Online behavioral advertising, also known as targeted advertising, is reportedly more than twice as effective in converting users to buyers as traditional online ads, and generates twice as much revenue per ad. The benefits to advertisers from targeted advertising are clear, but consumers also receive benefits, including greater shopping efficiency and more targeted information about desirable products and services. However, targeted advertising raises privacy concerns – and new legislation in California, along with increased regulatory enforcement and class action litigation elsewhere in the country, make it imperative that companies take these concerns seriously.
The new law prescribes that operators can satisfy this disclosure requirement by “providing a clear and conspicuous hyperlink” in their privacy policies that links to an online location containing a description “of any program or protocol the operator follows that offers the consumer” the choice to opt-out of internet tracking. Because the new law does not prohibit tracking, it has been described as a transparency proposal, and not a DNT proposal.
Companies will be deemed to be in violation of the proposed law if they fail to add the disclosure provisions to their privacy policies. Companies that do not clearly explain these practices will receive a warning and be given 30 days to comply with the requirements. Lawsuits arising from claimed violations of this amendment, along with other requirements of the law, can be brought by the California Attorney General or private litigants.
California has some of the strictest privacy laws in the country, and more often than not sets the privacy standards around the country. But these issues are not limited to California. Elsewhere in the U.S., the plaintiffs’ bar has already stepped up class action activity based on behavioral tracking. Commencing in late 2010, the plaintiffs’ bar filed a series of behavioral tracking cases against cable companies providing internet services, and other putative class action complaints were filed thereafter against online retailers and financial institutions. More recently, in June 2013, the 7th Circuit Court of Appeals in Harris v. comScore allowed the largest class action case in history, with potentially millions of class members, to proceed against an online data research company in a behavioral tracking case. Regulatory enforcement regarding behavioral tracking has also increased. Last year, for example, the FTC issued a record $22.5 million civil penalty against Google for tracking in contravention of privacy settings set by users using Safari.
The message is clear. Every company that engages in behavioral tracking – whether by means of a Web site, online service, or mobile app – and whether or not that organization is based in California, should review its privacy, data collection and data tracking policies, and should consider updating them in order to stay ahead of these legislative, regulatory and litigation trends.