By Kate Tummarello - 02/16/14 07:55 AM EST
Federal regulators are beginning to scrutinize retailers that secretly track the movements of customers in their stores.
The Federal Trade Commission (FTC) is holding an event this week to explore the growing use of commercial surveillance, which often happens without customers' knowledge.
Through a smartphone’s Wi-Fi and Bluetooth capabilities, retailers can use mobile location technology to track customers as they move around stores or shopping centers.
Sen. Al Franken (D-Minn.) contrasted mobile location tracking with the more traditional store tracking programs that customers must consent to.
“It's one thing to track someone’s shopping habits through a loyalty card; folks understand that their information may be collected,” Franken said in a statement to The Hill. “But it’s another thing entirely to track consumers’ movements without their permission as they shop.”
Franken said he looks forward to seeing what comes out of the FTC’s focus on the mobile tracking of consumers.
Even if customers were aware of the mobile location technologies, there’s not much they can do to prevent the tracking without turning off their phones or disabling some of its capabilities.
“Since the types of identifiers tracked here are almost impossible to change without getting a new phone, and since phones are pretty essential tools these days, this can be a highly reliable method of tracking consumer behavior and habits over time,” said Joe Hall, chief technologist for the Center for Democracy and Technology.
Seth Schoen — senior staff technologist at the Electronic Frontier Foundation and a presenter at the FTC’s upcoming event — said a store’s ability to track customers’ location should be viewed as a security flaw rather than an opportunity for retailers.
“It's not something that [customers have] given consent to and it's not something that they intended when they got and used these devices,” he said.
Privacy advocates worry that retailers would be able to combine the tracking data with information such as purchase history to build intricately detailed profiles of customers.
But the retailers and mobile location tech companies say these concerns are overblown.
Jim Riesenbach, CEO of iInside, a mobile location tracking technology company, said retailers are only interested in aggregate location data that shows them how people generally move through their stores.
“We don’t provide anything that looks at any individual consumer,” Riesenbach said.
“Our business is really about helping retailers catch up with ecommerce,” where online retailers can digitally monitor the way customers move around shopping websites, he said.
Riesenbach said anonymous, aggregated tracking data helps retailers answer operational questions, such as how to best organize their stores.
Those are “very, very valuable observations,” said Mallory Duncan, senior vice president of the National Retail Federation.
If a store using mobile location technology can see that “people are moving from this department to another department … than that could tell you something about rearranging your shelf displays,” he said.
Last year, major mobile location tech companies committed to collecting and using only aggregate, anonymous data as a part of a broader code of conduct.
The code of conduct — written with the help of advocacy group the Future of Privacy Forum and approved by Sen. Charles Schumer (D-N.Y.) — also requires retailers to display signs informing customers when they are being tracked in a store.
Additionally, tech companies that have signed onto the code — which Riesenbach said includes the major players in the field — must allow consumers the chance to opt-out of the tracking by visiting a website maintained by the companies.
Jules Polonetsky, executive director of the Future of Privacy Forum, said he welcomes FTC involvement in the world of mobile location tracking “while the technology is still being rolled out.”
“It is very hard to retrofit privacy practices after businesses have invested in systems, so the time is right to set good, but flexible rules in place,” he said.
Others are hoping the agency will impose rules that go further than the companies’ self-regulation.
“The self-regulatory framework is not effective,” said Jeff Chester, executive director of the Center for Digital Democracy. “There need to be real rules, not self regulation.”
Chester said he expects to see more from the FTC on the topic moving forward.
The agency’s decision to hold the workshop is “a kind of acknowledgement by the FTC that it is looking very closely” at technologies that track consumers’ locations, he said.
The FTC is “very interested” in this technology, according to Robert Schoshinski, assistant director of the agency’s Division of Privacy and Identity Protection.
Through the workshop and other policy work in this field, the FTC will “assess the state of this technology” and evaluate how its uses fit with current consumer protection laws, he said.