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Of Apps and Antitrust: FTC Monitoring Kicks Into High Gear

By Peter S. Vogel
Feb 13, 2013 5:00 AM PT

Periodically we are reminded that the Federal Trade Commission plays a major role in regulating the Internet. For instance, the FTC is in charge of protecting privacy on the Internet in the U.S. and continually starts new privacy initiatives as the use of the Internet evolves.

Of Apps and Antitrust: FTC Monitoring Kicks Into High Gear

Unlike the EU, which has strict data privacy rules, the FTC has decided that websites are not required to have privacy policies at all -- and those sites can do anything they like with personal identifiable information.

However, if a website sells your PII -- such as your IP address or your phone number -- despite having a privacy policy that promises it will not be sold, then the FTC may sue to force the site to comply with its own privacy policy.

Another major function of the FTC is a job it shares with the Department of Justice -- to regulate anticompetitive activities. Over the years, the FTC and DoJ have split their anticompetition responsibilities by industries.

With respect to Internet regulation, the FTC has taken responsibility for search engines -- specifically Google. Comscore's latest rankings indicate 66.7 percent of all U.S. searches are conducted on Google, and Pew Research's statistics show that about 92 percent of all adults use search engines every day.

However, in many EU states, Google accounts for 90 percent of all searches, so many competitors see Google as a target for antitrust issues, as I have mentioned in other columns.

FTC Continues to Launch Initiatives to Protect Privacy

FTC Chair Jon Liebowitz's recent announcement of his resignation comes at a time when many privacy and antitrust issues are on the front page of all news services, and when the FTC has several privacy initiatives under way.

One of those privacy initiatives is to better police the information mobile apps collect from smartphones and tablets. The FTC recently "recommended that mobile app stores should consider developing dashboards that allow app users to review the types of personal data accessed by the apps they have downloaded," Network World reported.

Children's Use of Apps - Alarming News About Privacy

In 2012, 80 percent of apps used by children gave them access the Internet (compared with 62 percent in 2011), and 13 percent could access user geolocation (compared with 10.5 percent in 2011), the FTC found.

Several hundred of the most popular educational and gaming mobile apps for children fail to give parents basic explanations about what kinds of personal information the apps collect from children, who can see that data, and what they use it for, The New York Times reported.

The FTC's 2012 Report, entitled "Mobile Apps for Kids: Disclosures Still Not Making the Grade," is a follow-up to a similar report in 2011.

It concludes by calling "on everyone involved in the mobile app marketplace -- app stores, app developers, and third-parties that interact with the apps -- to follow the three key principles and related advisory laid out in the FTC's Privacy Report:

  1. adopting a 'privacy by-design' approach to minimize risks to personal information;
  2. providing consumers with simpler and more streamlined choices about relevant data practices; and,
  3. providing consumers with greater transparency about how data is collected, used, and shared."

The Privacy Report also states the following:

Of greatest relevance to the findings in this report, industry participants must work together to develop accurate disclosures regarding what data is collected through kids' apps, how it will be used, who it will be shared with, and whether the apps contain interactive features such as advertising, the ability to make in-app purchases, and links to social media.
Perhaps in part because of the fact that smartphones and tablets are in use by children, coupled with apps' alarming invasion of children's privacy, the FTC in 2010 starting evaluating children's use of technology.

As a result, for the first time since Congress passed the Children's Online Privacy Protection Act (COPPA) in 1998, the FTC issued new guidelines for children under 13. Before the new guidelines were issued, the FTC focused on protecting children's personal information when they visited websites, and restricting what websites could do with information on children under age 13.

The FTC's COPPA Guidelines, which go into effective July 1, 2013, include many critical suggestions:

  • Modify the list of "personal information" that cannot be collected without parental notice and consent, clarifying that this category includes geolocation information, photographs and videos;
  • Offer companies a streamlined, voluntary and transparent approval process for new ways of getting parental consent;
  • Close a loophole that allowed kid-directed apps and websites to permit third parties to collect personal information from children through plug-ins without parental notice and consent;
  • Strengthen data security protections by requiring that covered website operators and online service providers take reasonable steps to release children's personal information only to companies that are capable of keeping it secure and confidential;
  • Require that covered website operators adopt reasonable procedures for data retention and deletion; and
  • Strengthen the FTC's oversight of self-regulatory safe harbor programs.

Time will tell if these new COPPA guidelines will help protect children.

FTC Concludes That Google Does Not Violate Antitrust Laws

Although the FTC recently issued a ruling exonerating Google from anticompetition, Chairman Liebowitz "stumbled in an attempt to rein in the Internet search practices of Google," The New York Times reported.

Competitors, advertisers and some consumer advocates had complained that Google manipulated the results of its Internet searches to give top-priority to results that featured companies in which it held an interest, while punishing those that were a competitive threat.

The FTC and Google recently announced a landmark agreement regarding allegations of antitrust behavior by Google's search engine. That settlement agreement also requires Google to share patents for smartphones "on fair, reasonable and nondiscriminatory terms ... needed to make popular devices such as smartphones, laptop and tablet computers, and gaming consoles."

The FTC also announced that it concluded Google's search engine was not anticompetitive:

The evidence the FTC uncovered through this intensive investigation prompted us to require significant changes in Google's business practices. However, regarding the specific allegations that the company biased its search results to hurt competition, the evidence collected to date did not justify legal action by the Commission.

Undoubtedly, Google took aggressive actions to gain advantage over rival search providers. However, the FTC's mission is to protect competition and not individual competitors. The evidence did not demonstrate that Google's actions in this area stifled competition in violation of U.S. law.

Not everyone is happy with the FTC settlement:

Consumer groups, Google's rivals and some legal analysts say the company now will be emboldened to enhance the visibility of its own products for travel, shopping and other lucrative services in ways that will make it harder for people to find other offerings and will lead to higher prices, The Washington Post reported.

After almost two years of investigation by the FTC, surely Google, at least, is pleased. It remains to be seen how this FTC resolution will impact the search engine market.

E-Commerce Times columnist Peter S. Vogel is a partner at Gardere Wynne Sewell, where he is Chair of the Internet, eCommerce & Technology Team. Peter tries lawsuits and negotiations contract dealing with IT and the Internet. Before practicing law, he was a mainframe programmer and received a Masters in computer science. His blog covers IT and Internet topics.

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