FCC Issues Largest Ever Fine To Verizon For Hiding Ability To 'Opt-Out' Of Selling Customer Info To Marketers

from the still-a-slap-on-the-wrist dept

Wed, Sep 3rd 2014 9:03pm — Mike Masnick

The big telcos don't exactly have particularly good records protecting your privacy. And now the FCC has reached an agreement with Verizon to pay the largest ever fine to the FCC to settle a long-term practice of hiding the fact that customers could opt-out of having their private info shared with marketers. Even as the "largest" ever such fine, it's still pennies for Verizon at $7.4 million.

At issue was that Verizon is required to have either an opt-in system for sharing information on users with marketers or an opt-out system. But if they have an opt-out system, they have to clearly tell new customers that they can opt-out and how to do so. Not surprisingly, Verizon chose the "opt-out" method... and then conveniently left out the part where they tell customers they have the right to opt-out. And they did this for several years. To approximately two million customers. Oh, and to make matters worse, the company is required to let the FCC know of any violation within five business days of becoming aware of it. Verizon finally "noticed" it's own failure to tell people about the opt-out in September of 2012, but forgot to say anything to the FCC for... 126 days. That's a bit longer than five.

For many of its customers, Verizon has used an opt-out process, sending opt-out notices to customers either as a message in their first bill or in a welcome letter. During its investigation, the Enforcement Bureau learned that, beginning in 2006 and continuing for several years thereafter, Verizon failed to generate the required opt-out notices to approximately two million customers, depriving them of their right to deny Verizon permission to access or use their personal information for certain marketing purposes. Moreover, the Enforcement Bureau learned that Verizon personnel failed to discover these problems until September 2012, and the company failed to notify the FCC of these problems until January 18, 2013, 126 days later. Under the terms of the Consent Decree the FCC announced today, Verizon must take significant steps to improve how it protects the privacy rights of its customers. For example, Verizon will now include opt-out notices on every bill, not just the first bill, and it will put systems in place to monitor and test its billing systems and opt-out notice process to ensure that customers are receiving proper notices of their privacy rights. Any problems detected that are more than an anomaly must be reported to the Commission within five business days, and any noncompliance must be reported as well.

To resolve the matter, Verizon will pay $7.4 million to the U.S. Treasury, which is the largest such payment in FCC history for settling an investigation related solely to the privacy of telephone customers’ personal information.

The fine is a slap on the wrist, but this once again suggests the rather cavalier attitude the telcos have concerning privacy and the ways in which they clearly are not particularly concerned about obeying FCC regulations.

DOC 329127A1 (PDF)DOC 329127A1 (Text)

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Filed Under: fcc, fine, marketing, opt out, privacy
Companies: verizon

32 Comments

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That One Guy (profile), 3 Sep 2014 @ 7:40pm

Would be interesting to see how much money they got from selling the data over that period of time, somehow I get the feeling they at worst came out slightly behind, if not broke even, though I suspect they likely made quite a bit more than they've been fined, making this little more than a pathetic flexing of authority on the part of the FCC, to try and look like they're actually interested in helping protect the public, without actually having to do so.
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- Anonymous Coward, 3 Sep 2014 @ 9:09pm
  
  Re:
  $3.7/customer? If they can't make that off selling data then it probably isn't worth their effort doing so anyway.
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  - Mason Wheeler (profile), 4 Sep 2014 @ 11:24am
    
    Re: Re:
    Precisely. At that scale, this is exactly what the article said: nothing more than a slap-on-the-wrist "punishment" for them. Now if it had been $7 billion, that might have gotten the message across that this sort of exploitation is unacceptable and if you do it anyway, you will truly get hurt for it. But alas, it was not to be...
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Anonymous Coward, 3 Sep 2014 @ 9:08pm

Imagine the outrage if rich people private info were sold without their knowledge.
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- Anonymous Coward, 3 Sep 2014 @ 11:12pm
  
  or if their data was stolen... cue the fappening
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- Howard the Duck, 4 Sep 2014 @ 4:35am
  
  Re: Rich people don't use Verizon?
  You must believe that all rich people are inherently evil.
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  - Anonymous Coward, 4 Sep 2014 @ 6:17am
    
    Re: Re: Rich people don't use Verizon?
    Huh?
    
    Point is (can't believe it needs explanation) apparently this is only a concern when rich people's info is stolen, leaked, sold, whatever.
    
