FTC Prohibits Data Broker from Selling Sensitive Location Data
The Federal Trade Commission (FTC) has announced its first settlement with a data broker over the sale of the precise geolocation data of consumers. Under the terms of the settlement, X-Mode Social is prohibited from selling or sharing sensitive location data with third parties unless it obtains consent from consumers or de-identifies the data.
Virginia-based X-Mode Social, now Outlogic LLC, works with app developers and provides a software development kit (SDK) that can be integrated into smartphone apps that allows data to be collected via the apps, including precise geolocation data. Precise geolocation data can identify where an individual lives and works, the residences of friends and family members, and other locations they visit. Some of those locations may be highly sensitive, such as places of worship, domestic violence centers, addiction treatment centers, places offering services to the LGBTQIA+ community, and reproductive health facilities. If precise geolocation data is collected that confirms consumers’ visits to sensitive locations such as reproductive health clinics and places of worship, they could face discrimination, physical violence, emotional distress, and other harms. Sen Ron Wyden determined that X-Mode had sold sensitive location data to U.S. military contractors in 2020, and another customer, a private clinical research company, paid X-Mode for access to consumer information that included visits to medical facilities, pharmacies, and specialty infusion centers across Columbus, Ohio, according to the FTC complaint.
FTC Alleges X-Mode Social Engaged in Unfair and Deceptive Practices
The FTC launched an investigation to determine whether the data broker had engaged in unfair or deceptive acts or practices. The FTC alleged that X-Mode sold raw data to third parties that did not have sensitive locations removed. X-Mode is also alleged to have failed to implement reasonable and appropriate safeguards against downstream use of that data. In addition to purchasing geolocation data from third-party apps, X-Mode also has its own apps – Drunk Mode and Walk Against Humanity. The FTC alleges users of those apps were not fully informed about how precise geolocation data would be used.
According to the FTC, X-Mode did not have policies and procedures in place to remove sensitive locations from its raw data before it was sold, and users of its own apps were not informed about who would receive their data, and safeguards were not put in place to ensure that they could honor requests by users to opt out of the tracking of movements and the serving of personalized advertisements. The FTC alleged these failures constituted violations of section 5 of the FTC Act.
“With this action, the commission rejects the premise so widespread in the data broker industry that vaguely worded disclosures can give a company free license to use or sell people’s sensitive location data,” said FTC chair Lina M. Khan.
Settlement Reached to Resolve FTC Complaint
Under the terms of the settlement, X-Mode and Outlogic are required to implement a program for maintaining a comprehensive list of sensitive locations and that information cannot be shared, sold, or transferred unless consent is obtained from consumers. X-Mode and Outlogic are also prohibited from using location data when they cannot determine if a consumer has provided consent.
X-Mode and Outlogic must develop a supplier program to ensure that all companies it purchases data from are obtaining consent from consumers covering the collection, sale, and use of data, and all precise geolocation data that indicates visits to sensitive locations that has been collected without consent must be deleted or destroyed, unless the data has been de-identified.
X-Mode and Outlogic are also required to implement procedures to ensure that recipients of its location data do not associate the data with locations that provide services to LGBTQ+ people, such as bars or service organizations, with locations of public gatherings of individuals at political or social demonstrations or protests, or use location data to determine the identity or location of a specific individual.
Consumers must also be provided with a simple and easy-to-find method of withdrawing their consent to collect and use their location data and request that data be deleted, and also provide a clear and concise way for consumers to request that any businesses or individuals that have been provided with personal data remove location data from commercial databases.
Outlogic’s public relations firm provided a statement in response to the FTC complaint and settlement. “We disagree with the implications of the FTC press release. After a lengthy investigation, the FTC found no instance of misuse of any data and made no such allegation. Since its inception, X-Mode has imposed strict contractual terms on all data customers prohibiting them from associating its data with sensitive locations such as healthcare facilities. Adherence to the FTC’s newly introduced policy will be ensured by implementing additional technical processes and will not require any significant changes to business or products.”
The agreement will be published in the Federal Register and comments will be accepted for 30 days, after which the FTC will decide whether to make the proposed consent order final.
