As we covered at the end of last month, the California Attorney General is targeting loyalty programs in a recent enforcement sweep alleging noncompliance with the California Consumer Privacy Act (CCPA). CPW’s Kyle Dull, a Senior Associate in Squire Patton Boggs Data Privacy, Cybersecurity & Digital Assets Practice, was recently interviewed by Law360 concerning businesses’ data practices in the operation of their loyalty programs. You can check out the Law360 article and his comments here. From the article:
The latest batch of warning letters, which the attorney general issued on Data Privacy Day on Jan. 28, is “a clear indicator that loyalty programs are an enforcement priority and the [attorney general’s office] wants businesses to be transparent about their data practices,” said Kyle Dull, a senior associate in the data privacy, cybersecurity and digital assets practice at Squire Patton Boggs LLP.
“Companies should take away that almost any loyalty program will be considered a financial incentive if it collects any personal information as part of its operation,” Dull said.
Attorneys say it would be useful for the new California agency to tackle financial incentive issues as part of its rulemaking, particularly with respect to the trade secrets concerns that have emerged as the law has matured.
Under the CCPA, businesses must disclose “a good-faith estimate of the value of the consumer’s data that forms the basis for offering the financial incentive or price or service difference” and a “description of the method the business used to calculate the value of the consumer’s data,” along with details about the value of the financial incentive itself.
Companies have voiced concerns that furnishing this information could reveal too much about its inner workings, which could give rivals a competitive advantage, including by opening the door for them to reverse engineer a loyalty program based on the disclosures made in the financial incentive notice.
“The data and benefit valuation methods and balancing requirement require strategic thought, including regarding trade secrets,” said Dull, the Squire Patton Boggs attorney. “Businesses need to be careful about their disclosures because they do not want to reveal any trade secrets developed when designing their loyalty programs, but at the same time being transparent about their data practices to satisfy the AG and CPPA.”
For more on developments out of California, stay tuned. CPW will be there to keep you in the loop.