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What’s Fair in War & Marketing?

AcxiomOctober 07, 2015

As we embrace a world filled with sensors, big data analytics, and a desire on the part of businesses to communicate with and market to individuals in a personal manner via a plethora of touch points, including, but not limited to, traditional offline channels, mobile devices, addressable TV and in-store sensors, we are operating without specific guidance on what is out of bounds from a legal and self-regulatory perspective. What must guide our decisions about how we should market is now as much an ethical question as it is a legal one. This is where understanding what is fair, or the converse, what is unfair, and what is deceptive becomes critically important.

Section 5 of the U.S. FTC Act prohibits unfair or deceptive acts and practices. The FTC’s standard for unfairness is: ‘(1) whether the practice, without necessarily having been previously considered unlawful, offends public policy as it has been established by statutes, the common law, or otherwise – whether, in other words, it is within at least the penumbra of some common-law, statutory, or other established concept of unfairness; (2) whether it is immoral, unethical, oppressive, or unscrupulous; (3) whether it causes substantial injury to consumers (or competitors or other businessmen).’

The FTC standard for deception is: (1) if there is a representation, omission or practice that is likely to mislead the consumer; (2) if the representation or practice affects a particular group, the practice is examined from a reasonableness perspective for that group; and (3) if the representation is material.

Other countries have similar fairness and deception standards embodied in various types of law, including some data protection laws. When interpreting what this translates to in practice, you need to be careful.

An example can be found in a recent FTC complaint and consent decree with Nomi Technologies where they charged the company failed to alert consumers to in-store cell phone tracking and failed to offer a promised in-store opt-out from the tracking as promised in their privacy policy.

Nomi Technologies provides retailers with technology that allows them to observe how customers move around their stores by tracking the WI-FI address of the customers’ mobile phone. The retailer then uses this information to refine their store configuration, pricing, and marketing activities in real-time. The technology anonymizes the data so the store doesn’t know who the individual is.

Nomi’s privacy policy said the consumer would be informed when the tracking took place, offered an opt-out from all tracking on the Nomi website, and additionally, said they would also honor in-store opt-outs. Consumers were not informed about the tracking by the store and the in-store opt-outs never materialized. Consequently Nomi failed to make good on their promises.

As a result, the FTC claimed their privacy policy was deceptive. It is worth pointing out that the FTC decision was not unanimous. Commissioners Wright and Ohlhausen dissented because they believed the promises were not material and did not affect consumer behavior. The full consent decree can be found here.

For over a decade the FTC has been aggressive in going after companies who don’t fully live up to their privacy promises. FTC Commissioner Julie Brill, in a speech this week at the Council of Better Business Bureau’s National Advertising Annual Conference, discussed the need for companies to respect user privacy when using new ad techniques, deploying tracking technology and sharing data.  She called for greater opt-out abilities for sharing data online. She believes consumers are still struggling to control targeted advertising.

Take heed and apply an ethical lens before you venture into deep water and engage in practices or use of technology that might be viewed as unfair or deceptive.