Mobile app developers faced new scrutiny at state and federal levels this December, with app makers removing apps and taking action to respond. On December 6, 2012, California Attorney General Kamala Harris filed suit against Delta Air Lines after its failure to include a privacy policy within its mobile app.¹ A few days later, the Federal Trade Commission (FTC) issued a report titled "Mobile Apps for Kids: Disclosures Still Not Making the Grade," which concluded that industry has made little or no progress in improving privacy disclosures in children's mobile apps since the FTC issued its last report on this topic in February 2012.² The report also signaled that the FTC has launched multiple non-public investigations to "address the gaps between company practices and disclosures" and determine whether these entities in the mobile app marketplace have violated the Children's Online Privacy Protection Act (COPPA)³ or engaged in unfair or deceptive trade practices in violation of the FTC Act.⁴ These developments parallel the growth of mobile devices generally and make clear the importance of addressing privacy considerations in the mobile space.

In the Delta complaint, Attorney General Harris alleged that Delta's "Fly Delta" app violated the California Online Privacy Protection Act (CalOPPA)⁵ and California's Unfair Competition Law⁶ by collecting personally identifiable information⁷ without an applicable privacy policy. CalOPPA requires operators of commercial websites to "conspicuously" post on their websites, and operators of online services to make reasonably accessible, a privacy policy that informs consumers about the categories of personal information collected by the operators and the categories of third parties with which the data is shared. California's Unfair Competition Law prohibits individuals and entities from committing unlawful, unfair, or fraudulent business acts and practices. Attorney General Harris has taken the position that CalOPPA applies to mobile apps, and that a privacy policy for a mobile app is not reasonably accessible to consumers under that statute if it is not available to consumers within the app itself.⁸ The complaint against Delta alleged that Delta did not make a privacy policy available to consumers within the "Fly Delta" app and, furthermore, that Delta's website privacy policy neither mentioned the "Fly Delta" app nor disclosed several types of personally identifiable information that it collected.⁹ Attorney General Harris has asserted that violations of CalOPPA may result in penalties of up to $2,500 per app download.

The FTC's survey of children's apps for its December 2012 FTC staff report examined the substance of privacy disclosures, moving beyond its prior report, which focused more on the presence of disclosures. This new qualitative emphasis likely brings greater challenges for early-stage companies with limited resources.

The FTC expressed concern that a majority of surveyed apps shared children's information (including device IDs) with third parties, or included interactive features such as advertising, the ability to make in-app purchases, or links to social media services without disclosing these practices to parents.¹⁰ Both 2012 FTC staff reports examined the number of children's apps with privacy disclosures and found that most surveyed apps failed to provide any information about the data collected through the app.¹¹ The most recent report urged players in the app ecosystem (i.e., app stores, app developers, and third parties that interact with apps) to develop accurate privacy disclosures for children's apps, including disclosing the presence of interactive features. The report also expressed the view that companies should make privacy disclosures available prior to the download of an app.¹² In addition, the FTC urged the mobile app industry to develop "best practices" to protect privacy, including the three key principles from the FTC's March 2012 final consumer privacy report:¹³ (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.

In light of regulators' increased privacy enforcement against players in the mobile app marketplace, mobile app developers can expect to face continued close scrutiny of their practices. Given this enforcement focus, understanding how an app collects, uses, and discloses information is increasingly important. Formulating disclosures that accurately reflect data practices in a manner that is simple, easy to understand, and accurate poses significant challenges generally, but especially in mobile.

Attorneys in Wilson Sonsini Goodrich & Rosati's privacy and data security practice routinely assist clients with all aspects of their information practices. If you have any questions regarding mobile app privacy, please contact Lydia Parnes at lparnes@wsgr.com or (202) 973-8801, Tracy Shapiro at tshapiro@wsgr.com or (415) 947-2042, Matt Staples at mstaples@wsgr.com or (206) 883-2583, Gerry Stegmaier at gstegmaier@wsgr.com or (202) 973-8809, or Sharon Lee at slee@wsgr.com or (650) 849-3307.

¹ State of California v. Delta Air Lines, Inc., Case No. CGC-12-526741 (Cal. Sup. Ct., complaint filed Dec. 6, 2012), available at http://oag.ca.gov/system/files/attachments/press_releases/Delta%20Complaint_0.pdf.

² The December 2012 FTC report is titled "Mobile Apps for Kids: Disclosures Still Not Making the Grade" and is available at http://www.ftc.gov/os/2012/12/121210mobilekidsappreport.pdf. The February 2012 FTC report is titled "Mobile Apps for Kids: Current Privacy Disclosures are Disappointing" and is available at http://www.ftc.gov/os/2012/02/120216mobile_apps_kids.pdf.

³ Children's Online Privacy Protection Act (COPPA), 15 U.S.C. §§ 6501-6506. COPPA applies to operators of websites and online services that are directed to children or from which the operator collects or maintains personal information from users that it has actual knowledge are under 13 years of age. COPPA requires such operators to, among other things, provide detailed notice to parents and obtain verifiable consent prior to collecting, using, or disclosing personal information from children under the age of 13. The FTC has taken the position that COPPA applies to mobile apps.

⁴ FTC Act, 15 U.S.C. §§ 41-58.

⁵ California Online Privacy Protection Act (CalOPPA), Cal. Bus. & Prof. Code §§ 22575-22579.

⁶ Unfair Competition Law, Cal. Bus. & Prof. Code §§ 17200 et seq.

⁷ According to the complaint against Delta, the personally identifiable information collected by the "Fly Delta" app included, among other data, the user's geo-location, photographs, full name, telephone number, and email address.

⁸ An open question is whether CalOPPA is preempted by the Airline Deregulation Act. 49 U.S.C. §§ 40101 et seq.

⁹ CalOPPA provides that a commercial website or online service operator is in violation of CalOPPA if the operator fails to post its privacy policy within 30 days after being notified of noncompliance. When Attorney General Harris filed suit against Delta, more than 30 days had passed since she had served a warning letter to Delta.

¹⁰ FTC staff found that 59 percent of surveyed apps transmitted some information from a user's mobile device back to the developer or to a third party. In addition, of those apps, all transmitted a device ID to the app developer or, more typically, to a third party.

¹¹ The February 2012 report stated that 16 percent of surveyed apps provided parents with a link to a privacy disclosure before app download. The December 2012 report stated that this percentage had increased only slightly, from 16 percent to 20 percent.

¹² In February 2012, California Attorney General Kamala Harris and the operators of the leading mobile application platforms entered into an agreement in which those operators—Amazon, Apple, Google, The Hewlett-Packard Company, Microsoft, and Research in Motion—agreed to, among other things, provide means in their app marketplaces for app developers to make available privacy policies for all apps prior to download. See https://oag.ca.gov/news/press-releases/attorney-general-kamala-d-harris-secures-global-agreement-strengthen-privacy.

¹³ The FTC's March 2012 final privacy report is titled "Protecting Consumer Privacy in an Era of Rapid Change: Recommendations for Businesses and Policymakers" and is available at http://www.ftc.gov/os/2012/03/120326privacyreport.pdf.