Antitrust Law Daily Wrap Up, CONSUMER PROTECTION NEWS: Retail tracking firm settles FTC charges of misleading consumers about opt-out choices, (Apr 23, 2015)

By Linda O’Brien, J.D., LL.M.

Nomi Technologies, a company whose technology allows retailers to track consumers’ movements through their stores, has agreed to settle FTC charges that it misled consumers with promises that it would provide an in-store mechanism for consumers to opt out of tracking and that consumers would be informed when locations were using the tracking services, the agency announced today (In re Matter of Nomi Technologies, Inc., File No. 132-3251).

According to the FTC complaint, beginning in late 2012, the company’s privacy policy promised that Nomi would provide an opt-out mechanism at stores using its services. This promise implied that consumers would be informed when stores were using Nomi’s tracking technology. The complaint alleges that these promises were not true because no in-store opt-out mechanism was available, and consumers were not informed when the tracking was taking place.

The complaint alleged that Nomi collected information on about nine million mobile devices within the first nine months of 2013. The complaint is the FTC’s first against a retail tracking company.

Nomi placed sensors in its clients’ stores that collect the media access control (MAC) addresses of consumers’ mobile devices as the devices search for WiFi networks. MAC addresses are unique 12-digit identifiers that are assigned to individual mobile devices. Although Nomi “hashes” the MAC addresses prior to storing them, the hashing process still resulted in an identifier that was unique to a consumer’s mobile device and could be tracked over time, the complaint stated.

The complaint claimed that Nomi tracked consumers both inside and outside their clients’ stores, tracking the MAC address, device type, date and time the device was observed, and signal strength of consumers’ devices. In reports to clients, Nomi provided aggregated information on how many consumers passed by the store instead of entering, how long consumers stayed in the store, the types of devices used by consumers, how many repeat customers enter a store in a given period, and how many customers had visited another location in a particular chain of stores.

Under the terms of the proposed consent order with the FTC, Nomi will be prohibited from misrepresenting consumers’ options for controlling whether information is collected, used, disclosed, or shared about them or their computers or other devices, as well as the extent to which consumers will be notified about information practices.

The Commission vote to issue the complaint and accept the proposed consent order was 3-2, with Commissioners Maureen K. Ohlhausen and Joshua D. Wright dissenting. Chairwoman Edith Ramirez and Commissioners Julie Brill and Terrell McSweeny issued a separate statement in support of the action, noting that Nomi’s express opt out promise was false and material, and therefore deceptive. Commissioners Ohlhausen and Wright issued separate dissenting statements.

The FTC will publish a description of the consent agreement package in the Federal Register shortly. The agreement will be subject to public comment through May 25. Interested parties can submit comments electronically.

“It’s vital that companies keep their privacy promises to consumers when working with emerging technologies, just as it is in any other context,” said Jessica Rich, Director of the Bureau of Consumer Protection. “If you tell a consumer that they will have choices about their privacy, you should make sure all of those choices are actually available to them.”

Companies: Nomi Technologies, Inc.

News: ConsumerProtection FederalTradeCommissionNews