Category Archives: Consumer Privacy & Marketing

Microsoft Leans Pro-Privacy With Its Do Not Track Browser Settings

Microsoft has caused quite a stir regarding an updated product that hasn’t yet shipped. The new version of its Explorer web browser will be preset to reject tracking of a person’s online movements. The company’s Chief Privacy Officer, Brendon Lynch, confirmed in a blog post that Windows 8 (containing Explorer 10 web browser) will have Do Not Track (DNT) enabled as the default setting.  DNT tells advertising and analytics companies that an individual does not want to have their information collected or used.  Naturally, if your company’s business model relies of being able to track users, having the world’s most popular web browser (ostensibly) make that choice for its users, doesn’t sit well. By default, users would be opted-out of tracking. Opponents of Microsoft’s decision include the influential World Wide Web Consortium (W3C), which had asked the company to make it an option rather than a preset. Others theorize that advertisers may simply ignore users’ preference arguing that Microsoft, not the individual consumer, chosen not be to tracked. This is topical and raises several very interesting privacy questions that may lead to legislative initiatives or legal challenges.

Google to Pay $22.5 Million Record Fine to FTC over Safari Tracking

Google agreed to pay a record $22.5 million to settle claims levied by the Federal Trade Commission (FTC) that Google violated an earlier privacy settlement it had with the agency.

Google placed advertising tracking cookies on the computers of Apple’s Safari browser who visited sites within Google’s advertising network for several months in 2011 and 2012. (Safari is the browser used in Macs, iPhones and iPads. Google’s ad network is DoubleClick.) This misled consumers who were assured that they were automatically opted out of tracking because Safari’s default setting blocks most cookies coming from third parties.

The Commission said Google’s misrepresentation to Safari users broke the terms of a 2011 FTC settlement decree relating to privacy problems with Google’s now defunct Buzz social networking tool. Google did not admit to violating the 2011 decree, but agreed to disable all the tracking cookies it said it would not place on consumers’ computers.

Jon Leibowitz, Chairman of the FTC, reaffirmed the Commission’s commitment to enforce consumer privacy rights, saying “No matter how big or small, all companies must abide by FTC orders against them and keep their privacy promises to consumers, or they will end up paying many times what it would have cost to comply in the first place.”

California Attorney General Forms New Privacy Unit With A-Team Prosecutors

California’s top attorney, Kamala Harris, announced the launch of the Department of Justice’s Privacy Enforcement and Protection Unit, being formed to guard the privacy of Californians by prosecuting violators of state and federal laws.  The press release says “The Privacy Unit will police the privacy practices of individuals and organizations to hold accountable those who misuse technology to invade the privacy of others.”  The new department, with six veteran prosecutors, will wield broad enforcement powers over cyber privacy, health privacy, financial privacy, identity theft, government records and data breaches. It will operate within the eCrime Unit that Harris created in 2011.

Congress Probes Leading Data Brokers on Dossiers

On Tuesday, the Congressional Privacy Caucus sent inquiry letters to nine of the largest data brokers regarding their privacy practices, including how they collect, analyze and sell consumer information.  Data brokers are organizations that compile data on consumers and sell that data to third parties for marketing and other purposes.  “By combining data from numerous offline and online sources, data brokers have developed hidden dossiers on almost every US consumer,” the letters said.  This practice is worrisome to privacy advocates and particularly the Federal Trade Commission (FTC), which has been candid in its statements and in its March report on consumer privacy, stating that the FTC intends to crack down on these unregulated data aggregators.  The settlement with Spokeo last month is reportedly the first with others to follow this year. The Privacy Caucus, co-chaired by Reps. Ed Markey (D-Mass.) and Joe Barton (R-Texas), seems to be weighing legislative action to demand oversight and industry accountability.  Companies receiving the letter were Axciom, Epsilon (Alliance Data Systems), Equifax, Experian, Harte-Hanks, Intelius, Fair Isaac, Markle and Meredith Corp.  The companies have until August 15 to respond.

Privacy Basics: Phishing. How Not To Be the Bait

Phishing is a deceptive method in which a criminal sends an email or text that mimics or claims to be from a trusted source (such as a bank, or the Internal Revenue Service, or the Better Business Bureau, or the Federal Trade Commission) in an attempt to steal personal and financial information from you – such as a social security number, credit card number, account number or password.

This scheme only works if the perpetrator convinces you to go from the email or text to a bogus website.  Below are some tips on how to spot a phishing email.  Once you spot it, delete it.

