On April 3, 2017, the President signed into law a joint resolution that eliminates rules submitted by the Federal Communications Commission (FCC) that would have required Internet Service Providers (ISPs) to get approval from their customers before selling any information about the customer's online activity. The resolution narrowly passed in the U.S. House of Representatives and the Senate before being presented to the President for signature.
Many opponents of the now rejected rules argue they would have stifled innovation and limited the ability of ISPs to compete with companies that do collect usage data like Google and Facebook. While such companies can only collect data from usage of a specific website, rule supporters have expressed concerns that ISPs will be able to track their customers' entire browsing history because ISPs have much broader access to an individual's online activity. Advertisers purchasing that history could then build individual marketing profiles enabling them to target ads at people in specific demographic groups based on these profiles. Because the rules had yet to take effect, the repeal does not change what ISPs already may do with their customers' information; however, the repeal leaves open the question of how to interpret existing laws regulating the selling of customer information.
In 2015, the FCC classified broadband ISPs as "common carriers," subjecting broadband ISPs to Section 222 of the Communications Act of 1996 and exempting them from oversight by the Federal Trade Commission (FTC). Section 222 allows broadband ISPs to collect and sell customers' aggregated data to third parties, but still mandates that broadband ISPs protect the confidentiality of their customers unless they receive approval to disclose and sell a customer's personal information. The now rejected rules would have clarified what type of "approval" is required for a broadband ISP to disclose and sell customers' personal information. Absent the rules, it is unclear whether simply offering an opportunity for customers to opt-out or providing notice in a privacy statement constitutes "approval." FCC Chairman Ajit Pai has vowed to work with the FTC to develop and enforce new, uniform privacy requirements equally applicable to all companies in the internet ecosystem.
Many of the major ISPs have agreed to follow a voluntary set of privacy principles based on the FTC's existing framework, specifically to: (1) allow for opt-in consent for the use and sharing of sensitive information as defined by the FTC; (2) offer an opt-out choice for the use of non-sensitive information for personalized marketing; and (3) rely on implied consent to use consumer information for certain activities, such as service fulfillment, market research, first-party marketing, and network management. Information related to a customer's browsing history or online activities would fall under the opt-out system.
The creation and adoption of new privacy rules is uncertain given that the FCC's proposed rules were repealed pursuant to the Congressional Review Act (CRA), which allows Congress to overturn recently adopted agency rules and prohibits agencies from adopting substantially similar rules in the future. The term "substantially similar" is not defined in the CRA and has yet to be interpreted by the courts. It is therefore uncertain whether the FCC could adopt new privacy rules.
Bass, Berry & Sims will continue to monitor and provide updates as we track privacy legislation and regulations. If you have questions regarding the potential effects of this legislation or any other privacy concerns relating to your organization, please contact an attorney on our Privacy & Data Security team.