Category: Information, Technologies and Telecom

California’s bill would require companies that provide online services or products “likely to be accessed by children” – defined as any individual under the age of 18 – to adhere to heightened privacy and data protection standards.

The California Age-Appropriate Design Code Act, A.B. 2273, passed in the California Legislature.  The bill is expected to be signed by the Governor and go into effect July 1, 2024.

The anticipated law applies to “businesses” which are for-profit organizations that do business in California and: (1) have revenue of more than $25 million, or (2) derive 50% or more of its annual revenue from selling consumers’ personal information, or (3) buys/receives for commercial purposes the personal information of more than 50,000 consumers/households/devices.  In summary, A.B. 2273 requires:

• Default privacy settings:  Companies must configure default privacy settings to the highest possible level of privacy and provide privacy information and other policies prominently in terms that children can understand.
• No use of minor’s personal information:  Companies will be banned from using children’s personal information “for any reason other than a reason for which the personal information was collected, unless the business can demonstrate a compelling reason that use of the personal information is in the best interests of children,” according to the legislation.
• Attorney General’s authority:  A.B. 2273 permits the Attorney General to seek an injunction or civil penalty against companies that violate the Act.  Negligent violations could result in a penalty of up to $2,500 per affected child, and intentional violations could result in a penalty of up to $7,500 per affected child, according to the bill.  Currently, the bill does not provide a private right of action.

In sum, the bill: (1) increases technology regulation, (2) aims to provide more online privacy protections for minors, and (3) will cause companies to increase privacy, legal, and engineering resources to meet the bill’s requirements.

The U.S. District Court, Northern District of Illinois recently held that a plaintiff’s Telephone Consumer Protection Act (“TCPA”) suit survived a motion to dismiss due to a lack of an established patient-provider relationship, when ruling on the health care exemption in the context of phone calls from an eye care provider.  The consumer had made an inquiry with the eye care provider but did not receive care, and thus, the exemption may not apply.

In Murtoff v. MyEyeDr. LLC, the Plaintiff sent an email to Defendant asking about the cost of a new pair of eyeglasses.  Plaintiff then began receiving automated phone calls from Defendant and its corporate entity regarding scheduling eye exams.  Plaintiff asked that the call stop, but they continued.

Plaintiff filed a putative class action, alleging violations of the TCPA.  Defendants filed a partial motion to dismiss regarding the part of the claim that relied on the lack of prior express written consent, asserting that the calls were health care messages.

The District Court analyzed that the Federal Communications Commission (“FCC”) has issued two health care exemptions for the TCPA, one of which was potentially applicable to this case.  Similar to the Federal Trade Commission’s (“FTC”) health care exception to its Telemarketing Sales Rule, the 2012 exemption covers any call that “Delivers a ‘health care’ message made by, or on behalf of, a ‘covered entity’ or its ‘business associate.”  To determine whether the exemption applies, the District Court then analyzed the factors set forth in Zani v. Rite Aid, which includes whether the call: (1) “concerns a product or service that is inarguably health-related”; (2) “was made by or on behalf of a health care provider to a patient with whom she has an established health care treatment relationship”; and (3) “concerns the individual health care needs of the patient recipient.” 

Significantly, the District Court noted that: (1) for the second factor, Plaintiff only made an inquiry regarding the cost of eyeglasses and thus never consummated a health care treatment relationship and (2) for the third factor, the calls regarding scheduling an eye exam were generic and not individualized as to Plaintiff.  Thus, the District Court ruled that – for purposes of a motion to dismiss – Plaintiff stated a claim that the calls were made without express prior written consent.

Lessons:  First, merely being a health care business is not, alone, sufficient to invoke the TCPA health care exemption.  Second, the exemption may not apply to a generalized message which is not specific to this patient or to this category of patients.