    Rich people evil? I have no idea where you get this - wtf.
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  - Mason Wheeler (profile), 4 Sep 2014 @ 1:42pm
    
    Re: Re: Rich people don't use Verizon?
    No, but to point the correlation back in the other direction, it certainly does seem that a disproportionate number of evil people--and especially of evil people who get away with it--are rich.
    
    "A criminal is a person with predatory instincts without sufficient capital to form a corporation."
    -- Howard Scott
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    - John Fenderson (profile), 4 Sep 2014 @ 2:56pm
      
      Re: Re: Re: Rich people don't use Verizon?
      That's one of my favorite quotes.
      
      "it certainly does seem that a disproportionate number of evil people--and especially of evil people who get away with it--are rich."
      
      It might seem that way without it being true because evil people who are wealthy are much more likely to actually affect your life than evil people who are poor.
      
      However, I happen to strongly suspect that the percentage of people who are evil is greater in the "rich" group than "poor" group. I suspect this for two reasons:
      
      1) You pretty much have to engage in unethical or illegal behavior in order to amass a huge amount of wealth. It's how the system is designed, and
      
      2) Evil is attracted to power, and in our society money is power. Therefore, on the whole, evil people are more likely to desire great wealth enough to work to attain it than non-evil people are.
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Mark, 3 Sep 2014 @ 9:40pm

I'm sure 7.4 million is a drop in the bucket compared to what they earned from not telling people.

If you ask me, the fine isn't large enough.
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- That One Guy (profile), 3 Sep 2014 @ 10:09pm
  
  Re:
  Not even close to large enough, no. If the FCC was interested in actually punishing Verizon over this, my suggestion would be to find out how much they made selling that data, and then fine them ten times that amount, with half of that being paid out to the affected Verizon customers.
  
  That way the fine amount is directly connected to the profits Verizon made from 'forgetting' to tell their customers how to opt out, it's large enough to completely eliminate any gain they might have made from doing so, and those affected get at least some repayment for what's been done.
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  - Anonymous Coward, 4 Sep 2014 @ 2:32am
    
    Re: Re:
    ...and with the fine being taken directly from the personal bank accounts of every Verizon C-level executive.
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  - John Fenderson (profile), 4 Sep 2014 @ 3:00pm
    
    Re: Re:
    Corporate fines should be levied (and reported) in terms of percent of yearly gross income rather than an absolute dollar figure. Want to levy a fine that actually stings Verizon? Make it 20% of last year's gross.
    
    At the very least, journalists need to stop reporting the absolute dollar amount and report fines in terms of % of income. It's the only measure that actually matters.
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    - John Fenderson (profile), 4 Sep 2014 @ 3:01pm
      
      Re: Re: Re:
      Ugh, I made this comment before reading all the other comments that make this exact point. Sorry for the spam!
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Anonymous Coward, 3 Sep 2014 @ 11:09pm

It's less than one% of their quarterly Revenue, all told. A much more appropriate fine would have been a percentage of their total revenues for this year....say, 20%?
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Anonymous Coward, 3 Sep 2014 @ 11:16pm

They need to start fining in percentages. That's a lot of money to a small business (and they'd get the message) but not a megalith super business like Verizon. Whereas X.XX% of a company's revenue is going to punish a small company the same as a too-big-to-care company.
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That Anonymous Coward (profile), 3 Sep 2014 @ 11:55pm

Perhaps it is time we shoot anyone who suggests it be made out-out.
The default setting on most anything should be opt-in.
Telemarketers tell tales about how people WANT their calls, so put your money where your mouth is make those customers clearly opt in.
My tears when that industry collapses won't be real.
Charities, Political, etc etc... make that all opt-in.

I bet you those notices would be in every bill, free texts every month, and they would offer extras to get people to do it. It is clear they failed at their responsibilities with opt-out so fine them every damn cent they earned for that failure and set the default to opt-in.

Why anyone thinks that opt-out is the best possible practice is beyond me. You are forcing customers to jump through all sorts of hoops and high pressure tactics to not do it. With opt-in those who are interested would have a super easy way to say yes by all means call me at dinnertime and tell me all about how you can fix this problem in my life.
Sure call me 14 times a day and tell me the lies about how this candidate wants to sell the country to the russians.

Trick someone into doing it... the fine is every cent you earned from selling that data that year... twice.

Problem - actual solution.

