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Behind the Scenes

Never Mind the NSA, Privacy Groups Set Sights on Big Retail

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Never Mind the NSA, Privacy Groups Set Sights on Big Retail

With the proliferation of smart phones and other mobile devices, it has never been easier for brands and marketers to collect data about the habits and desires of their customers. But, as a group of major national retail stores recently discovered, the proliferation of data has also led to a renewed sensitivity to consumer privacy.

Just as retailers track consumer behavior when they shop online, retailers are eager to track consumer behavior when they shop in old-fashion brick and mortar stores, and mobile devices are finally making this possible. Using “mobile location analytics,” technology companies are working on services that would provide aggregate reports to retailers on everything from consumer shopping patterns, check-out waiting times, and the optimal store layout.

However, the effort has led to a backlash, particularly after it came to the attention of US Senator Chuck Schumer (D-NY), who has spearheaded an effort to raise awareness about the issue. Now, a group of technology companies, a think tank called the Future of Privacy Forum, and Senator Schumer have announced a new Code of Conduct that would govern use of in-store tracking technology. Specifically, the new Code calls on retailers and other companies that engage in in-store tracking to provide conspicuous notice to consumers that their behavior is being tracked, including information about how the data is used and how they can opt-out of the practice. The Code also calls on companies to limit their collection of information from mobile devices and to agree to never use the data in an adverse manner relating to employment eligibility, credit eligibility, health care, or pricing.

Although the Code is optional and self-regulatory, it could provide a basis for enforcement action by the Federal Trade Commission against companies that agree to the policy but then fail to follow its terms. Further, if enough analytics companies that are developing the tracking technology decide to adopt the Code, it could force retailers to choose between adopting the Code themselves or forgoing tracking altogether. Retailers should be mindful of the Code as they move forward with developing new technologies to track and target their customers.

Arent Fox will continue to monitor developments related to the new Code and in-store tracking. Please contact Anthony Lupo, Sarah Bruno, Eva Pulliam, or Dan Jasnow with questions.

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