[co-author: Rithika Kulathila, summer associate]
Oregon’s legislature recently expanded the scope of statutory consumer protections by passing a bill to amend the state’s Unlawful Trade Practices Act (the “Act”). Recently, Oregon’s Governor Kate Brown signed H.B. 2090 into law after near unanimous passage by state lawmakers. The bill is particularly notable because it squarely targets online commerce and imposes liability on businesses for publishing false or misleading online privacy policies. Specifically, the amended Act will allow the Attorney General or county District Attorney where a violation is alleged to have occurred to:
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Hold businesses accountable for consumer-facing statements or representations of fact published online about how the business will “use, disclose, collect, maintain, delete or dispose of information” obtained from consumers. Violations arise when any such statements are “materially inconsistent” with the company’s actual practices.
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Look to company websites and consumer contracts for compliance! The new law applies not only to online statements, including privacy policies, but also to “consumer agreement[s] related to a consumer transaction.” Therefore, false representations made in a consumer contract could give rise not only to a breach of contract claim, but also to liability under the amended Act.
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Enforce alleged violations by: (1) opening an investigation and requiring from any person testimony under oath, written responses to interrogatories, or production of relevant evidence, (2) accepting or rejecting an assurance of voluntary compliance agreement with alleged violators before instituting suit, or (3) file an action in the name of the State of Oregon to seek (i) injunctive and equitable relief, (ii) reasonable attorney fees, (iii) damages up to $25,000 per willful violation, and/or (iv) any additional orders or judgments that “may be necessary to ensure cessation of unlawful trade practices.”
According to Oregon’s Attorney General Ellen Rosenblum, “if a business tells you its privacy policy is going to treat your online information a certain way—and then it doesn’t comply with what it told you—it’s in violation of the Oregon consumer protection laws.” In a Bloomberg Law article, Attorney General Rosenblum stated that while the high penalty for violations to the Oregon statue provides a “good hammer,” the Attorney General’s office will work to educate businesses rather than resorting to litigation to encourage better privacy hygiene.
What kinds of information collected from consumers trigger the law?
Oregon’s amended Act applies to information that is “request[ed], require[d] or receive[d] from a consumer.” This language arguably applies not only to voluntary information consumers give to a business through its website or otherwise, but also to information that a company’s website automatically collects from consumers. Potentially, this could extend to data the site receives through cookies and other tracking technologies. However, it is too early to say if Attorney General Rosenblum will focus oversight on statements around personally identifiable information collected by automatic means.
Oregon must have read the FTC’s playbook
Interestingly, Oregon’s new bill tracks some of the Federal Trade Commission’s (“FTC”) enforcement power under Section 5 of the Federal Trade Commission Act of 1914. Recent FTC enforcement actions seem to suggest that the FTC has power under Section 5 to hold businesses accountable for misleading/false statements in their privacy policies. For instance, in an enforcement action against Nomi Technologies, Inc., the government took issue with the company’s privacy policy that stated it would “always allow consumers to opt out” of tracking and that consumers would be informed when retailers were using Nomi’s tracking services. But, customers were not provided such notice and there not a true opt-out mechanism available at retail locations. Accordingly, the FTC entered into a 20-year consent order with Nomi in which Nomi agreed to: (1) stop the misrepresentation, (2) submit to a range of reporting and notification requirements, and (3) make available records for a period of five years related to: (i) statements disseminated to consumers about representations relating to the consent order, (ii) consumer complaints about privacy practices, and (iii) documents that may call into question Nomi’s compliance with the consent order. Similarly, in another enforcement action against Snapchat, Inc., the FTC held Snapchat liable for misrepresentations it made about collecting Android users’ GPS information and statements to the effect that “snaps” would disappear once the timer expired. The FTC and Snapchat entered into a 20-year consent order with many similar obligations as the FTC imposed on Nomi, plus an added requirement on Snapshot to maintain a comprehensive privacy program.
Of course, the FTC only has the capacity to target a limited number of large businesses, and so it is remarkable that now Oregon has codified a similar enforcement power at the state level!
How do I protect my business?
Companies need to be more vigilant about their privacy policies and claims made on their websites and in consumer contracts about consumer data. Why? Because even after doing a good job drafting a privacy policy, it is far too easy to post and then forget about while changes to the business render many aspects of the policy obsolete, misleading, or simply false. Oregon has already ramped up the potential liability and soon other states could join the fray. Here are some tips to steer clear of trouble:
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Review your company’s privacy policy on an annual basis. Make sure to involve your information technology team, sales and marketing folks, any project teams who may have new initiatives underway, and try to identify website functionality or company practices which do not align with statements in your current privacy policy.
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Following this review, check-in with your in-house legal team or outside counsel to determine if changes to your privacy policy are warranted.
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Confirm your business has controls in place to identify prospective changes within the organization or to the website that may impact the way data is collected and stored, used and disclosed, or eventually destroyed. Confirm that your legal team or an appropriate contact will be notified of these changes before they are rolled out.
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Do what you say! Be vigilant, communicate with stakeholders often, and strive to make sure your organization practices what it preaches about privacy and data security.
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