used to deny consumers benefits or cause significant harm” (p. 28).

More information here.

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Power i

An industry group is launching its response to the FTC’s challenge for better self-regulation of behavioral advertising.  In a variety of fora, the FTC has made it clear that it wants to see stronger and more clear disclosures regarding targeted on-line advertising.  The challenge of just how to provide useful information to consumers, who may or may not understand the technologies at issue, has proved problematic to say the least.

The Future of Privacy Forum’s answer, reported today in the New York Times, is a new "Power I" symbol that will alert consumers that further information is available regarding the source of the content they are seeing.  The hopes is that this will give consumers the power to understand and shape how their information is used online. 

The open question is whether the Power I will be enough for an FTC that seems uncomfortable with notice and consent (a/k/a contractual) solutions, and seems inclined to regulate in this area of rapidly evolving technologies.  And of course it also remains to be seen whether consumers will view this "Power I" as empowering information, or as a "Power Eye" invading their privacy. 

The full story is over at The New York Times, in the article by Stephanie Clifford, "A Little ‘i’ to Teach About Online Privacy."