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Digital Media, Technology & Privacy Alert >> Mobile Shopping Apps Do Not Provide Sufficient Disclosures to Consumers, FTC Staff Report Finds

October 27, 2014

A staff report issued by the Federal Trade Commission (FTC) in 2014 found that many “mobile shopping” apps do not provide consumers with important information prior to download (such as how the apps manage payment-related disputes or handle consumer data). As such, the report contains a number of recommendations to companies that offer these apps to improve transparency at point-of-download and beyond.

The FTC surveyed 121 popular shopping apps available on the Google Play and Apple App Stores. The survey included apps in three categories:

  1. Price comparison apps;
  2. “Deal” apps that provide consumers with coupons or discounts; and
  3. In-store purchase apps.

The principal findings in the report, titled “What’s the Deal? An FTC Study on Mobile Shopping Apps,” were:

Prior to download, the reviewed apps frequently failed to give consumers clear information about dispute procedures, data security, and consumers’ potential liability in the event something went wrong with a payment made through the app.

A majority of the shopping apps across all three categories had privacy policies disclosing that the apps collected a wide array of consumer information, ranging from consumers’ names and addresses to detailed information on consumers’ purchases, their Social Security numbers, and data provided about the consumers by third parties. However, the reviewed apps’ privacy disclosures often used vague language as to how this data was handled, reserving broad rights to collect, use, and share consumers’ information.

Specifically, although almost all of the apps stated that they shared consumer personal data with third parties, 29 percent of price comparison apps, 17 percent of deal apps, and 33 percent of in-store purchase apps reserved broad rights to share consumer personal data without restrictions of any kind, making it difficult for consumers to make informed decisions about whether to use the apps based on particular privacy considerations.

“Consumers should be able to make informed decisions about the apps they install and the services they use,” according to the report. To reach that goal, the report recommended that:

  • Apps clearly disclose consumers’ rights and liability limits for unauthorized, fraudulent, or erroneous transactions, in addition to clear disclosures around data security and privacy practices with regard to consumer financial data.
  • In-store purchase apps provide clear dispute resolution and liability limits information to consumers, particularly when using prepaid, gift, or stored value methods to process payments (since these transactions may be less secure than credit card transactions).
  • Apps clearly describe how they collect, use, and share consumer data.
  • Companies ensure that their data security promises are mirrored by strong data security practices that take advantage of the most current technology available (especially across mobile platforms).
  • Companies honor any commitments they make about the security they provide as a general rule.

The Bottom Line

The FTC staff report on “mobile shopping” apps – coming on the heels of FTC workshops, other reports, and enforcement actions on the topic of mobile privacy – highlights the FTC’s continuing commitment to translating its general position on company privacy and disclosure practices to emerging and new mobile platforms. We can expect to hear more from the FTC on mobile commerce, but in the meantime, all companies developing mobile shopping apps should build in the recommendations contained in this staff report.