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Apple settlement reflects FTC's struggle to keep up with mobile

NEW YORK - A Kelley Drye & Warren attorney at Mobile FirstLook: Strategy 2014 said that Apple?s settlement with the Federal Trade Commission for in-app purchases was not a surprise as regulators struggle to keep pace with how quickly mobile is evolving.

Yesterday, Apple agreed to a settlement with the FTC for $32.6 million as a result of claims that children were making purchases in mobile applications without realizing that actual dollars were being spent. During the ?Legal/Privacy: Big Data, Big Brother, Big Issues? session, executives from Reed Smith, Kelley Drye & Warren and Critical Mass discussed legal and privacy issues that arise in mobile, touching on how regulators such as the FTC tend to be behind and reactionary when it comes to legislating with new technology.

?I think a lot of us in the space are not surprised to see an announcement come out,? said Christopher Loeffler, associate at Kelley Drye & Warren, Washington, DC. ?The claims are children weren?t aware of purchases they made in a game.

?Instead of coins or berries, they were actually real dollars,? he said. ?The parents may not have been aware when they were downloading games and handing them off to kids or even the adult not realizing they were making a real purchase.

?When you have narrow platforms, a fair bit of this is going to be controlled by a limited number of parties, in this case Apple is controlling a big part. If you want to do business with Apple as a developer, you largely go by Apple?s terms. It?s such a controlled environment with a framework set by Apple.?

The panel was moderated by Chantal Tode, associate editor at Mobile Marketer.

Reactionary regulation
At issue in the FTC complaint were in-app purchases made by children during a 15-minute window after their parents had entered Apple passwords to allow for a single payment. Parents were not aware that children could continue to make purchases during this window without the need for additional parental authorization.

The company has reportedly argued that the FTC complaint is not relevant at this point since it sent emails last year to 28 million customers and sent refunds for 37,000 claims

All three panelists agreed that in the United States particularly, regulation tends to be reactionary when it comes to technology. By the time a law is finally passed, it is often no longer even relevant.

For instance, a lot of the writing in bills regarding tracking refer to cookies specifically, but in reality, most companies are moving away from cookies now, especially with mobile not even offering cookies.

?Mobile can fall through the cracks because the legislature doesn?t always get it,? Mr. Loeffler said. ?We?re not looking at the leading technology thought leaders when we?re talking about members of congress.

?Mobile is done differently, and I think that?s going to leave some problems if the U.S. continues this reactive approach to regulations,? he said.

Apple?s settlement with the FTC is just one of the many different forms of regulation in today?s conversation. There is also talk of Do Not Track and the consumer?s right to be lost and get rid of his or her information.

Yet Joseph Rosenbaum, partner at Reed Smith, Pittsburg, is not optimistic about these possible regulations.

?I have a very skeptical view of all these pieces of information?many of them will not see the light of day,? Mr. Rosenbaum said. ?Most legislation is obsolete when it?s passed.

?Google, Microsoft, none of the major companies rely on cookies anymore,? he said. ?Technology is almost advancing ahead of the law anticipating some of these things and realizing if that?s not going to work we have to come up with something that does.?

Defining privacy
Mr. Rosenbaum also believes that the notion of privacy itself is undergoing a complete shift where society is coming to terms with the fact that privacy no longer means the same thing it did back in the 19th and 20th century.

Very little is completely private nowadays, but according to Mr. Rosenbaum that is not necessarily a bad thing.

As long as consumers receive value from sharing information and data, they may not mind the changing reality of privacy. If a marketer can clearly explain to a consumer that the information being shared will benefit the consumer and help personalize the experience or add some other value, then the consumer may jump on board.

For instance, Mr. Rosenbaum mentioned an app called Aviate that accumulates information about the phone?s user, tracking behavioral patterns such as when you go to work, how you get there. As it learns about the user?s behavior, it will display different apps on the homescreen based on what it predicts will be most useful and relevant to the user.

In this case, yes the app knows a lot about the user, but it can make the user?s life easier, and if that is considered to be a value, the information exchange may be warranted.

?I think we are getting to the point society-wise where most people accept the fact that maybe their DNA sequence and some other things are private and very little else is,? Mr. Rosenbaum said.

?Our very notions of what?s private are changing and I think that will ultimately affect the law in the long term,? he said. ?Judges are interpreting what is the standard for society.

?Just like obscenity, the I?ll know it when I see it, I?m not sure that privacy isn?t leading to that same place and that we?re not looking at a fairly major change in how we distinguish between what is truly private versus what is publically available.?

Final Take
Rebecca Borison is editorial assistant on Mobile Marketer, New York