First CCPA Fine heralds bad news for many websites

Written by Mike Oliver

September 9, 2022

close up shot of a typewriter

The first fine under the California Consumer Privacy Act was issued this week against Sephora U.S.A., Inc. The complaint alleged in part “The right to opt-out is the hallmark of the CCPA. This right requires that companies follow certain straightforward rules: if companies make consumer personal information available to third parties and receive a benefit from the arrangement—such as in the form of ads targeting specific consumers—they are deemed to be “selling” consumer personal information under the law.”

There are three important observations arising from both this allegation, and the consent by Sephora:

  • “Selling” Personal Information does not just mean literally collecting actual personal information and selling it – it means, according to the California attorney general, collection of essentially any information about a web site visitor (for example, what browser they are using) and then providing that to a third party, who then uses that to track such website visitor in their own network of customers – even if the tracking company does not actually know who that person is;
  • Websites that use ANY tracking technology must meet the fairly onerous disclosure notification rules that the site sells personal information – for example Sephora had stated (as most websites do today) that they “do not sell personal information”; and
  • For all practical purposes any website visitor has the right to completely opt out of “tracking” essentially anything, and the site must provide this ability to opt out and respect it.

The other matter of significance from the complaint and resulting consent fine is that if a user instructs their browser to send a do not track signal (also known as a global privacy control, or GPC), the website must honor it.

Finally, Sephora was unable to establish that the analytics providers were “service providers,” which would have resulted in the transaction not being a sale, because they did not have valid service provider agreements with these providers – indeed, the complaint goes to great lengths to note that Sephora exchanged personal information for free or reduced price analytic services.

Under the CCPA, a service provider agreement must:

“(1) Specif[y] that the personal information is sold or disclosed by the business only for limited and specified purposes.

(2) Obligat[e] the third party, service provider, or contractor to comply with applicable obligations under this title and obligate those persons to provide the same level of privacy protection as is required by this title.

(3) Grant[] the business rights to take reasonable and appropriate steps to help ensure that the third party, service provider, or contractor uses the personal information transferred in a manner consistent with the business’ obligations under this title.

(4) Require[] the third party, service provider, or contractor to notify the business if it makes a determination that it can no longer meet its obligations under this title.

(5) Grant[] the business the right, upon notice, including under paragraph (4), to take reasonable and appropriate steps to stop and remediate unauthorized use of personal information.”

CCPA, § 1798.100(d).

Virtually no analytics provider online terms of service meet these requirements.

The whole matter is also strange in that Sephora was given 30 days notice of the violations and for some reason chose not to comply. Did they decide to contest the claims, and then later decided not to? If so, it was a costly decision.

As a result of this decision, all websites using any form of third party (data sharing) analytics providers needs to make sure that they review the agreement with the analytics company carefully to see if they meet the above requirements. If not, they need to either obtain such an agreement, or cease using such provider. They also need to make full disclosure about what data is shared (sold) to the analytics provider, and provide a full opt out notice – and of course, ensure that the site respects GPC, and respects any opt out request. This is going to be very challenging to accomplish for many reasons – in part because in most cases, these analytics providers do not actually know who the person is – they just have all the data that identifies the electronic interaction – so they are going to have to devise a system to scan their identifiers for the requests. In short, this decision is going to make using web analytics all but impossible except where the analytics are limited solely to the website operator.

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