Privacy Policies, Terms of Service, and FTC Enforcement: Broadening Unfairness Regulation for a New Era

Michigan Telecommunications and Technology Law Review, Dec 2012

This Note examines website privacy policies in the context of FTC regulation. The relevant portion of Section 5 of the Federal Trade Commission Act, 15 U.S.C. § 45(a), uses the following language to define the scope of the agency's regulatory authority: "Unfair methods of competition in or affecting commerce, and unfair or deceptive acts or practices in or affecting commerce, are hereby declared unlawful." Specifically, this Note analyzes the FTC's power to regulate unfair practices (referred to as the FTC's "unfairness power") granted by Section 5, and also discusses the deception prong of Section 5, which allows the agency to regulate and prevent deceptive commercial acts by businesses. This Note argues that, given the prevalence of confusing and obscure data collection practices, the FTC must aggressively interpret its statutory authority in order to effectively protect consumers. By examining three prominent websites--Google, Facebook, and Twitter--this Note demonstrates how some of their practices might be considered unfair toward consumers, in light of the statements set out in their privacy policies. However, the FTC would need to reformulate its policy choices concerning unfairness and pursue a more aggressive regulatory strategy in order to address those potentially unfair practices. Part I of this Note examines the recent history of the FTC and its enforcement powers, including a close analysis of the FTC's policy statements on deception and unfairness and their future implications. In Part II, this Note explores the procedures and challenges of applying the legal standards in deception and unfairness cases. In Part III, the focus turns to Google and its recent decision to create a cross-platform privacy policy. Facebook, the subject of Part IV, remains in the news for privacy violations, despite a history of controversies concerning its handling of user data. Finally, Part V discusses Twitter and the ramifications of the FTC's settlement with the microblogging service--the first case brought against a major social network. In conclusion, this Note examines the likelihood of change in the FTC's approach, the recent attention given toward consumer online privacy by the White House and the FTC, and possible trends in privacy regulation in the near future.

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Privacy Policies, Terms of Service, and FTC Enforcement: Broadening Unfairness Regulation for a New Era

Cite as: G.S. Hans, Privacy Policies,Terms of Service, and FTC Enforcement: Broadening UnfairnessRegulation for a New Era Privacy Policies, Terms of Ser vice, and FTC Enforcement: Broadening Unfairness Regulation for a New Era G. S. Hans 0 1 2 3 4 0 Commons , Organizations Law Commons, and thePrivacy Law Commons 1 Part of theAdministrative Law Commons, Comm unications Law Commons , Internet Law 2 University of Michigan Law School , USA 3 This Note is brought to you for free and open access by the Journals at University of Michgian Law School Scholarship Repository. It has been accepted for inclusion in Michgian Telecommunications and Technology Law Review by an authorized editor of University of Michgian Law School Scholarship Repository. For more information , please 4 G. S. Hans, Privacy Policies, Terms of Service, and FTC Enforcement: Broadening Unfairness Regulation for a New Era, 19 Mich. Telecomm. & Tech. L. Rev. 163 (2012). Available at: Follow this and additional works at: http://repository.law.umich.edu/m ttlr Recommended Citation - * J.D., University of Michigan Law School, 2012; M.S. in Information, University of Michigan School of Information, 2012; Editor-in-Chief, Vol. 17, Michigan Telecommunications and Technology Law Review. With thanks to my thesis advisor, Professor Don Blumenthal, and the other members of my thesis committee, Professor Jessica Litman and Alissa Centivany; Liz Allen, Musetta Durkee, Joseph Lorenzo Hall, Chris Kurpinski, Aaron Melaas, and Brandon Weiner; and Cliff Helm, Alexa Nickow, Liza Roe, Juliana MacPherson, and the MTTLR Volume 19 staff. INTRODUCTION As Americans continue to embrace the Internet as a tool for communications, business, and social interaction, a host of issues surrounding privacy, data collection, and monetization of content remain both hotly debated and increasingly urgent. In the early years of the commercial Internet, many websites-from Amazon to NYTimes.com to Craigslist-offered their services and content for free. As a result, consumers became accustomed to receiving free content, rather than having to pay individual websites or networks a subscription fee.1 Exploiting user data is a lucrative and effective method for websites to earn money and avoid charging consumers. User data consists of information that users provide to websites, information regarding a user's browsing habits on a particular site, or both, and can reveal a great deal about the user herself, from individual preferences to biographical information to browsing history. This data can be sold or shared with third parties, allowing advertisers to create more targeted advertisements for individual users. In some cases, there are broad social benefits to collecting user data. For example, over the past few years, Google aggregated user search data to track flu outbreaks. The site could even have reported some of these outbreaks before the Center for Disease Control.' Yet collecting too much user 1. Indeed, when the New York Times announced that it would institute a "pay wall" by restricting content to paid subscribers and allowing non-subscribers a limited number of articles to read per month, reactions were mixed, though the pay wall was ultimately deemed successful. Don Reisinger, NYTimes: Consumer Pay Wall Response "Positive," CNET (July 21, 2011, 6:41 AM), http://news.cnet.com/8301-13506_3-20081371-17/nytimes-consumerpay-wall-response-positive/. 2. Miguel Helft, Google Uses Searches to Track Flu's Spread, N.Y. TIMES, Nov. 11, 2008, at Al. data could be disturbing to website users. When the extent of data collection is revealed, users' emotions have escalated to anger and frustration.3 A website's privacy policy should, in theory, make it clear to a website's users if and how their data is being collected, and for what purposes. These privacy policies, however, can be quite long and difficult for an average user to comprehend. Moreover, their claims may not be accurate, and users may have no way of knowing what data is collected and what exactly happens to or with their data. The federal government-specifically the Federal Trade Commission ("FTC"), an independent agency charged with protecting American consumers-has played a crucial role in regulating the collection and use of consumer data online. But in a rapidly changing online ecosystem, government regulation may not be sufficient to protect consumers. This Note examines website privacy policies in the context of FTC regulation. The relevant portion of Section 5 of the Federal Trade Commission Act, 15 U.S.C. § 45(a), uses the following language to define the scope of the agency's regulatory authority: "Unfair methods of competition in or affecting commerce, and unfair or deceptive acts or practices in or affecting commerce, are hereby declared unlawful." Specifically, this Note analyzes the FTC's power to regulate unfair practices (referred to as the FTC's "unfairness power") granted by Section 5, and also discusses (...truncated)


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G. S. Hans. Privacy Policies, Terms of Service, and FTC Enforcement: Broadening Unfairness Regulation for a New Era, Michigan Telecommunications and Technology Law Review, 2012, Volume 19, Issue 1,