  • You’ve Got (an Unexpected) Email!  Let common sense be your guide. Legitimate companies don’t ask for personal information via email or text.
  • Act Now!  Online scammers prey on vulnerabilities. One trick is to create a sense of urgency by convincing you that something bad has happened (or will happen) and you need to act quickly or there will be dire consequences. For example, they might threaten to close your account or take other action against you if you don’t act quickly.
  • “Dear Account Holder.”  Most phishing emails have generic salutations like “Dear Account Holder” or “Our Valued Customer” or “Dear Client” or “Greetings”
  • Phishing Expeditions Request Your Personal Information.  Remember, the aim of a phishing expedition is to get you to surrender your personal information. Be especially suspicious if you are asked to update your information; that’s a very common ploy.
  • Link is Forged. Don’t be duped by a web link that appears to be legitimate just because you may recognize some part of the business name in it. That doesn’t mean it links to an official website. One trick to ferret this out is to scroll over the link and see if it matches the sender’s email address.  If not, that’s your answer.
  • “S” stands for “Secure.”  Only provide personal or financial information through a website if you have personally typed in the web address directly into the browser yourself, and the site appears to be secure.  Tip:  Websites that are safe start with “https:” – where the “s” stands for secure. If you don’t see “https:” it’s probably not a legitimate website.

Spear phishing is a more sophisticated form of phishing.  In the case of spear phishing, the presumed sender of the email an individual within your company and it’s generally someone with authority like a “System Specialist” or “Network Administrator.”  Spear phishers target sensitive confidential information of the company. Frequently, the email or text will request you to either log in to a bogus web page that requires the employee’s user name and password, or to click on a link (that will initiate the download of spyware or malware on your computer or the company’s network). 

  • Tip:  If you don’t recognize or have doubts about the identity of the email Sender, you should look them up on your company’s directory or contact your supervisor.


  • Once you’ve spotted a phishing message, delete it.
  • If you accidentally click on the phishing link and a program downloads on your computer or network, contact your tech support department right away.
  • Add signature blocks to your emails so that you’re easily identifiable as a company employee. Include name, title and phone number so you can be contacted directly.


Data Broker Spokeo to Pay $800,000 Under FTC Settlement

Online data broker Spokeo agreed to pay $800,000 to settle Federal Trade Commission (FTC) charges that it marketed information profiles on millions of consumers to companies that used them for employment screening, without taking necessary steps to protect consumers.  This misuse of data violated federal law, specifically the Fair Credit Reporting Act (FCRA), because Spokeo operated as a consumer reporting agency but it failed to disclose the source of its data or give consumers the chance to correct inaccurate information, among other things.  The conduct occurred between 2008 and 2010 when the company marketed the data on a subscription basis.  The settlement was announced by the FTC on June 12, 2012.

Spokeo is a data aggregator, merging personal information it collects about consumers from online and offline data sources to create detailed individual profiles of consumers.  A profile might include name, address, age range, email address, ethnicity, religion, photos, hobbies, and participation on social networking sites.  Spokeo describes itself as a “people search engine.”

This case is important because it’s the first FTC case to address the sale of Internet and social media data for employment screening.  The FTC also accused Spokeo of posting deceptive endorsements of their services on news and technology websites and blogs “portraying the endorsements as independent when in reality they were created by Spokeo’s own employees.”  These misleading endorsements violated the Federal Trade Commission Act.

Victims of Data Breach Would Take Action!

A recent Unisys Security Index survey asked 1,000 individuals in the U.S. what they would do if they learned that their personal information, stored by an organization that they were doing business with, had been accessed through a security breach.  Nearly all said they would take some form of action including:

   87% would change their passwords

   76% would stop dealing with the company by closing their account

   65% would publicly expose the data breach

   53% would take legal action

   31% would maintain their account with the company, but not engage in online transactions

   Only 3% of the respondents said they would do nothing at all!

Data Breach Costs Decline for First Time in Seven Years

In March, Ponemon Institute released the results of its seventh annual study concerning the cost of data breach incidents for U.S. companies.  The 2011 study examined costs incurred by 49 companies in 14 different industries after the companies experienced the loss or theft of personal information.  As required by state data breach laws, the companies had to notify breach victims.  Ponemon’s study findings do not apply to “catastrophic breaches” which would include data breaches of more than 100,000 compromised records.

