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, identitytheft.gov.

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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FTC’s Data Privacy Staff Report – Comments Due Jan. 31

Last week, the Federal Trade Commission released its long-awaited privacy report.  Called “Protecting Consumer Privacy in an Era of Rapid Change”, the 79-page preliminary staff report outlines a framework for consumer privacy based on three principles: (1) Privacy By Design; (2) Simplified Choice; and (3) Transparency. 
 
Some of its key proposals include: a “Do Not Track” browser add-on and other changes to consumer privacy choices; broadening the scope “to all commercial entities that collect consumer data in both offline and online contexts, regardless of whether such entities interact directly with consumers;” and looking at whether COPPA-style consent requirements should apply to teenagers. The FTC is requesting comments on the report by January 31, 2011, and plans to issue a final report later in 2011. Annexed to the report are six pages of questions to which the FTC seeks comments.
 
The first half of the report discusses the principles of “notice and choice” and “harm” that have formed the basis for the FTC’s privacy-related policy work, educational efforts, and enforcement actions. It also summarizes the FTC’s activities and provides an overview of key issues raised during several years of roundtable discussions involving consumer advocacy groups, businesses, academicians and others. The second half of the report expands on the new principles, which appear to simply consolidate and expand upon the earlier principles – “notice” becomes “transparency”, “choice” becomes “simplified choice”, and “harm” becomes “privacy by design”:
  • Privacy by Design – Companies are urged to “incorporate substantive privacy and security protections into their everyday business practices and consider privacy issues systemically, at all stages of the design and development of their products and services.” Companies are urged to collect information only for a specific purpose, limit the amount of time that data is stored, use reasonable safeguards, and develop comprehensive, company-wide privacy programs. However, the FTC staff also recognizes that these measures need to be tailored to each company’s data practices – companies that collect limited amounts of non-sensitive data need not implement the same types of programs required by a company that sells large amounts of sensitive personal data.
  • Simplified Choice – Companies should “describe consumer choices clearly and concisely, and offer easy-to-use choice mechanisms . . .at a time and in a context in which the consumer is making a decision about his or her data.”  The FTC is proposing a new “laundry list” approach to determine whether or not companies need to provide choice to consumers. For example, defined “commonly accepted practices” generally will not require choice, whereas other practices may require either (1) some type of choice mechanism; (2) enhanced choice mechanism; or (3) even more restrictions than enhanced consent. As this is designed for both online and offline behaviors, categorizing each company’s practices as “commonly accepted” or not could be a daunting task.  A chart below outlines the basics of simplified choice.  
    • Do-Not-Track: The day after the report issued, the Commerce Department’s NTIA testified to Congress that it would be convening industry and consumer groups to discuss the “achieving voluntary agreements” on Do-Not-Track.   The FTC would then “ensure compliance with these voluntary agreements, as appropriate.” 
    • ABA Antitrust Section Members note: Companies in markets with limited competition may be subject to “Enhanced Privacy protections” and/or “Additional Enhanced Privacy Protections.” 
  • Greater Transparency – Companies should “make their data practices more transparent to consumers”. The FTC suggests developing a standardized policy like the notice templates currently developed for financial companies complying with Gramm-Leach-Bliley. The FTC is also considering whether increase the transparency of data broker activities and proposes allowing consumers to access (but not necessarily change) profiles compiled about them from many sources.
Two Commissioners issued concurring statements to the proposed framework. Commissioner Kovacic called some of the recommendations “premature” – including the Do-Not-Track proposal. He also pointed out the report lacked consideration of the existing federal and state oversight of privacy concerns. Commissioner Rauch issued a concurring statement that applauds the report as a useful “horatory exercise”, but criticizes the new approach. He states that it could be overstepping the FTC’s bounds to consider “reputational harm” and “other intangible privacy interests” if no deception is involved.
 
Stay tuned – there are many privacy developments on the horizon. In remarks delivered with the report, Chairman Liebowitz declared that “despite some good actors, self-regulation of privacy has not worked adequately and is not working adequately for Americans consumers.” He signaled that the FTC will be bringing more cases in the coming months – and that cases involving children are of particular interest.  In addition, the Commerce Department’s “green paper” on Commercial Data Privacy is expected soon.
 
                                                            Table – Simplified Choice
 
Choice Not Required
Choice Mechanism REQUIRED
Choice Not Required
No choice, but Additional Transparency (Notice)
(Unspecified – presumably Company Discretion; also Do Not Track)
Enhanced Consent (Affirmative Express Consent)
“Even more heightened restrictions” than Enhanced Consent
Do Not Track
1. “Commonly Accepted Practices” 
Laundry list of practices, report suggests: first party marketing (FTC seeks comment on scope); internal operations, legal compliance, fraud prevention.
 
1. Technically Difficult/not feasible to provide choice mechanism: e.g. Data Brokers? (comment sought)
2.“Enhancement?” – compiling data from several sources to profile consumers (comment sought re: whether choice should be provided about these practices?) 
1. Not “Commonly Accepted Practices” and not “Technically Difficult” e.g. Data Brokers (comment sought).
1. Sensitive Information for online behavioral advertising; information about children, financial & medical information, precise geolocation data.
2. Sensitive Users: Children: Teenagers (staff seeks comment); Users who lack meaningful choice (lack of competition in market) (Staff seeks comment).
3. Changing specific purpose: Use of data in materially different manner than claimed when data was posted, collected, or otherwise obtained.
1. Lack of alternative consumer choices through Industry factors (competition): Broadband ISP deep packet inspection.
2, Others?
 
1. Online Behavioral Advertisers.
2. Others?
 


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FTC Announces Public Roundtables on Consumer Privacy Issues

On September 15, 2009, the Federal Trade Commission unveiled a series of public roundtables that will focus on the effect of modern technology and business practices on the privacy of consumer information.  The goal of the panels is to explore how to best balance the concerns for consumer privacy, beneficial use of consumer information and technological innovation.  The discussions will address myriad technologies and practices, such as social networking, cloud computing, behavioral marketing, mobile marketing and, generally, the collection of consumer information for various purposes.  The roundtables will also consider the adequacy of existing legal and self-regulatory frameworks.  Participants will include academics, privacy experts, consumer advocates, industry representatives, technology experts, legislators, and experts from outside the United States.  The Commission has asked individuals and organizations to submit requests to participate as panelists and suggest discussion topics.  The Commission also has asked interested parties to submit written comments and research on the issues of (i) risks, concerns and benefits associated with the collection and use of consumer information, (ii) consumer expectations of how their information is used, and (iii) the adequacy of existing legal requirements and self-regulatory regimes in protecting consumer privacy interests.

Click here for more information on the Commission’s news release.