I have a right to not be bothered if I don't want to be.
You do not have a right to sell access to bother me.
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- Anonymous Coward, 4 Sep 2014 @ 12:12am
  
  Re:
  The only time opt-out should be a feature is for something that was previously enabled and did not have an opt-function.
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- Digger, 4 Sep 2014 @ 7:45am
  
  Re:
  Fine needs to be 100x anything made on data sold, for every user's data sold that did not opt in, per day that the users data was marked as Opt-In, when the user did not request it independently. No "if you do not respond, you will be marked as opt-in". It has to be "If you wish to opt-in, please contact us so we may send you a bottle of KY before you bend over for us."
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Whatever (profile), 4 Sep 2014 @ 2:09am

Good on them!
Good job by the FCC, this is a perfect example of a company gone way over board. Verizon did the deed and yes, they should pay for it. It's too bad that many other companies who use similar (or slightly less slimy) ways of getting people to consent to certain things aren't taken to task.
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- Anonymous Coward, 4 Sep 2014 @ 6:20am
  
  Re: Good on them!
  Except they will pay nothing while taking the tax write off.
  Business as usual.
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  - Digger, 4 Sep 2014 @ 7:43am
    
    Re: Re: Good on them!
    Fines cannot be written off from taxes. Sorry Charlie.
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    - Anonymous Coward, 4 Sep 2014 @ 8:00am
      
      Re: Re: Re: Good on them!
      Small difference between fine and settlement
      
      BofA Grabs $12 Billion Tax Write-Off From $17 Billion Mortgage Settlement
      
      http://www.forbes.com/sites/robertwood/2014/08/21/bofa-grabs-12-billion-tax-write-off-from -17-billion-mortgage-settlement/
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      - Digger, 4 Sep 2014 @ 8:11am
        
        Re: Re: Re: Re: Good on them!
        Who the hell was paid in the IRS for letting that slip through?
        
        Settlements with government agencies shouldn't be tax write-offs.
        
        F'ing idiots
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Ninja (profile), 4 Sep 2014 @ 5:30am

I think fines should be calculated in terms of revenue to be meaningful at all. A few millions against a revenue of billions is kind of ... A wrist slap indeed.
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- Anonymous Coward, 4 Sep 2014 @ 5:46am
  
  Re:
  Barely a wrist pat, actually.
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  - Anonymous Coward, 4 Sep 2014 @ 6:21am
    
    Re: Re:
    A good finger wagging.
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VerizonSucks, 4 Sep 2014 @ 7:42am

FCC needs to set rules to make those "Opt-In" only
Don't allow anything like that to happen in the first place.
Modify all programs like that for Cellular / Internet / Telephone companies to be Opt-In, with everyone's status immediately reverted to Opt-Out, then wait for the users to call to be added back if they wish to be.

That's the only "right" way for things to happen.
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Anonymous Coward, 4 Sep 2014 @ 8:15am

The Fine Is Not the Punishment
Fines like this traditionally signaled plaintiff class action lawyers that it was time to start looking for a sympathetic name plaintiff. That's where the real pain came from, and that helped keep companies honest - or at least above-board.

Of course, since the Supreme Court gutted class actions in the name of arbitration, this likely no longer applies. I'll bet Verizon didn't "accidentally" forget to include a class action waiver / arbitration clause in their form contracts.
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John85851 (profile), 4 Sep 2014 @ 3:05pm

No problem, I have $7.4 in my wallet
"$7.4 million fine? I have that in my wallet. Do you have change for a $10 million bill?" said Verizon.

There are two ways this will play out:
1) This fine is so low (which it is) that they'll consider it a cost of doing business, pay it, and keep doing it until they're caught again... and pay that fee.
2) They take the fine seriously and charge their customers more money to cover this "loss".
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Eldakka (profile), 5 Sep 2014 @ 12:30am

$7.4million, /6 years /2million customers

=$0.62 per person per year.

The fine should be at a minimum, $1 per user per year, plus a multiplier of how many times over the required reporting limit they are, 126days/5days

= 25.2

5 days is pretty tight tho, so give them a grace period of 1 month, so it's (126 days - 30 days) /5

= 19

final fine 1*2000000people*6years*19 = $228million.
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- limbodog (profile), 5 Sep 2014 @ 8:46am
  
  Re: fairness in fines
  Absolutely! If it were a single person uploading copies of Adam Sandler's film "Billy Madison", then the uploader would be fined once for each time someone downloaded the movie.
  
  Corporations should face the same consideration. Every instance of each person affected should result in a cumulative fine.
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