Are You In Compliance?

January 16, 2012Article
Smart Business Los Angeles

By Natasha Shabani

Online Privacy Policies for Websites and Mobile Apps

If your company’s website collects personal information from California residents, a California privacy protection law requires you to post a privacy policy on your site detailing what personal information your site collects and what is being done with that personal information.

A privacy policy is an online legal notice providing information about the use of consumers’ personally identifiable information by the business owner. There currently is no federal law requiring a business owner to post an online privacy policy, but there is a California state law. Moreover, the Federal Trade Commission and state attorneys general regularly investigate website owners and, most recently, mobile app owners who collect personal information without consent and share that information with third parties.

In 2004, California became the first state to enact a law mandating that a privacy policy be posted on any website that collects personally identifiable information about California residents. The California Online Privacy Protection Act (CalOPPA), extends beyond California’s borders because websites all over the world can be accessed by California residents who may submit their personally identifiable information at any time. CalOPPA requires privacy policies to set forth what information is collected and how it is shared. Those who fail to comply with CalOPPA risk civil suits for unfair business practices.

As mobile apps grow in number and popularity, many consumers find themselves providing personal information via mobile apps downloaded on their smartphones or tablets. However, the majority of apps either do not have a posted privacy policy at all or have one that is buried somewhere on a page where the consumer is unlikely to see it.

Recently, this issue has earned the scrutiny of the California Attorney General’s office, which has taken the position that apps are subject to the requirements of CalOPPA just as traditional websites are.

Thus, if you operate a website or app that allows consumers to make purchases, sign up for mailings, enter contests or sweepstakes, engage in social networking, or otherwise collect and/or share users’ personally identifiable information, you should post an online privacy policy.

"Personally identifiable information" generally means any information collected online about an individual consumer, such as his/her name, address, email, telephone number, Social Security number, or any other information that permits the physical or online contacting of a particular individual.

On Oct. 30, 2012, California Attorney General Kamala Harris sent formal notices to approximately 100 app owners, including United, Delt and OpenTable, informing them that their apps violate CalOPPA. The companies have been given 30 days to conspicuously post a privacy policy within their app that informs users of what personally identifiable information about them is being collected and what will be done with that personal information. Noncompliant companies may face stiff fines of $2,500 for each time that the noncompliant app is downloaded by a California user.

This recent crackdown by Attorney General Harris is consistent with an agreement she forged earlier in 2012 among the leading mobile and social app platforms to improve privacy protections for app users. Those platforms – Amazon, Apple, Google, Hewlett-Packard, Microsoft and Research in Motion, later joined by Facebook – agreed to implement global privacy principles to bring the app industry in line with CalOPPA requiring mobile apps that collect personal information to have a privacy policy. This agreement also requires consumers to have the opportunity to review an app’s privacy policy before they download the app rather than after and offers consumers a consistent location for an app’s privacy policy on the application-download screen in the platform’s store.

To comply with CalOPPA, as well as FTC and state standards, your privacy policy should address all of the following:

• What personal information is collected?

• How is the collected data used? Is it disclosed to third parties? If so, to whom?

• Are cookies used? What type of information is recorded?

• How can consumers opt out from receiving emails and from disclosure of their information to third parties?

• Is personal information collected from children under the age of 13? If so, how is verified parental consent obtained, in compliance with the federal Children’s Online Privacy Protection Act?

• How are the server and online operations kept secure?

• How can a consumer review and make changes to his/her personally identifiable information?

• How can consumers learn of material changes made to the privacy policy?

• What is the effective date of the privacy policy?

Most importantly, once you have a good privacy policy in place, your company must act in accordance with it. Many online companies have been prosecuted by the FTC and state attorneys general for having a "deceptive" privacy policy – one that does not reflect the actual practices of the company. Specifically, recent litigation in this area has focused on companies that posted privacy policies promising not to share their customers’ personal information but subsequently did disclose data to third parties. Another problem area is when companies make material changes to their privacy policies without giving consumers appropriate notice and an opportunity to opt-out.

Once you have adopted a legally compliant privacy policy that you are comfortable with, the privacy policy must be "conspicuously posted" on your website or app, in accordance with CalOPPA. A link to the privacy policy should appear on the homepage of your website or on the download screen for your mobile app. The link should contain the word "privacy," either in capital letters or in a contrasting font or be otherwise distinguishable from the surrounding text.

Finally, to the extent possible, your privacy policy should be written in clear and simple language that the average consumer can understand. Certainly legal compliance with CalOPPA and other laws is essential; however, if your privacy policy is so filled with legal jargon that your users feel confused about and distrustful of your privacy practices, they may lack confidence in your business and will not feel comfortable providing their information to you online.

Be sure to enlist the expertise of counsel to help you draft a privacy policy that is not only legally compliant but also clear, concise and easy to understand.

As published in Smart Business Los Ange