Some highlights from the report are:

  • The cost of a data breach declined.  The cost to a U.S. company declined from $7.2 million in 2010 to $5.5 million in 2011, and the cost per record declined from $214 to $194.  This was the first time both costs have declined in the same year since the study began.
  • More customers remain loyal after a data breach than in previous years.
  • “Lost business costs” declined significantly from $4.54 million in 2010 to $3.01 million in 2011. In previous studies, the highest cost for lost business was $4.59 million in 2008 and the lowest was $2.34 million in 2005.  Lost business costs include customer churn and reputation losses.
  • The cost to notify breach victims increased in 2011’s study from approximately $510,000 to $560,000.
  • The study found that the overall cost of a data breach can be reduced based on organizational decisions like if, for example, the company has a Chief Information Security Officer (CISO), the cost drops as much as $80 per record.  Engaging external consultants during a breach response can reduce cost by as much as $41 per record.
  • Certain factors of the data breach can increase overall cost like the fact that data breaches caused by third parties or a lost or stolen device increased the cost by $26 and $22, respectively.  Companies that notified customers too quickly without completing a comprehensive investigation paid on average $33 more per record.  Companies that experienced their first ever data breach in 2011 spent on average $37 more per record.
  • Negligent insiders and malicious attacks are the main causes of a data breach. Surprisingly, 39% of companies participating in the study said that negligence was the main cause of the data breaches.  Malicious or criminal attacks account for more than one-third of the total breaches reported in the study.


RockYou to Settle with FTC Over Massive Data Breach

The social networking and gaming site was hacked in December 2009 and suffered a severe data breach, which exposed personal information including email addresses, passwords and photos of 32 million users.  Of that 32 million, 179,000 were children.  The situation went from bad to worse for RockYou when the hacker posted on the Internet a snippet of the data he obtained, showing that RockYou’s user account data were stored in plain text in its database and not encrypted.  Unencrypted personal information is basically like catnip to a hacker and from a risk perspective, the company was in deep trouble. Compounding its problems, RockYou handled the communication to its users and the public horribly and this incident was a public relations disaster for the company.

The magnitude of the data breach drew the attention of the Federal Trade Commission (FTC).  The FTC is the federal agency responsible for enforcing laws that protect online consumers.  The FTC is especially proactive when the personal information of children is compromised.  RockYou is one company on a growing list of companies that the FTC has aggressively pursued for violating the Children’s Online Privacy Protection Act, known as COPPA, which the FTC enforces.  In short, COPPA requires that before a website collects, uses or shares personal information it receives from a child under 13, the website operator must get verified parental consent (commonly referred to as “email plus” verification method).  The rule also requires websites to post a clear, understandable and complete privacy policy on their site.

Here, the FTC investigated and found that RockYou’s information security practices were deceptive, posing a significant risk to consumers and that the company had violated COPPA by gathering personal information from kids under 13 over a two-year period without obtaining the mandatory parental consent.  In addition, the company failed to spell out in its posted privacy policy how the information it collected would be used or shared.  Finally, RockYou was faulted for not maintaining reasonable security procedures to prevent breaches like the one that occurred.  The FTC came down hard on RockYou for its mistakes.  According to a proposed settlement order with the FTC announced on March 27, 2012, RockYou must pay a $250,000 penalty for COPPA violations, implement a data security program, and submit to security audits every other year for 20 years.  In addition, the company it is barred from any further violation of COPPA and prohibited from making deceptive claims regarding privacy and data security. 

The takeaways?  This is a story about the consequences of a company’s deceptive business practices, failed data security program and clearly a lack of preparedness when faced with a large scale data breach.  Aside from the $250,000 fine and attorneys’ fees the company must pay, the other economic costs here are lost business costs and the widespread damage to RockYou’s reputation and brand caused by this catastrophic breach.

Nolo’s Privacy Matters Blog Premieres!

Welcome to Privacy Matters, a Nolo blog devoted to information privacy and data security issues as they relate to small businesses and consumers.  Information privacy covers the rules that apply to the gathering and handling of “personal information” — in other words information that can be traced to a particular individual, like geolocation information, credit information, or health records. 

Privacy law varies by industry, state, country, transaction and customer and is complicated.  Through blog posts and an ongoing series of Nolo primer articles, I hope to provide general, useful information about fundamental privacy principles and best practices that Internet, technology and bricks and mortar businesses need to be aware of, as this area of law can be a field of landmines for the unknowing.

Class action lawsuits and Federal Trade Commission enforcement actions against tech titans like Facebook and Google, and high-profile data breaches jeopardizing that private data of millions of individuals and tarnishing the reputations of scores of companies like Sony, Heartland Payments Systems and RSA Security — have thrust privacy onto the front pages.  It’s important for small business owners to recognize that the same rules that have gotten large companies into trouble apply to small businesses as well.  When it comes to privacy, an once of prevention is, in fact, worth a pound of cure.