FTC Report on Mobile Shopping Apps Emphasizes Need for More Transparent Disclosures

On August 1, 2014, the Federal Trade Commission (FTC) released a report on mobile shopping apps finding that many of these apps provide inadequate information about how the apps work and their privacy and security practices.  The report, What’s the Deal? An FTC Study on Mobile Shopping Apps, is based on a survey of 121 different apps used for comparing prices, purchasing in-store products, and redeeming and collecting discounts.  The survey examined data collection and retention policies, as well as disclosures made at the time the apps are downloaded.  The FTC found that many apps did not adequately inform consumers about their payment liabilities, the handling of payment-related disputes, or how the apps collect and use information. 

The FTC made several recommendations to mobile shopping app providers, including:

1.    Disclose Potential Liability:  Where apps permit payments, companies should disclose what potential liability, if any, consumers have for unauthorized transactions.  Stored value payment transactions conducted using apps do not have the same protections as credit and debit card purchases, so adequate assurances should be provided before the app is downloaded and used to pay for a product.

2.    Have clear data privacy policies:  Data collection, use, and sharing practices should be described in detail.

3.    Ensure strong data security practices:  Companies should not only employ strong data security measures, but also honor any promises and commitments they make relating to data security.  

The report builds on a 2012 workshop on mobile payments and demonstrates the FTC’s continued focus on mobile apps.  The FTC has taken several actions against mobile app developers in recent months relating to deceptive and unfair practices, including Apple and Amazon (unauthorized in-app purchases made by children), Snapchat (false promises about disappearing messages and misrepresentations about privacy and data security), and Goldenshores Technologies (deceptive and misleading privacy policy).  The FTC is expected to continue to evaluate the adequacy of disclosures and effectiveness of privacy and security practices by app providers. 

For more information about privacy, data security, product safety, and other consumer protection–related issues, contact Sheila A. Millar at millar@khlaw.com or 202 434-4143; or Tracy P. Marshall at marshall@khlaw.com or 202 434-4234.