The Legal Battle Brewing Over LBS and Privacy

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Anxiety is rising over the use of location-based services as tools for advertising to consumers. One federal agency is pondering whether government regulation is needed, while the industry meanwhile scrambles to show that it can police itself. Surveys suggest that consumers see value in LBS, but they are concerned about their privacy. This means LBS providers must walk a tightrope in providing both privacy options and value to consumers.

Recent surveys have shown that consumers like to get location-based coupons from nearby merchants and are growing comfortable with sharing their location information. Prosper Mobile Insights’ reported that over half of the people they surveyed said they prefer to have coupons delivered to them while in the vicinity of the store offering the coupon. A survey by Microsoft in January 2011 similarly indicated that 55% of consumers in the U.S. are comfortable with location-based services if they can manage who sees their location information.

Meanwhile, it seems that many of these same consumers are also worried about their privacy, despite the benefits of LBS. Microsoft’s survey revealed that 83% of the consumers worry about loss of their privacy. Likewise, over 44% of the consumers surveyed by Prosper Mobile Insight were concerned about privacy.

The Federal Communications Commission, which regulates mobile devices, is considering whether consumer protection is needed via legislation, regulation or better self-policing by the industry. Last June 28, 2011, the FCC held a public forum featuring representatives of telecommunications carriers, technology companies, consumer advocacy groups and academia “exploring how consumers can be both smart and secure when realizing the benefits of Location-Based Services (LBS).” The FCC said it will use the testimony provided at the forum to determine whether to make recommendations about protecting consumer privacy, but did not say when it would release a report.

In response, consumer groups called for more regulation, while the industry asked for a chance to provide consumers with viable options for LBS. The Privacy Rights Clearing House urged the FCC to use its rule-making authority to provide greater protection to consumers: “These regulations should be guided by a strong set of Fair Information Principles (FIPs), with the principle of opt-in as the foundation,” the organization submitted in a paper to the FCC.

The industry told the FCC it can provide consumers with viable options. The Interactive Advertising Bureau’s counsel Michael Zaneis told the FCC  that over-regulation could impede the economic benefits of LBS: “Allowing the industry to innovate and develop new technologies and approaches to meet consumers’ privacy expectations will allow the marketplace to grow and deliver valuable new products and services to the American public,” he said.

In October 2011, the Mobile Marketing Association recommended standards in  a white paper in which marketers should “exercise great care to give consumers explicit and simple control of if, when and how their location data will be used.” The MMA recommended:

  • Give consumers notice about how their location will be used.
  • Get consent from the users to participate in LBS. That is, have consumers opt-in before initiating offerings based on location.
  • Give consumers the ability to opt out.
  • Limit the time that information is retained about a consumer’s location.

In response to pressures from the European Union, Google announced on November 14, 2011, that it was providing users the ability to opt out of wireless access point information (in other words, a user could refuse to have their location tracked based on their Wi-Fi connection).

Lawsuits also are a problem. Within the past year, consumers filed class action suits against Apple, Google and other parties, claiming that the phones’ operating systems and applications provided by developers let advertisers track users’ activities on mobile device without permission. While the lawsuit against Apple was dismissed on September 23, 2011, a similar lawsuit against Google (In re: Google Android Consumer Privacy Litigation, Case No. MDL No. 2264) remains pending in California.

The rules and risks for LBS providers are not clear, and they are evolving. The key is to reduce risk as much as possible. One approach may be to review industry practices such as those provided by the MMA and to ensure that consumers have clear choices about their options with LBS. At minimum, LBS may be offered only if:

  • Consumers specifically sign up for the services.
  • Consumers have an ability to easily opt out of the services.
  • Information about an individual consumer should not be shared with third parties unless the consumer authorizes it (such as, to fulfill a transaction like redeeming a coupon).

These suggestions are not comprehensive and should be reviewed with you counsel from time to time based on potential regulations, laws or industry standards that may evolve in the future. This column is for general information purposes only. Information posted is not intended to provide legal advice.

Brian Dengler is an eMedia attorney and journalist who covers legal issues in eMedia. He is a former Vice President of AOL, a former newspaperman and EMMY-winning TV journalist. He teaches eMedia management as an adjunct at Kent State University.

Image courtesy of Flickr user St_A_Sh.