Shaking Up the Settlement Process: FTC Reconsiders Whether Companies Can Deny Wrongdoing While Settling Privacy Violation Claims

The Federal Trade Commission ("FTC") recently announced settlements of cases brought against Google and Facebook for alleged privacy violations. The Google settlement drew headlines for being the largest fine ever assessed for the violation of a FTC consent order ($22.5 million). But Commissioner J. Thomas Rosch's dissents are perhaps more momentous, as they have prompted the FTC to re-examine its practice of accepting settlements in which companies deny wrongdoing.

The FTC's complaint against Google alleged that the Internet services company circumvented the privacy controls in Apple's Safari Internet browser. The FTC claimed that despite telling Safari users that they did not need to change the browser's default privacy settings, Google exploited an exception in Safari's cookie-blocking software to allow advertising tracking cookies. This, the FTC alleged, violated a previous settlement agreement that prohibited Google from, among other things, misrepresenting the degree of control a consumer has over collection of her personal information. The earlier settlement agreement resolved allegations brought in 2011 that Google used deceptive practices and violated its public privacy promises when it launched its social networking product, Google Buzz (which we blogged about here).

Senior FTC attorney Leslie Fair also blogged about the record-breaking Google settlement, discussing some general practices to avoid FTC scrutiny:

Companies should be aware of the cookies they use, as well as when they make privacy promises outside of their privacy policy. The Google complaint alleged Google made misrepresentations on its Advertising Cookie Opt-Out Plug-In page. If a company joins a self-regulatory group, it needs to adhere to the group's codes. The FTC accused Google of misrepresenting its adherence to the Network Advertising Initiative's Code. Companies should be careful not to circumvent users' preferences. Google was charged with using a cookie to work around Safari's default cookie-blocking software. Finally, companies should promote communication and cooperation between IT personnel, marketing executives, and legal advisors. One day after the Google settlement, the FTC announced settlement of a similar action against Facebook. The FTC alleged that the social networking company violated its privacy policy by circumventing user preferences. Facebook allegedly told users that their information would be kept private despite allowing it to be shared...