On February 27, 2015, the White House released a highly-anticipated draft of the Consumer Privacy Bill of Rights Act of 2015 (the “Act”) that seeks to establish baseline protections for individual privacy in the commercial context and to facilitate the implementation of these protections through enforceable codes of conduct. The Federal Trade Commission is tasked with the primary responsibility for promulgating regulations and enforcing the rights and obligations set forth in the Act.
The Act’s baseline of consumer protections would apply broadly (with certain stated exceptions) to the privacy practices of covered entities that collect, create, process, retain, use or disclose personal data in or affecting interstate commerce. “Personal data” is broadly defined under the Act as “any data … under the control of a covered entity, not otherwise generally available to the public through lawful means, and … linked, or as a practical matter linkable by the covered entity, to a specific individual, or linked to a device that is associated with or routinely used by an individual.” The Act carves out from the definition of personal data several types of information, including de-identified data, cybersecurity data and employee data that is collected or used by an employer in connection with an employee’s employment status.
The Act sets forth individual rights for consumers and corresponding obligations of covered entities in connection with personal data. Key examples of the proposed privacy protections and obligations include:
- Transparency. Covered entities shall provide individuals with clear, timely, conspicuous and easily understandable notice about the entity’s privacy and security practices. The Act sets forth various content requirements for such notices.
- Individual Control. Individuals must be provided with reasonable means to control the processing of their personal data that are proportionate to the privacy risk to the individual and are consistent with context, which is defined to mean the circumstances surrounding a covered entity’s processing of personal data.
- Respect for Context. If a covered entity processes personal data in a manner that is not reasonable in light of context, the entity must conduct a privacy risk analysis, and take reasonable steps to mitigate any identified privacy risks. If the privacy risk analysis is conducted under the supervision of an FTC-approved Privacy Review Board, the covered entity may be excused from certain heightened requirements under this section.
- Focused Collection and Responsible Use. Covered entities may collect, retain and use personal data only in a manner that is reasonable in light of context. This limitation requires businesses to consider ways to minimize privacy risk, as well as to delete, destroy or de-identify personal data within a reasonable time after fulfilling the purposes for which the personal data were first collected.
- Security. Covered entities are expected to identify reasonably foreseeable internal and external risks to the privacy and security of personal data that could result in the unauthorized disclosure, misuse, alteration, destruction or other compromise of the information. Based on this analysis, covered entities must establish, implement and maintain safeguards reasonably designed to ensure the security of such personal data, including but not limited to protecting against unauthorized loss, misuse, alteration, destruction, access to, or use of the business’ information.
- Access and Accuracy. Upon request, a covered entity must provide an individual with reasonable access to, or an accurate representation of, personal data that pertains to the individual and is under the control of the covered entity. This obligation entails providing the individual with a means to dispute and resolve the accuracy and completeness of his or her personal data.
- Accountability. Covered entities must take measures appropriate to the privacy risks associated with its personal data practices, including training employees, conducting internal or independent evaluations, building appropriate consideration for privacy and data protections into the design of systems and business practices, and contractually binding third parties to comply with similar requirements prior to disclosing personal data to them.
Under the Act, a violation of the relevant requirements constitutes an unfair or deceptive act or practice in violation of Section 5 of the FTC Act. While the attorney general of any state may bring a federal enforcement action for injunctive relief based on an alleged violation causing harm to a substantial number of the state’s residents, the FTC has the right to intervene as a party and assume lead responsibility for the prosecution. In an action brought or prosecuted by the FTC, the covered entity also may be liable for a civil penalty of up to $25 million under certain circumstances. The Act offers covered entities a safe harbor against enforcement actions when they have complied with an FTC-approved code of conduct for data governance that provides equivalent or greater protections for personal data than that of the Act. In addition, the Act does not offer a private right of action to individuals.
Notably, the Act preempts state and local laws to the extent they impose requirements with respect to personal data processing, but it does not preempt states’ general consumer protection laws, health or financial information laws, or data breach notification laws. With respect to federal preemption, the Act does not modify, limit or supersede the privacy or security provisions of federal laws, including the Gramm-Leach-Bliley Act and the Health Insurance Portability and Accountability Act of 1996.