As has been widely reported in the press, efforts continue unabated by the marketing industry to keep online privacy and web-user tracking outside the ambit of federal or state legislation. These self-regulatory initiatives have received unprecedented praise from the Federal Trade Commission and the White House, with a shared belief that government needs to first let industry police its practices on its own.
Self-regulation is something industry has done very well in the past, with initiatives focusing on marketing to children, nutritional advertising, and many other areas of concern. And while Microsofts recent announcement that its newest version of Explorer (IE10) will have its default set to do not track rather than the industrys preference of allowing consumers to opt out caught marketers off guard and hatched a firestorm of debate, there is no question that at both the trade association and business levels there is unity in the desire to thwart off regulatory control by providing transparency and choice to consumers.
That balance, however, may have dramatically changed on June 21 when the National Association of Attorneys General (NAAG) announced its agenda for 201213. Under the leadership of Marylands attorney general, Douglas Gansler, NAAG will spearhead a national initiative examining privacy and the Internet. According to Gansler, the initiative, Privacy in a Digital Age, will begin this summer with panel discussions at NAAGs summer meeting, focusing on online gaming and the theft of childrens Social Security numbers.
But one would be very naïve to believe NAAG will stop there. Its far more likely that NAAG will broaden its involvement and include topics on mobile marketing, privacy policies in general, online targeting, and more pervasive oversight of nutritional and childrens advertising practices. This is particularly true with respect to mobile advertising, clearly the most important digital media for marketers.
New Jersey Attorney General Jeffrey Chiesas recent action against mobile app developer 24x7digital is a clear indication of how AGs are intent on inserting themselves more aggressively into the digital privacy debate. AG Chiesa alleges 24x7digitals collection and distribution of the names and unique device identifiers from children without parental consent is a violation of the Childrens Online Privacy Protection Act (COPPA), an area about which NAAG and its members have been relatively silent. Indeed, Chiesas case is an important reminder of how misguided the market can be when it relies on the historical dormancy of state regulatory action, even when the AGs have authority to act. Too many companies have learned the lesson that while AGs may be sleeping at times, it doesnt take much to wake them up.
This past February, mobile app developers were targeted by California Attorney General Kamala Harris over concerns that many do not adequately disclose their apps data collection practices to consumers. The state resolved those concerns through agreements with six leading mobile app platform providers, requiring them to create, implement, and maintain more transparent privacy policies.
NAAG members have also expressed serious concerns over privacy policy revisions by Facebook and Google. NAAG members have long argued that companies should mean what they say in their privacy policies, and should not make unilateral changes that harm consumers. Those concerns resulted in an agreement between Facebook and AG Harris for Facebooks App Center. The case remains open with regard to Google (both in the United States and Europe).
Why should this be of concern to corporate counsel, and what should they do or prepare in response?
First and foremost, whenever NAAG gets a collection of AGs involved with a marketing methodology or industry sector, the playing field drastically changesto the distinct disadvantage of marketers. The costs associated with an investigation by a multitude of AGs are daunting enough, let alone the whipsaw effect the market suffers from such joint activity. So any time NAAG shows an interest in a marketing practice, corporate counsel need to take heed and inventory what their companies are doing in the area receiving NAAGs attention. As such, now would be a good time to ask your technology and marketing groups what theyre doing in the digital space.
Furthermore, corporate counsel need to make sure their lobbyists are attuned to NAAGs activities and encourage them to keep the prime focus at the federal, and not the state, level. Unless there is a clear message from Washington that the issues are being well addressed, NAAG will step in. Thats exactly what NAAG did when the states became disenchanted with the progress the feds were making with regulating tobacco marketing. NAAGs joint action by nearly every AG in the country resulted in a settlement agreement with virtually all the major tobacco companies on marketing practices that went beyond anything the federal authorities could obtain and the Constitution would allow. The lesson learned is that NAAG is a very worthy advocate, with the advantage of multi-state actions that are extremely expensive to defend even if there is merit to a defense.
This brings us back to NAAGs focus on the mobile Internet. Without question, mobile apps are the future of digital marketing. If not already a necessity, smartphones are quickly becoming the media for engaging consumers across every product or service sector, from watching movies to ordering groceries. The expression, Theres an app for that is no longer speculationits reality, with literally millions of apps available for iPhones, Android devices, and just about every other mobile platform. As such, corporate counsel need to stay on top of legal developments in the mobile space as their clients continue to use that medium to reach customers and consumers. While it will never replace traditional broadcast or print, hundreds of millions, if not billions, of dollars are already being spent in the mobile marketing space, and this trend shows no sign of abating.
Its never good news to be targeted by NAAG or to see NAAG focusing on marketing practices of a particular industry sector. But it is very disconcerting when NAAG targets practices that cross all industry sectors, and then threatens to use its collective leverage to change how marketers reach out to their customers and consumers far beyond what traditional notions of the law would allow. At that point, it all too often becomes social engineering, not consumer protection.
Special thanks to Paul Bond and Christine Nielsen for their contributions to this column.
Douglas Wood is a partner in the New York office of of Reed Smith LLP. He specializes in media and entertainment law and is editor of Network Interference-a Legal Guide to the Commercial Risks and Rewards of the Social Media Phenomenon, a White Paper on how social media globally impacts every level of business. The White Paper is available here. Mr. Wood can be reached at [email protected] or through LinkedIn, Facebook, or Twitter.