FTC To Retailers: If You're Collecting Customer Info, Say So Clearly

Retailers that collect consumer data electronically—especially through smartphone apps—may need to tread a little more carefully after an order issued on Monday (April 15) by the U.S. Federal Trade Commission. The FTC came down hard on seven rent-to-own companies that used software to spy on PC renters who fell behind in their payments—but the companies failed to provide clear, specific notices that they would be using the spyware. That could signal that the FTC will no longer accept vague click-through opt-ins for consumer data collection from retailers in general.

The settlements finalized Monday "will prohibit the use of geophysical location tracking without consumer consent and notice, and bar the use of fake software registration screens to collect personal information from consumers," the FTC said in a statement.

But what does location tracking "without consumer consent and notice" mean, exactly? Is it something that the consumer will have to agree to every time a retailer's app goes active? That's the model for accepting website cookies under the European Union's requirements. Or will apps need to spell out much more explicitly what will be done with the location data (or other personal information) to pass muster with the FTC? What about cases in which a retailer tracks a customer through the Wi-Fi or cell signals the phone emits, even without an app on the phone? What will a store be required to do to make sure the customer is adequately informed?

And how much will be too much? Piling on unreadable fine print just to encourage customers to click through without reading is an old software trick, but it doesn't usually fare so well in court—and it's likely to do even more poorly for the first retailer hauled in because of what the FTC views as deceptive or unclear notices of how data will be collected and used.

In practice, the simplest approach may be the best: Tell customers which information you want to collect, and how, and why, as clearly and briefly as possible. What sounds reasonable to most customers—as long as they understand it—is probably the best defense against the FTC.

For more:

-See this FTC news release

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