By: Sheila Raftery Wiggins

The Federal Trade Commission (“FTC”) announced that it is exploring rules to address commercial surveillance and lax data security. The FTC seeks public comment on the harms stemming from commercial surveillance and whether new rules are needed to protect people’s privacy and information.

Commercial surveillance is the business of collecting, analyzing, and profiting from information about people. The business of commercial surveillance can prompt companies to collect large quantities of consumer information, even though consumers only proactively share a small amount of this information. For example, companies reportedly surveil consumers while they are connected to the internet, including obtaining access to many aspects of the consumer’s online activities and physical movements/location.

The FTC’s concerns about commercial surveillance include:

• Children: Some surveillance-based services may be addictive to children and lead to a wide variety of mental health and social harms.
• Discrimination: There are concerns that the algorithms that underlie commercial surveillance may be prone to errors or bias which results in discrimination against consumers based on legally protected characteristics like race, gender, religion, and age, harming their ability to obtain housing, credit, employment, or other critical needs.
• Condition for service: Some companies require consumers to sign up for surveillance as a condition for service. After consumers sign up, some companies change their privacy terms going forward to allow for more expansive surveillance.

For nearly 20 years, the FTC used its existing authority to bring many enforcement acts against companies for privacy and data security violations. The FTC is now exploring rules to: (1) establish clear privacy and data security requirements and (2) grant the FTC with authority to seek financial penalties for first-time violations.

The public will also have an opportunity to share their input on these topics, including during a virtual public forum on September 8, 2022.

The Second Circuit ruled that an unsolicited faxed invitation to participate in a market research survey in exchange for money does not constitute an “unsolicited advertisement” under the Telephone Consumer Protection Act, 47 U.S.C. § 227 (“TCPA”).  Bruce Katz, M.D., P.C. v. Focus Forward, LLC, No. 21-1224 (2^nd Cir. Jan. 6, 2022).

Plaintiff is a professional corporation that provides medical services.  Defendant is a market research company.  In 2019, Defendant sent Plaintiff two unsolicited faxes, addressed to the “Nurses” and “Practitioners,” seeking participants in “market research surveys” and offering $150 to participate in a “telephone interview.”

Plaintiff filed a putative class action alleging violations of the TCPA.  The TCPA prohibits the use of “any telephone facsimile machine, computer, or other device to send, to a telephone facsimile machine, an unsolicited advertisement.”  An “unsolicited advertisement” is defined by the statute as “any material advertising the commercial availability or quality of any property, goods, or services which is transmitted to any person without that person’s prior express invitation or permission.”

The regulations of the Federal Communications Commission (“FCC”), implementing the TCPA, contain an identical definition of “unsolicited advertisement.”  In 2006, the FCC promulgated a rule that construes the TCPA as specifically proscribing any faxed surveys that “serve as a pretext to an advertisement.”

In Katz, the Second Circuit reasoned that: (1) the two faxes “plainly do not advertise the availability of any property, goods, or services” and therefore “cannot reasonably be construed” as unlawful advertisements and (2) the word “property” does not appear to include money, as the word is used in the TCPA.

The Second Circuit noted that its holding may not necessarily extend to all communications, including faxed surveys, offering the recipient both money and services because such communications could incur liability under the TCPA depending on the specific content of the communication.

The Second Circuit declined to adopt the reasoning of the Third Circuit in Fischbein v. Olson Research Group, 959 F.3d 559 (3d Cir. 2020), which ruled that such faxes are advertisements because the “offer of payment in exchange for participation in a market survey is a commercial transaction, so a fax highlighting the availability of that transaction is an advertisement under the TCPA.”  Thus, the Second Circuit held that – based on the statutory text, legislative history, and FCC implementation of the TCPA – an invitation to participate in a survey, without more, is not an unsolicited advertisement under the TCPA.

Lesson:  An invitation to participate in a survey should be drafted to avoid offering “property, goods, or services” which may fall within the meaning of a “unsolicited advertisement” under the TCPA.