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California clarifies that internally generated inferences are “personal information” under the CCPA
On March 10, the California Office of the Attorney General (OAG) issued an opinion on the question of whether, under the California Consumer Privacy Act (CCPA), a consumer’s right to know the specific pieces of personal information collected by a covered business about that consumer applies to internally generated inferences that the business holds about the consumer from either internal or external information sources. According to the OAG, the answer is yes—consumers have the right to know internally generated inferences about themselves, and a business must provide such information upon request, unless a business can demonstrate an applicable CCPA statutory exception. The CCPA, which was enacted in June 2018 and became effective January 1, 2020 (covered by a Buckley Special Alert), provides California consumers with new rights of control over the personal information held about them (with certain exceptions), including the right to know what information is being collected and how a business uses and shares that information, the right to delete personal information, and the right to opt out of certain transfers and sales of their personal information. The OAG noted that while the Consumer Privacy Rights Act of 2020 will become fully operative January 1, 2023, none of the act’s amendments to the CCPA will change the conclusions presented in the opinion.
The OAG’s opinion defines “inference” under the CCPA to mean “the derivation of information, data, assumptions, or conclusions from facts, evidence, or another source of information or data.” Example inferences such as “married,” “homeowner,” “online shopper,” or “likely voter,” the OAG explained, are derived from information collected by businesses such as online transactions, social network posts, or public records. OAG noted that some businesses also use proprietary methods to create inferences and “then sell or transfer the inferences to others for commercial purposes,” thus allowing, according to studies, “seemingly innocuous data points” to be combined with other data points “to deduce startlingly personal characteristics.” According to the OAG’s interpretation of the plain language of the CCPA, as well as legislative history, businesses are generally required “to disclose internally generated inferences to consumers” “regardless of whether the inferences were generated internally by the responding business or obtained by the responding business from another source.”
The OAG further explained that, inferences are “personal information” for purposes of the CCPA, and therefore must be disclosed provided two conditions exist: (i) “the inference is drawn ‘from any of the information identified”’ in subdivision (o) of Civil Code section 1798.140, which includes, among other things, personal identifiers such as names, addresses, account numbers, or identification numbers, customer records, age, gender, race, or religion, as well as inferences obtained from any of the provided items; and (ii) “the inference is used to ‘create a profile about a consumer,’ or in other words to predict a salient consumer characteristic.” For the purposes of responding to a consumer’s request to know, the OAG stated that “it does not matter whether the business gathered the information from the consumer, found the information in public repositories, bought the information from a broker, inferred the information through some proprietary process of the business’s own invention, or any combination thereof.” The business is required to disclose the personal information it holds to the consumer upon request. The OAG noted, however, that the CCPA does not require businesses to disclose protected trade secrets used to derive its inferences, provided the business demonstrates “that such inferences are indeed trade secrets under the applicable law.”
CARU orders app company to correct violations of children’s privacy rules
On March 8, the Children’s Advertising Review Unit (CARU) announced that a smart watch phone operator has agreed to take actions to correct alleged violations of the Children’s Online Privacy Protection Act (COPPA) and CARU’s Self-Regulatory Guidelines for Children’s Online Privacy Protection. According to the press release, CARU is the nation’s first FTC-approved COPPA Safe Harbor Program and is tasked with monitoring online services for compliance with COPPA and CARU’s privacy guidelines to make sure the collection of children’s data is handled responsibly. CARU examined the company’s data handling and sharing practices and found that the company, among other things, “failed to provide clear and complete, and non-confusing, notice of its children’s information collection practices in its privacy policy and failed to provide any notice that would constitute a direct notice to parents as required by COPPA.” The company also failed to offer a method for parents to provide verifiable consent to its data gathering practices prior to its collection of information from children, CARU stated, adding that the company’s privacy policy, terms of service, and other online disclosures also included “inconsistent, confusing and/or contradictory statements about its collection, use, or disclosure of children's personal information.”
CARU noted that the company submitted a “detailed plan” outlining measures to remedy the concerns and agreed to correct the violations in order to comply with CARU’s privacy guidelines and COPPA. The company will also update its privacy policy to include information on how parents can prohibit the use of their child’s data or have it deleted and will obtain verifiable parental consent prior to completing the registration process. CARU also recommended that the company revise its website and app to provide parents with “direct notice of what personal information the operator can collect from children through their use of the service, both passively and actively, and how such personal information can be used and disclosed, together with a clear and prominent link to its privacy policy.”
