Data brokers invade Americans’ privacy. But does their business model violate federal law?

August 30, 2022, 5:39 PM UTC
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Now here’s a Federal Trade Commission lawsuit that the public can get behind—even if the case doesn’t ultimately go in the agency’s favor.

FTC officials on Monday sued one of the nation’s larger data brokers, Kochava, alleging the Idaho-based company has violated federal law by acquiring and selling data that tracks consumers’ precise movements through their mobile phones. Agency lawyers said in a complaint that Kochava’s customers can use the data to identify the addresses of tens of millions of people, as well as their visits to sensitive locations (medical offices, domestic violence shelters, places of worship, etc.).

The lawsuit comes after the FTC board’s new Democratic majority, led by Chair Lina Khan, filed the agency’s first blockbuster case since gaining power, claiming that Facebook parent Meta’s planned acquisition of an up-and-coming virtual reality fitness app violates federal antitrust laws. While Big Tech foes cheered the action, some legal analysts said the case rested on weak legal arguments, and Bloomberg reported that Khan overruled staff members who opposed the lawsuit. Several prominent entrepreneurs also argued that the Meta lawsuit, if successful, would chill investment in innovative companies.

Compared with the Meta case, the FTC’s political pretext for its strike against Kochava is certainly stronger.

The $200 billion–plus data broker industry fundamentally puts profits over privacy—and Americans aren’t happy about it. A poll last year of about 2,000 registered voters by Morning Consult found 83% of respondents believed privacy legislation should be a “top” or “important, but lower” priority for Congress. Four in five respondents said they believed it was “very” or “somewhat” important to include geolocation data in any new privacy laws.

This year, Congress has responded. Legislators have spent the past several months haggling over comprehensive privacy legislation, with a House committee approving a sweeping, bipartisan bill, known as the American Data Privacy and Protection Act, by a 53–2 vote in July. The legislation would limit commercial entities’ ability to collect and use wide swaths of data, while also adding new transparency requirements for data collectors. (The bill still faces big hurdles in the Senate, where some influential members argue the legislation is too weak and overrides stronger state privacy protections.)

But similar to the Meta lawsuit, the FTC is treading on potentially shaky legal terrain in its crusade against Kochava.

The FTC’s lawyers argue that Kochava is violating federal law that prohibits “unfair or deceptive acts or practices in or affecting commerce.” 

To prove this, the FTC must show that Kochava “causes or is likely to cause substantial injury to consumers.” In its complaint, the FTC argues that Kochava’s sale of data “poses an unwarranted intrusion into the most private areas of consumers’ lives,” which constitutes a “substantial injury.” 

FTC lawyers offer one specific example of harm, citing a publicly available sample of Kochava data that traces a device to a women’s reproductive health clinic and a single-family home. FTC officials also include a few hypothetical examples of Kochava customers using the data to connect home addresses with religious facilities and shelters for vulnerable people. 

However, the FTC doesn’t provide any concrete examples of how a Kochava customer’s knowledge of a mobile device owner’s movements led to physical harm, monetary losses, reputational injury, or embarrassment. 

While it’s easy to imagine all sorts of unwanted fallout from misused or widely published tracking data, a judge might be more interested in actual examples of harm. If the FTC doesn’t provide them, a judge could have to decide whether the privacy implications of mobile data sharing alone causes “substantial injury” to consumers, or if the potential harm tied to Kochava’s business practices meets the “likely to cause substantial injury” standard. (Kochava argued in a preemptive legal filing last month that it “does not uniquely identify users” and invited customers to participate in a new feature that “blocks the sharing of health service locations.”)

The FTC also must prove that the substantial injury is not “reasonably avoidable by consumers themselves”—a point on which Kochava could make a decent case.

As Kochava officials wrote in last month’s legal filing, mobile phone and app users can opt out of tracking features. While many consumers aren’t aware of those choices and tech companies often make it difficult to opt out of monitoring, that isn’t Kochava’s fault.

“The consumer agreed to share its location data with an app developer,” Kochava’s lawyers wrote. “As such, the consumer should reasonably expect that this data will contain the consumer’s locations, even locations which the consumer deems is sensitive.”

The FTC could very well lose its case against Kochava on legal grounds. At least this time, though, the court of public opinion should rule overwhelmingly in the feds’ favor.

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Jacob Carpenter


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From the article:

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