Litigation Risk for Website and Mobile Apps Marketing

As the year 2013 began, more than 180 consumer class actions regarding the relatively common practice of companies tracking user behavior on line and via mobile devices were pending. Any company that advertises using a website or mobile apps should pay close attention to this trend.

Online behavioral advertising (OBA) is the term used to describe this process of tracking consumers’ on line activities in order to target them for advertising directed at their specific interests. Even when ads are not served, tracking can lead to liability. From December 2011 through January 2012, for example, some 60 class actions were filed against the mobile industry for tracking user behavior for internal analytics purposes, and not for ad serving. Tracking children’s habits is especially risky. In December 2012, for example, Google and Viacom were sued in California for alleged illegal tracking of children’s video viewing to serve targeted advertising.

OBA is being addressed by regulators in Canada and the European Union, among other places. In 2011, the SEC issued a guidance calling for publicly-traded companies to disclose material cyber-risks in public filings. Being named in a do-not-track class action counts as a fact that must be disclosed.

Companies should consider the following steps: Understand what tracking is taking place through their websites and apps, include requisite insurance and indemnity provisions in vendor agreements, and include appropriate disclosures in privacy policy and website disclosures, to inform consumers and obtain their consent.