Virginia passes additional VCDPA amendments
On March 7, the Virginia House and Senate passed HB 714, which amends Sections 59.1-575 and 59.1-584 and repeals Section 59.1-585 of the Virginia Consumer Data Protection Act (VCDPA). Specifically, the amendments expand the definition of a nonprofit organization to include political and certain tax-exempt 501(c)(4) organizations, thus exempting them from the VCDPA’s provisions. The bill also abolishes the Consumer Privacy Fund and provides that all civil penalties, expenses, and attorney fees collected from enforcement of the VCDPA shall be deposited into the Regulatory, Consumer Advocacy, Litigation, and Enforcement Revolving Trust Fund. Under Section 59.1-584, the attorney general has exclusive authority to enforce the law and seek penalties of no more than $7,500 per violation should a controller or processor of consumer personal data continue to violate the VCDPA following a 30-day cure period, or breach an express written statement provided to the attorney general that the alleged violations have been cured.
As previously covered by InfoBytes, the VCDPA was enacted last year to establish a framework for controlling and processing consumers’ personal data in the Commonwealth. The VCDPA, which explicitly prohibits a private right of action, allows consumers to access their personal data; make corrections; request deletion of their data; obtain a copy of their data in a portable format; and opt out of targeted advertising, sale of their data, or “profiling in furtherance of decisions that produce legal or similarly significant effects concerning the consumer.” The bill now heads to the governor, and if enacted, will take effect January 1, 2023.
State AGs investigate streaming service for privacy violations
On March 2, a coalition of state attorneys general, led by California Attorney General Rob Bonta, announced a nationwide investigation into a video streaming service regarding whether it is violating state consumer protection laws and putting children at risk by promoting its social media platform to children and young adults while its use is associated with physical and mental health harm to youth. According to the California AG, the investigation will examine the harm that the platform may cause to young users and what the platform knew about that harm, and will focus on, among other things, the techniques it utilized to boost young user engagement, including strategies or efforts to increase the duration of time spent on the platform and the frequency of engagement with the platform.
Florida house tries again on consumer privacy legislation
On March 2, the Florida house passed HB 9, which would, among other things, regulate the sale and sharing of consumers’ personal data and provide consumers the right to sue over alleged violations. This is the state’s latest attempt to pass comprehensive consumer privacy legislation. Last year, the Florida legislatures failed to reconcile differences in their bills before the session ended. Highlights of the bill (which include changes from last session’s versions) include:
- Applicability. The bill will apply to any entity meeting the definition of a controller, processor, or third party that buys, sells, or shares consumers’ personal information and (i) has global annual gross revenues exceeding $50 million; (ii) annually buys, receives, sells, or shares personal information of at least 50,000 consumers, households, or devices; or (iii) derives 50 percent or more of its global annual revenue from the selling or sharing of personal information. The bill sets forth numerous exemptions from its requirements, including personal information shared “with a financial service provided solely to facilitate short term, transactional payment processing for the purchase of products or services”; deidentified or aggregated personal information; data governed by certain federal, state, or local regulations or used to exercise or defend legal claims; certain personal information collected through a controller’s direct interaction with a consumer that is used to advertise or market products or services that are produced or offered directly by the controller; personal information used in the context of a consumer’s role or former role with the controller; specified protected health information; financial institutions covered by the Gramm-Leach-Bliley Act; personal information disclosed during intentional interactions or disclosed as part of a merger, acquisition, bankruptcy, or other transaction in which the third party assumes control of all or part of the controller; and personal information used to fulfill the terms of a written warranty, a product recall, or public- or peer-reviewed scientific or statistical research in the public interest.
- Consumer rights. Under the bill, consumers will be able to, among other things, access their personal data; request deletion or make corrections; and opt out of the sale or sharing of personal information to third-parties. Controllers will be required to deliver the requested information free of charge within 45-calendar days (a one-time additional 45-day extension may be granted), but are not required to provide personal information to a consumer more than twice in a 12-month period. Controllers will also be prohibited from selling or disclosing the personal information of minor consumers, except in certain circumstances. Additionally, the bill will provide controllers the ability to charge a consumer who exercises any of their rights under the bill “a different price or rate, or provide a different level or quality of goods or services to the consumer” provided the “difference is reasonably related to the value provided to the controller by the consumer’s data or is related to a consumer’s voluntary participation in a financial incentive program, including a bona fide loyalty, rewards, premium features, discounts, or club card program offered by the controller.” Financial incentives that are not unjust, unreasonable, coercive, or usurious may also be offered as long as consumers give prior consent and are allowed to revoke consent at any time. The bill further stipulates that contracts or agreements that waive or limit certain consumer rights are void and unenforceable.
