A federal grand jury has launched an investigation of popular apps to determine if federal laws are being violated through improper sharing of information about users with ad networks.
Pandora Media Inc., the Oakland, Calif. online music streamer, which filed last month for an IPO, Monday confirmed the investigation in a Securities and Exchange filing. Pandora said that earlier this year it received a subpoena from a federal grand jury in New Jersey investigating how smartphone apps share information about users.
Pandora said it was asked to “produce documents in connection with a federal grand jury, which we believe was convened to investigate the information-sharing processes of certain popular applications that run on the Apple (AAPL) and Android mobile platforms.”
Pandora said it was informed it was not “a specific target,” adding that it believes many other smartphone app publishers have received similar subpoenas.
“Any claims or allegations that we have violated laws and regulations relating to privacy and data security could result in negative publicity and a loss of confidence in us by our listeners and our advertisers, and may subject us to fines by credit card companies and loss of our ability to accept credit and debit card payments,” the company noted.
The Wall Street Journal reported investigators are aiming to determine if app makers are violating the Computer Fraud and Abuse Act, with the potential argument being that app makers are, in effect, “hackers” who invade users’ smartphones.
The investigation may not result in a criminal prosecution, but could result in civil litigation.
Back in December, the Journal reported on how “Big App” was watching users, transmitting to “outsiders,” such as ad networks, information like name, location, age, gender, phone number, unique device number and other personal data without users’ knowledge or consent. Reporters examined 101 apps and found that 56 of them transmitted the smartphone’s unique device ID and 47 apps transmitted the phone’s location.
This is probably news to many app users.
The Journal noted that unlike computer users, smartphone users can’t block cookies. For now, if you like your apps, you may have to put up with the spyware.
But that could change.
The government is considering requiring “Do Not Track” features built into browsers and opt-in plans to enable consumers to stop or restrict advertisers from studying their online behavior for marketing purposes.
Pandora, which the Journal noted in December transmitted age, gender, location and phone ID info to ad networks, warned: “Restrictions on our ability to collect, access and harness listener data, or to use or disclose listener data or any profiles that we develop using such data, would in turn limit our ability to stream personalized music content to our listeners and offer targeted advertising opportunities to our advertising customers, each of which are critical to the success of our business.”
