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May 30, 2011

FTC’s Settlement With Google Provides Game Changing Internet Privacy Regulations

You’ve certainly heard about Google’s highly promoted BUZZ service which is designed to compete directly with Twitter by offering much of Twitter’s basic functionality with a Facebook-like platform including location data integrated into Gmail. What you may not have heard is that the Federal Trade Commission (FTC) recently made BUZZ the poster child for the FTC’s effort to show that the old tried and true privacy protection methodology is now not enough.

Once again, the FTC has upped the ante for privacy requirements, and all websites are expected to comply with the new game changing regulations, or face the consequences.

The FTC’s Allegations

On March 30, 2011, the FTC announced a proposed consent order regarding Google’s BUZZ service. According the FTC, Google had engaged in deceptive practices regarding discrepancies between its privacy policy statements and its actual practices regarding BUZZ.

Google’s privacy policy stated in part: “When you sign up for a particular service that requires registration, we ask you to provide personal information. If we use this information in a manner different than the purpose for which it was collected, then we will ask for your consent prior to such use.”

When Google launched BUZZ, Google invited its Gmail users to sign-up with two options: * “Sweet! Check out Buzz”, or * “Nah, go to my inbox”.

The FTC alleged that both of these options were deceptive. The “Sweet” option was allegedly deceptive because users were not clearly informed that the identities of certain of their email recipients would be made public by default. The FTC claimed this was contrary to Google’s promise to obtain consent for new information uses and also in violation of Google’s requirements in its self-certified participation in the US-EU Safe Harbor program.

The “Nah” option was allegedly deceptive because users were unwittingly enrolled in certain parts of BUZZ despite selecting “Nah”.

The Game Changers

As part of the proposed settlement, Google is required to implement a comprehensive privacy program with very specific mandated requirements and to undergo privacy audits over the next twenty years. This requirement is not new. The FTC has historically signaled its expectations through consent orders with similar requirements.

What’s new, and certainly game changing, are the following.

* Covered Information. Up to now, privacy regulations has focused on “personal information” that may be used to identify an individual person. From now on, the focus will be on “covered information” which the FTC construes to cover additional elements including screen names, location data, and lists of contacts.

* Privacy by Design. Generally, privacy by design is a holistic approach where privacy compliance is designed physically into systems from their inception, rather than waiting to address compliance the end of the design process or separately through a published privacy policy. Although at this time there is scant information regarding privacy design specifics, a safe bet is that privacy by design will involve pop-up or interstitial messaging regarding the use and sharing of covered information at the time a user discloses information or opts in to a specific program.

This is in stark contrast to the current practice of providing all such messaging in a separately published privacy policy.

Conclusion

With the proposed BUZZ settlement, the FTC has aggressively raised the bar in terms of privacy requirements for all online businesses. In essence, the FTC settlements have created “common law” regarding privacy, and websites that fail to comply do so at their peril.

Expect more specific information regarding the game changers in the form of additional suits and settlements by the FTC in the near future.


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