FTC May Revisit Order Against Sears In Privacy Case

The Federal Trade Commission may take another look at a 2009 settlement order that restricts Sears' ability to engage in online data collection.

The order, which is slated to expire in 2029, requires the company to "clearly and prominently" disclose any programs that track consumers' online activity. Those disclosures must be on a separate screen, and must appear before the final user agreement. The disclosures must include a host of information including all types of data that may be collected, and whether that data may be used by a third party.

In a rare move, Sears is asking the FTC to revise the settlement. The company, which is currently restructuring its business, says the order is causing "significant hardship" -- particularly when it comes to mobile apps, which Sears says are key to its digital commerce plans.

"The inclusion of the mandatory disclosures and consents creates friction in the initial application launch process, disrupting the mobile app’s user experience during a user’s first interaction with each mobile app -- a time that is critical to user retention," Sears says in a petition filed with the FTC late last month. "As a consequence, the timing of the mandatory disclosures that Sears must display results in an initial app flow that unavoidably discourages adoption of Sears’ apps as compared to similar apps offered by Sears’ primary competitors."

The FTC said this week it is seeking public comments on Sears' request.

The settlement stemmed from allegations that Sears distributed tracking software created by a third party as part of a market research program. (The FTC didn't name that third party, but Harvard Business School professor Ben Edelman reported in 2008 that Sears was working with comScore.)

Sears had sent emails inviting people to download software, and promised them $10 if they kept the program for at least one month. The emails said the software would track "online browsing." But the FTC found that language insufficient to convey that the software would monitor nearly all online activity, including banking activity, video rentals, library borrowing histories and online drug prescription records.

At the time, the FTC's enforcement action struck some observers as unusual, given that the company paid people who downloaded the software, and that there were not any allegations of identity theft or financial harm.

Sears now argues that much has changed in the last eight years, and that the terms of the original order are "obsolete and impractical" for mobile apps.

"Sears’ consumers expect that in order to interact with the company’s sites, forms, and offerings, some data collection, use, and sharing is necessary," the company contends.

The company specifically argues that the requirement to make clear and prominent disclosures before collecting data should not apply in all situations, including when the app collects data about its configuration, whether it's functioning, and information regarding consumers' use of the program.

It's not yet clear whether the Republican-dominated FTC will revisit the case. But it won't be surprising if the agency does so, given the recent explosion of tracking technologies.

Tanya Forsheit, a privacy lawyer with Frankfurt Kurnit Klein & Selz, points out that much has changed in the ad-tech world since 2009.

"Lots of companies are doing very, very granular and personalized tracking," she says, adding that some are also appending information from data brokers about people's offline activity. She adds that it's "extraordinarily difficult" for companies to come up with a "short, user friendly privacy policy" that discloses the full extent of their tracking.

The FTC is accepting comments through December 8.

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