Sears' Online Snooping Nets Fed Smackdown

Under a proposed settlement with the U.S. Federal Trade Commission, Sears has agreed to destroy incredibly detailed and personal information it collected about the activities of people who signed-up to become members of an online "community" between April 2007 and January 2008.

The FTC has accused Sears Holdings Management Corp. of failing to adequately explain to participants in the "My SHC Community" the extent of its data-collection spyware program. (See the full text of the FTC complaint.) The information was gathered by an application voluntarily downloaded onto participants' computers. Operating in the background, the program delved deep into the lives of participants, tracking their every online move and more, said the commission.

The FTC said the highly intrusive application would "monitor consumers’ online secure sessions–including sessions on third parties’ Web sites–and collect information transmitted in those sessions, such as the contents of shopping carts, online bank statements, drug prescription records, video rental records, library borrowing histories, and the sender, recipient, subject, and size for web-based E-mails. The software would also track some computer activities that were not related to the Internet."

In addition to ordering the destruction of all information collected by the effort, the settlement directs Sears, should it decide to advertise or disseminate any tracking software in the future, to "clearly and prominently disclose the types of data the software will monitor, record, or transmit." (See the full text of the FTC settlement.) Sears also must make those disclosures "prior to installation and separate from any user license agreement" and must also disclose "whether any of the data will be used by a third party," the FTC said.

Sears spokesman Tom Aiello provided reporters with this comment: "Sears Holdings takes the safety and security of our customers' private information very seriously. The company conducted a research project nearly two years ago with a small panel of consumers who were recruited online to better understand the surfing behavior of U.S. retail customers. The panelists were informed upfront of the nature of the work being conducted and were paid for their participation in the study. At all times, Sears Holdings ensured the privacy and security of the personal information of all participants who enrolled in the program. We also worked to ensure best practices of its disclosures and notifications to panelists."The Sears statement went on to note the "research project" ended more than a year ago and stressed Sears has not been involved in anything similar since then and has no plans to do so in the future. "No customer data was ever compromised or disclosed, and all personal information was destroyed at the end of the project," added Sears. "Any software that was downloaded by panelists was also removed at the conclusion of the research period with each participant. No tracking software is being deployed on any of Sears Holdings’ sites or communities.”

The original Sears research was done in partnership with Comscore and Aiello stressed that Sears played a minor role. "Comscore was the research company that conducted the research on our behalf as they do for dozens of other major companies. We didn’t create any software," he said. "All data was deleted after the study was completed, just as with surveys (with) Neisen or other survey vendors."

Aiello also said that, even though Sears and Comscore collected all of that data, the information that was delivered to Sears was devoid of any sensitive, personal information. "We never received or looked at any personal information, just aggregate reports. All data was anonymous in any case. No human gets to see any of the personal information and PII was scrubbed automatically. But we probably should stay away from commenting on process and what Comscore does."

Harvard Business School Assistant Professor Ben Edelman, an Internet security advocate, was one of the first to discover and write about what Sears was doing. "Sears’ tracking was deplorable," Edelman said after the FTC settlement was announced. "The FTC has confirmed that Sears’ software tracked not just ordinary Web browsing and searching, but medical records, financial records, and even library book usage. No wonder Sears couldn’t tell users, simply and directly, what the software actually did. What users would accept such detailed and onerous tracking? But, to Sears’ credit, they substantially stopped this practice once the public (myself included) began to express concern."

Invitations to join the "My SHC Community" appeared to some people as they visited Sears.com and Kmart.com. The invitations called upon users to “participate in exciting, engaging, and on-going interactions – always on your terms and always by your choice” and Sears paid participants $10.

The FTC said Sears disclosed (in a very long user license agreement) the full extent of its information gathering plans that appeared "at the end of a multi-step registration process." The commission said the disclosure failed to plainly and adequately warn participants about the depth of the data gathering and, therefore, was deceptive and in violation of FTC regulations.

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