- Disclosures. The bill will require controllers that collect consumers’ personal information to disclose certain information regarding data collection and selling practices to consumers at or before the point of collection. This information “may be provided through a general privacy policy or through a notice informing the consumer that additional specific information will be provided upon a certain request.” Additionally, processors or third parties must require any subcontractor to meet the same obligations with respect to personal information. Businesses also will be prohibited from collecting or using additional categories of personal information without first notifying consumers.
- Security. Under the bill, businesses will be required “to implement reasonable security procedures and practices” to protect consumers’ personal information.
- Private cause of action, right to cure. The bill will provide a private right of action to allow consumers to bring a civil action under certain circumstances for injunctive or declaratory relief, and establishes a damage amount of either statutory damages of at least $100 but not more than $750 per consumer per incident, or actual damages, whichever is greater. Consumers may obtain specific relief from businesses with annual gross revenues greater than $50 million. In lawsuits involving businesses with annual gross revenues exceeding $500 million, consumers also are permitted to recover attorneys’ fees and costs. Civil actions must be filed within one year after discovery of the violation. The Department of Legal Affairs is also authorized to take action against a controller, processor, or third party for unfair or deceptive acts or practices. Fines may be tripled if a violation involves consumers 18 years of age or younger, or if a controller, processor, or third party fails to cure the violation upon written notice within 45 calendar days.
If enacted in its current form, the bill would take effect January 1, 2023. The bill must be approved by the Florida senate and any differences reconciled before being sent to the governor.
FCC launches inquiry to reduce cyber risks
On February 25, the FCC adopted a Notice of Inquiry proposed by FCC Chairwoman Jessica Rosenworcel that would launch an inquiry into the vulnerabilities of the internet’s global routing system, in response to the increasing risk of cyberattacks stemming from Russia’s invasion of Ukraine. The adopted inquiry solicits public comments on vulnerabilities threatening the security and integrity of the Border Gateway Protocol, which is central to the global routing of internet traffic. The inquiry also intends to evaluate how these security risks could impact the transmission of data through email, e-commerce, and bank transactions to interconnected Voiceover Internet Protocol and 911 calls and how best to address any identified challenges. Comments are due 30 days after publication in the Federal Register, with replies due 30 days later.
Utah legislature passes privacy bill
Recently, the Utah legislature passed SB 227, which would enact the Utah Consumer Privacy Act and establish a framework for controlling and processing consumers’ personal data in the state. (See also senate and house approved amendments here.) Highlights of the bill include:
- Applicability. The bill will apply to a controller that conducts business in the state or produces products or services for consumer residents that also “has annual revenue of $25,000,000 or more” and “controls or processes personal data of 100,000 or more consumers” or “derives over 50% of the entity’s gross revenue from the sale of personal data and controls or processes personal data of 25,000 or more consumers.” Certain entities are exempt from the bill’s requirements, including governmental entities and third parties under contract with a governmental entity that acts on behalf of that entity; tribes; institutions of higher education; nonprofits; certain types of health information subject to federal health privacy laws; consumer reporting agencies, furnishers, and consumer report users of information involving personal data bearing on a consumer’s credit; financial institutions and affiliates subject to federal privacy disclosure requirements; personal data regulated by certain federal regulations; and air carriers. Additionally, a controller will be considered to be in compliance with the bill’s parental consent obligations provided it complies with verifiable parental consent mechanisms under the Children’s Online Privacy Protection Act.
- Consumer rights. Under the bill, consumers will be able to, among other things (i) confirm whether their personal data is being processed and access their data; (ii) delete their data; (iii) obtain a copy of their previously provided data; and (iv) opt out of the processing of their data for targeted advertising and the sale of their data.
- Controllers’ and processors’ responsibilities. Under the bill, data controllers will be responsible for responding to consumers’ requests within 45 days (an additional 45-day extension may be requested under certain circumstances). Responses to consumers’ requests must be provided free of charge, “unless the request is the consumer’s second or subsequent request during the same 12-month period.” Data processors must adhere to a controller’s instructions and enter into a contract with clearly specified instructions for processing personal data. The bill also requires controllers to provide privacy notices to consumers disclosing certain information regarding data collection and sharing practices (including sharing with third parties), and if the controller sells a consumer’s personal data to third parties or engages in targeted advertising, the controller must disclose how consumers may exercise their rights under the bill. Controllers also will be prohibited from processing sensitive personal data without first presenting a consumer with the opportunity to opt out. The bill further specifies requirements for processing deidentified data or pseudonymous data.
