The Federal Trade Commission (“FTC”) recently issued a report on mobile shopping apps, which follows a case study of many different shopping-related apps that are currently available to consumers.  The report provides recommendations to the companies that provide such apps and to the consumers that use them, with a focus on the privacy and security of consumer data, as well as consumers’ potential financial liability for fraudulent mobile transactions.

The FTC Mobile Shopping App Report: “What’s the Deal?”

The FTC surveyed 121 different shopping apps across the Google Play and Apple App stores.  The apps fall into three main categories, specifically those that allow consumers to: (1) use their mobile phones in stores to compare prices between competing retailers; (2) seamlessly collect and redeem coupons or discounts; and (3) pay for purchases.

The FTC’s Recommendations

The report makes a number of recommendations to companies that provide mobile shopping apps to consumers, including:

1. Apps should clearly disclose consumers’ rights and liability limits for unauthorized, fraudulent or erroneous transactions.  

The FTC study revealed that prior to download, apps often fail to provide any information to consumers about their potential liability in the event that there is a payment issue.  The FTC notes that stored value accounts, which usually involve the transfer of funds into an account that is maintained by the app provider for use in future consumer purchases, may lack the legal protections that are associated with credit or debit card transactions.

As such, the FTC recommends that app developers provide clear dispute resolution and limitation of liability information to consumers, particularly when using a stored value method to process payments.

2. Apps should more clearly describe how they collect, use and share consumer data.

The FTC study revealed that app privacy disclosures often contain vague language, reserving broad rights to collect, use and share consumer information.  While almost all apps notify consumers of the fact that they share personal data, 29% of price comparison apps, 17% of deal apps and 33% of in-store purchase apps reserve the right to share consumer data without restriction. The FTC indicates that this makes it difficult for consumers to make informed decisions about whether to use the subject apps in the first place based on privacy considerations.

Of course, the FTC notes that privacy considerations are particularly important because the data collected may be extremely sensitive and may include consumers’ Social Security numbers and detailed information about consumers’ purchases.

The FTC recommends that apps should clearly describe how they collect, use and share consumer data so that consumers may better evaluate and compare apps.

3. Companies should ensure that their data security promises translate into sound data security practices.

The FTC encourages all companies to provide strong protections for the data that they collect and follow through on their “promises” to safeguard consumer data.

The FTC urges consumers to be cautious in downloading and using mobile apps – and to closely review apps’ stated policies on important issues such as dispute resolution, liability, as well as privacy and data security.  The FTC further cautions consumers to beware of apps that do not provide such information.

Takeaway

While not legal requirements, per se, the FTC’s recommendations: (1) reflect the increasing scrutiny of regulators; and (2) provide guidance to companies in the growing mobile app space.  For anyone in this industry, it is important to stay abreast of new developments and to understand the state and federal laws applicable to mobile apps, including those governing data privacy and security.