Phone Tracking And The Law: Clear Sailing

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Attorney Mark D. Rasch is the former head of the U.S. Justice Department’s computer crime unit and today serves as Director of Cybersecurity and Privacy Consulting at CSC in Virginia.

In the ongoing Nordstrom/Euclid cell phone tracking debate, it seems that Nordstrom (NYSE:JWN) failed to ask all three necessary questions when using any technology that might raise a privacy concern. These questions are, in no particular order: Is it legal? Is it profitable? And is it wise? Ask only two of these three questions, and you can be in deep trouble.

The debate surrounds the Seattle-based retailer's use of a vendor called Euclid, which captures information from the Wi-Fi signals of both customers and passersby.

Is it legal?
There is no specific U.S. law on whether MAC addresses are "personal information" entitled to legal protection. Moreover, U.S. law regarding things like access to cell phone records and cell phone usage probably don't apply to the Wi-Fi portion of the device. So although it may constitute an unlawful "trap and trace" or "pen register" to capture a cell phone number or IMEI of a cell phone, these laws likely don't apply to capturing the MAC address of a Wi-Fi-enabled device. Put simply, your iPad or Wi-Fi-enabled iPod isn't a phone, nor is the non-phone portion of your iPhone, Blackberry, Android or Windows mobile device.

So the "ping" is probably legal. Or better yet, probably not expressly prohibited under current U.S. law (lawyer tip—always equivocate. Always.).

The next question is whether a MAC address is "personal information." Generally, a MAC address would not be considered personal information, any more than the serial number of your toaster would be personal information. It identifies a device, not a person, and it reveals no information about that device except the manufacturer and that it is a device. Big fat hairy deal, right?

But a Wi-Fi-enabled device does reveal a lot more than a toaster. And a MAC address can reveal intimate personal information, depending on how it is used and what information it is used with.

For example, Valentine's Day was last week, and you and your girlfriend (each with a separate device) strolled into Nordstrom. The Euclid sensor picks up the unique MAC addresses and follows the two unknown devices into the store. Yours veers off to hardware (I know, Nordstrom doesn't have hardware, but stay with me here) and hers walks to to women's shoes. Hmm. I detect a pattern. You then meet at jewelry and stay there for about 15 minutes. You leave together. Personal information? Maybe.

A few hours later, your MAC address again pings the store. This time, it's accompanied by an entirely different MAC address. This time, it's your wife's MAC address. Busted! Hard to say that the MAC address with the traffic data is not, in some way, "personal."

Now we add the anti-theft cameras, the parking lot cameras capturing license plate information and even the registers themselves. Pretty easy to turn an anonymous MAC address into a real-life, real-time profile of a specific person. And each bit of information is perfectly legal to capture. Now, this is not what either Euclid or Nordstrom are doing. That's fine. Except that Euclid is collecting and storing the raw MAC address and traffic data. What can it do with it? The Nordstrom privacy policy doesn't explicitly say. How does Euclid protect the data? How does the vendor store it? How and when does it purge that data? Can Euclid aggregate it and sell the same data to third parties? (As the initial story noted, Euclid says its policies do not permit such sales. But policies can be changed, and there is nothing in the law that would restrict the vendor from doing so.) When I walk past a Euclid sensor, say a Starbucks (NASDAQ:SBUX) in Denver, can that Starbucks know I was at a Nordstrom in Dallas a week earlier? Can the vendor know I was at the shoe department? It's not so simple to say, "we don't share this information" or "it's not personal information."

Is it profitable?
Footfall data is supposedly useful to retailers, because they can use this anonymized and aggregated data to determine things like store locations, product placements, and where and when customers go. So footfall data is clearly profitable for Euclid, and it may ultimately be profitable for Nordstrom or other retailers.

Is it Wise?
The final question is whether this is a good idea. Nordstrom made good strides by doing two things. Apparently, the retailer placed notices outside its stores, offering some information about the policy, and provided the quoted privacy policy with more information. Euclid's Web site provides a way for users to opt out of the data collection if they provide their MAC address to Euclid and type in a Captcha (those annoying letters and numbers to prevent fraud). It's not very difficult to do, but it is a pain.

At the end of the day, anytime a retailer is collecting, storing, using, selling, transferring or analyzing data about a customer, that retailer needs to put itself in the shoes of its customers (in Nordstrom's case, very nice shoes) and ask, "what would I want to know about this?" As a retailer, you want trust, which comes from openness, honestly and, potentially, an "opt in" rather than an "opt out." And ask hard questions of the vendors, too. Find out how they will use the information collected, whether they will sell it and secure it, and how they will delete it. And put that in your privacy statement, too. Another question to ask is, "if my customers knew I was doing this, would they be upset?" If the answer to that question is "yes," then maybe you should rethink the policy. If the answer is "no," then hey, just tell them.

If you disagree with me, I'll see you in court, buddy. If you agree with me, however, I would love to hear from you.