- Private right of action and state attorney general enforcement. The bill explicitly prohibits a private right of action. Instead, it gives the Division of Consumer Protection investigative power and grants the state attorney general excusive authority to enforce the law and seek penalties of up to $7,500 per violation. The attorney general may also recover reasonable investigation and litigation expenses.
- Right to cure. Upon discovering a potential violation of the bill, the attorney general must give the controller or processor written notice. The controller or processor then has 30 days to cure the alleged violation before the attorney general can file suit.
If enacted in its current form, the bill would take effect December 31, 2023.
Virginia passes amendments on CDPA for data deletion
On February 25, the Virginia House and Senate passed HB 381, which amends Section 59.1-577 of the Virginia Consumer Data Protection Act (VCDPA) related to consumers’ data deletion requests. Specifically, the amendment provides that a controller that has obtained a consumer’s personal data from a third party “shall be deemed in compliance with a consumer’s request to delete such data . . . by either (i) retaining a record of the deletion request and the minimum data necessary for the purpose of ensuring the consumer’s personal data remains deleted from the business’s records and not using such retained data for any other purpose . . . or (ii) opting the consumer out of the processing of such personal data for any purpose except for those exempted pursuant” to the VCDPA. As previously covered by InfoBytes, the VCDPA was enacted last year to establish a framework for controlling and processing consumers’ personal data in the Commonwealth. The VCDPA, which explicitly prohibits a private right of action, allows consumers to access their personal data; make corrections; request deletion of their data; obtain a copy of their data in a portable format; and opt out of targeted advertising, sale of their data, or “profiling in furtherance of decisions that produce legal or similarly significant effects concerning the consumer.” The bill now heads to the governor.
Irish DPC releases annual report
On February 24, the Irish Data Protection Commission (DPC) released their 2021 Annual Report. According to the report, the EU’s General Data Protection Regulations (GDPR) enforcement efforts have gained “significant momentum” by, among other things: (i) “resolving thousands of complaints”; (ii) “processing thousands more data breach notifications”; (iii) “imposing fines and corrective measures”; (iv) “auditing the gamut of Irish political parties”; and (v) “settling its enforcement action in relation to certain processing elements of the Public Services Card on terms protective of the data rights of citizens generally.” Among other things, the report discussed new data regulation regimes, such as the Digital Markets Act, the E-Privacy Regulation, and the Artificial Intelligence Act, “which demonstrate that the GDPR was never going to resolve all data issues in one single legislative instrument.” The report also outlined the DPC’s regulatory strategy for the next five years, which it released in December and includes placing a focus on mounting “targeted actions aimed at ensuring children and more vulnerable internet users are protected in personal data terms—without shutting off their access.”
District Court: Employees are not “customers” under California Customer Records Act in breach lawsuit
On February 24, the U.S. District Court for the Southern District of New York granted a waste management company’s motion to dismiss putative class action data breach claims after determining, in part, that the plaintiffs failed to allege how the company breached any duty of care. Plaintiffs, comprised of current and former employees, sued the company, claiming a 2021 data breach exposed their personal identifiable information (PII) to an unauthorized actor. Several plaintiffs were victims of apparent identity theft, the complaint stated, which alleged negligence, breach of contract and implied contract, breach of confidence, breach of fiduciary duty, unjust enrichment, and breach of the California Consumer Privacy Act, the state’s Unfair Competition Law, and the California Customer Records Act (CCRA). In dismissing the case, the court concluded, among other things, that the plaintiffs failed to plead facts showing specific measures that the company did or did not take, such as data encryption, to protect employee data. Additionally, the complaint did not “contain any allegations regarding the manner in which their systems were breached.” Moreover, the court determined that the complaint did not plausibly allege that the employees qualify as “customers” under the CCRA (a “customer” under the law is defined as “an individual who provides personal information to a business for the purpose of purchasing or leasing a product or obtaining a service from the business,” but in this matter, the court stated the plaintiffs did not allege that they provided their PII to the company in exchange for a product or service; rather, they were required to give their PII as part of their employment). The court also ruled that the plaintiffs did not plausibly allege that the company unreasonably delayed notifying them of the data breach by waiting 24 days after the breach to provide notice.