Dive Brief:

• The Federal Trade Commission last week granted a petition from Sears Holdings to reopen and modify a 2009 order settling charges that Sears did not adequately disclose the scope of personal information collected from consumers on an app that tracked users, according to a press release.
• An administrative complaint that preceded the 2009 order said Sears "deceptively failed to disclose the full extent of the software’s data collection." The settlement order required Sears to supply clear and prominent warning of the collection practices of any "Tracking Application" as defined in the order, then obtain consumers’ express consent to that data collection prior to downloading or installing the software, according to the statement.  
• In its petition, Sears asked the FTC to reopen and modify its definition of "Tracking Application" due to changing circumstances and public interest. Sears said the old definition unnecessarily restricts its ability to compete in the mobile app marketplace. By changing the definition to exclude data about application functionality, the company will be able to "keep step with current market practices" related to retail online tracking applications.

Dive Insight:

The mobile marketplace has evolved significantly in the last nine years, along with expectations related to data tracking and the FTC’s regulation of it. This modification allows Sears to better track customers and gather data from app users.

The Sears settlement order may have broader significance for retailers that collect information via mobile apps and other platforms, according to a report from JD Supra. The FTC has clarified that it generally does not expect heightened notice given regarding data use involved in the functionality of applications "in performing a service the consumer expects." Such application functionality is distinct from such other forms of data use as passive tracking, cross-application tracking or third-party tracking, for which the FTC continues to support heightened forms of consumer notice and consent.

The FTC decided that changed conditions of fact require the reopening of the order, and as a result has made the modifications proposed by Sears. While the modified order still covers mobile applications, the FTC added exceptions to the definition of "Tracking Application." These "exclude software that tracks only the configuration of the software program or application itself; information regarding whether the software program or application is functioning as represented; or information regarding consumers’ use of the program or application itself," according to the statement. 

In response to the Sears petition, 12 public comments were filed with FTC, reported The National Law Review. All opposed modification of the consent order. Many comments raised general concerns about data collection. The FTC acknowledged their "concerns about maintaining the order’s strong protections for consumer privacy," and said making the modifications would "continue to fulfill the goal of maintaining strong protections for privacy without unduly burdening consumers or Sears."

In 2009, the FTC complained Sears told consumers that the software would track their "online browsing," according to a press release. But the commission added that that the software would also monitor consumers' online secure sessions — including those on third parties' websites — and collect information transmitted in those sessions, including the content of shopping carts, online bank statements, drug prescription records, video rental records, library borrowing histories, as well as the sender, recipient, subject and size for web-based e-mails. The software would also track some computer activities that were not related to the Internet.

The FTC required Sears in the settlement to stop collecting data from the consumers who downloaded the software and to destroy all data it had previously collected. Most of the requirements in this settlement remain in place as the modification only affects functional aspects of applications related to how they operate.