Over the course of the last decade, many companies have become accustomed to notifying consumers of their data collection practices in their online privacy policy.  However, in a recent proposed settlement, the FTC indicated that, at least under the facts before them, disclosures that were “buried” in a privacy policy were not sufficient.

On June 4, the FTC reported a proposed settlement with Sears Holding Management Corporation of a complaint that Sears had failed to meaningfully disclose to customers the extent of the information it was collecting through its online market research software.  The FTC claimed that this failure to disclose constituted an “unfair or deceptive act” under the Federal Trade Commission Act. 

The complaint arose out of Sears’ promotion of “My SHC Community,” a “highly interactive online community” intended to help Sears better understand the online shopping habits of consumers visiting its website.  Those who joined the online community agreed to let Sears use online tracking software to learn about their needs and preferences. 

The My SHC Community registration screen notified customers that if they joined, software would be installed on their computers to track their “online browsing.”  However, according to the FTC, users were not notified until late in the registration process, starting in line 75 of terms and conditions contained in a 10-line wide scroll box, that the software would monitor not just online browsing, but “nearly all of the Internet behavior" of users of the computer on which it is installed, including "web browsing, filling shopping baskets, transacting business during secure sessions, completing online application forms, checking online accounts, and, through select header information, use of web-based email and instant messaging services."

The FTC’s proposed settlement with Sears has surprised a lot of companies who previously thought that the FTC supported disclosures made in privacy policies.  These companies are now rethinking whether their consumer disclosures are conspicuous enough.

How Can I Make My Consumer Disclosures Conspicuous?

•    Prominently display your company’s privacy policy and disclosures separately from other information to ensure your customers see them. 
•    Disclose the most important information, that which would likely impact a user’s decisions about your offering, separately from other boilerplate material.
•    Make the relevant disclosures early on in the customer’s decision-making process.
•    Display important disclosures outside of a scroll box.

Comments on the FTC’s proposed settlement with Sears are due by July 6th.