Privacy & Information Security Law Blog

Following numerous complaints about the use of behavioral advertising technology by internet service providers, the European Commission (the “Commission”) launched infringement proceedings against the United Kingdom for an alleged failure to keep people’s online details confidential. The EU Telecoms Commissioner, Viviane Reding, has called upon the UK to change its national laws to ensure the confidentiality of communications by prohibiting interception and surveillance without the user's consent. If the UK does not comply, the Commission can issue a final warning before taking the UK to the European Court of Justice.

News last week that Chinese and Russian hackers had infiltrated the U.S. electrical power grid gave practical significance to already high-profile issues in Washington -- how better to secure the nation’s cyber-infrastructure.  Late in 2008, the Center for Strategic and International Studies Commission on Cyber Security for the 44th Presidency (the Commission) released a report citing the U.S.’s failure to protect cyberspace as “one of the most urgent national security problems” facing the Obama administration.  The failure threatens the safety and well-being of the United States and its allies and raises immediate risks for the economy.  In a global economy, where economic strength and technological leadership are as important to national power as military force, failing to secure cyberspace puts the U.S. at a disadvantage.  When Chinese and Russian intruders apparently left software on networks supporting the U.S. power grid that could be used to compromise electric and water systems, the warnings of the Commission proved true in a real-world way.

Federal Trade Commission Chairman Jon Leibowitz has appointed six senior staff members with extensive experience in the private sector, in the public interest community, in academia, and in government.

“We’re delighted to attract such a talented and creative group of people,” Leibowitz said. “Their leadership and expertise will help ensure that the Commission’s work on behalf of American consumers will continue to be effective. We’re very fortunate.”

The mere increased risk of identity theft following a data breach is sufficient to give the data subjects standing to bring a lawsuit in federal court but, absent actual identity theft or other actual harm, claims against the data owner and its service provider for negligence and breach of contract cannot survive, a federal judge ruled this month.  Ruiz v. Gap, Inc., et al., No. 07-5739 SC (N.D. Cal. April 6, 2009).

Various authorities, both at a European and a national level, are currently addressing the issue of online behavioral advertising. On March 31, 2009, Meglena Kuneva, the European Commissioner for Consumer Affairs, gave a keynote address in Brussels in which she raised the issue of online behavioral advertising and addressed the need to enhance consumer protection related to the practice. While recognizing the numerous beneficial applications for consumers made possible by the Internet, Kuneva expressed her concern that the World Wide Web could become the “world wide west” and called for a better balance between the interests of businesses and consumers. 

On March 20, 2009, the Federal Trade Commission (“FTC”) published its long-awaited guide to the Red Flags Rule (the “Rule”), entitled “Fighting Fraud with Red Flags Rule:  A How-To Guide for Business.”  The guide applies to creditors and certain financial institutions (such as state-chartered credit unions and mutual funds that offer accounts with check-writing privileges) that are subject to the FTC’s jurisdiction and addresses the provision of the Rule that requires implementation of an Identity Theft Prevention Program.  For entities subject to the FTC’s jurisdiction, the relevant compliance deadline is May 1, 2009.  Financial institutions that are regulated by federal bank regulatory agencies or the National Credit Union Administration (which issues their own versions of the Red Flags Rule) were required to comply with the Rule as of November 1, 2008.

On March 20, 2009, the Federal Trade Commission published a Red Flags Rule compliance guide for businesses, entitled “Fighting Fraud with the Red Flags Rule.”  The guide offers an overview of the Rule and practical steps businesses need to take to comply.  In addition, the guide addresses the issue that has raised the most concern among businesses -- the Rule's scope.  As expected, the FTC is interpreting the Rule broadly, suggesting, for example, that any company that sells goods or services and bills customers later is a "creditor" subject to the Rule.  According to the guide ...

Google Earth and Google Street View, two popular applications offered by Google that enable users to view detailed satellite images of buildings or street-level panoramas of major roads and neighborhoods, have recently engendered controversy.  In the United States, legislators in California and Texas have introduced bills directed at Google Earth and other similar applications.  The proposed California bill prohibits operators of commercial Internet websites that make a “virtual globe browser available to members of the public” from providing “aerial or satellite photographs or imagery” of schools, religious facilities or government buildings, unless those images have been blurred.  Violators could be fined at least $250,000 and natural persons who knowingly violate the provisions could face imprisonment between one to three years.  The proposed Texas bill prohibits any person from publishing on the Internet “an image capable of zooming into greater detail than that of an aerial photograph taken without a magnifying lens 300 feet or higher of private property not visible from the public right-of-way,” and classifies the offense as a Class B misdemeanor, which is punishable by a fine up to $2,000 or 180 days in prison.

Behavioral targeting on the Internet has recently come under the scrutiny of lawmakers and privacy advocates.  This increased interest has been triggered in part by Facebook’s and Google’s recent adoption of targeted advertising practices.  In response to growing concerns over behavioral tracking, three U.S. congressmen are preparing a draft bill that would mandate the disclosure of monitoring practices for advertising purposes.  The goal of the bill is to increase transparency and provide individuals with the opportunity to learn what information is being collected about them, by whom and how the information will be used.  At present, there are suggested best practices set forth in the Federal Trade Commission’s (“FTC’s”) Staff Report on Self-Regulatory Principles for Online Behavioral Advertising.  These Self-Regulatory Principles are designed to encourage industry self regulation for the protection of consumer privacy in online advertising activities.  The FTC is in the process of reviewing the privacy issues raised by online behavioral advertising over the course of the last decade.  An FTC Town Hall meeting to address behavioral advertising practices was hosted in November 2007.  In response to the comments received at the Town Hall meeting, the FTC issued Self-Regulatory Principles to promote industry self-regulation.  If enacted, the proposed bill would frustrate industry’s nascent efforts to self-regulate in this area.

On March 17, the Article 29 Working Party released its Opinion 3/2009 (dated March 5) on standard contractual clauses for the transfer of personal data from data controllers in the EU to data processors outside the EU. The Opinion deals with proposed changes to the European Commission's decision 2002/16 containing standard clauses for controller to processor transfers. The Opinion discusses proposals to update these clauses to accommodate data transfers to sub-processors, in light of increased global outsourcing. Although not mentioned in the Opinion, the March 17 Opinion is based on the proposal made in October 2006 to the European Commission by three business groups (the International Chamber of Commerce (ICC), the American Chamber of Commerce to the European Union (AmCham EU) and the Federation of European Direct and Interactive Marketing (FEDMA)). The proposal of the three business groups would amend the existing clauses from 2002 to bring them into line with business realities.