The Federal Trade Commission (“FTC”) settled allegations against consumer data provider Spokeo in what the agency described as its first case on the sale of Internet and social media data in the employment screening context.1 The case followed several warning letters that the FTC sent earlier this year to mobile application (“app”) marketers warning that their background screening apps may be subject to the Fair Credit Reporting Act (“FCRA”).2
The federal complaint filed against Spokeo by the U.S. Justice Department, litigating on behalf of the FTC, stated that Spokeo provides “consumer reports” subject to the FCRA because the company assembled consumer information from sources including social networking sites, provided access to individually identifiable data profiles through paid subscriptions, and offered and marketed its data for use in hiring and recruiting job candidates.3 The complaint alleges that Spokeo failed to comply with applicable requirements of the FCRA.
The FTC further alleged that Spokeo employees endorsed company products in online forums without revealing their connection to the company, thereby engaging in deceptive advertising in violation of the FTC Act. In 2009, the FTC issued an update to its guidance on endorsements in advertising, which clarified the agency’s views that online commenters should disclose material connections to companies they endorse.4
In addition to paying $800,000 in civil penalties, Spokeo agreed in the settlement to comply with the FCRA, to rectify its advertising endorsement practices, and to comply with reporting and recordkeeping provisions similar to those of other FTC consent agreements.