FTC Issues Business Alert on Illegal Use and Sharing of Location, Health and other Sensitive Data
On July 11, 2022, the Federal Trade Commission’s Bureau of Consumer Protection issued a business alert on businesses’ handling of sensitive data, with a particular focus on location and health data. The alert describes the “opaque” marketplace in which consumers’ location and health data is collected and exchanged amongst businesses and the concerns and risks associated with the processing of such information. The alert specifically focuses on the “potent combination” of location data and user-generated health and biometric data (e.g., through the use of wellness and fitness apps and the sharing of face and other biometric data for app/device authentication purposes). According to the alert, the combination of location and health data “creates a new frontier of potential harms to consumers.”
The alert highlights the particular risks posed by reproductive health data (e.g., data generated by menstruation, fertility and contraceptive tracking apps) when combined with location data. As an example of the potential misuse of such data, the alert cites an enforcement action brought by the Massachusetts Attorney General against a marketing company for its alleged “geofencing” of abortion clinics to identify individuals who were near the clinics and send targeted ads to the individuals’ phones with links to websites with information about abortion alternatives.
The alert also focuses on the role of (1) mobile operating systems that collect sensitive data; (2) app publishers and software development kits (SDKs) that “embed tools in mobile apps to collect location information and provide the data to third parties”; and (3) data aggregators and data brokers that (a) collect information from multiple sources, (b) draw sensitive inferences from such data (e.g., regarding a consumer’s pregnancy status), (c) create profiles about consumers using such data, and (d) sell access to such data to marketers, researchers and government agencies. The alert portrays the ad tech and data broker ecosystems as “often shadowy,” and states that companies in these industries “have a profit motive to share data at an unprecedent scale and granularity.”
The alert provides the following guidance to companies with respect to sensitive data:
Sensitive data is protected by state and federal laws, including those enforced by the FTC. These include Section 5 of the FTC Act, which prohibits unfair and deceptive trade practices, and the HIPAA Safeguards Rule, the Health Breach Notification Rule, and the COPPA Rule.
Claims that data has been “anonymized” or “aggregated” are often deceptive and can constitute a deceptive trade practice under the FTC Act when untrue. The alert states that “anonymized” data can frequently be re-identified, particularly when it involves location data, and references research that identified 95% of individuals using only four location points with timestamps. The alert warns that businesses making false claims about data anonymization “can expect to hear from the FTC.” This is of particular relevance to companies operating in the ad tech and data broker space that may make these claims.
The FTC “cracks down” on businesses that misuse consumer data. The alert highlights the FTC’s recent enforcement actions against companies for the alleged misuse of consumer data, including against (1) ad exchange OpenX for allegedly collecting location data from users who opted out of being tracked, and from children in violation of COPPA, which resulted in a $2 million settlement; (2) Kurbo/Weight Watchers for alleged COPPA violations and indefinitely retaining sensitive consumer data, resulting in civil penalties of $1.5 million, and an order to destroy any models or algorithms developed using children’s personal information; (3) CafePress, a custom merchandise platform, for its alleged failure to implement reasonable security measures (including the failure to implement reasonable data retention practices) and failure to respect consumers’ deletion requests, which resulted in an order requiring the company to pay a fine and minimize its data collection practices; and (4) Flo Health, a fertility tracking app, for the alleged over-collection, indefinite retention, misuse, and improper sharing of consumer data, including allegations that the company shared app users’ health information with third-party marketing and analytics services despite representations that the company would keep such information private.
The alert warns businesses that the FTC is “committed to using the full scope of its legal authorities to protect consumers’ privacy” and that the agency will “vigorously enforce the law if [it] uncover[s] illegal conduct that exploits Americans’ location, health, or other sensitive data.”
The alert comes days after President Biden’s Executive Order that, in part, directed the FTC to “consider actions, as appropriate and consistent with applicable law (including the FTC Act) to protect consumers’ privacy when seeking information about and provision of reproductive health care services.”