What's Really at Stake in the FCC-Verizon Supercookies Case

What's Really at Stake in the FCC-Verizon Supercookies Case
What Exactly Is a Supercookie?
The Data Was Given to Verizon and Third Parties
The Origin of Supercookies
Customers Didn't Get a Chance to Opt Out Until Much Later
Supercookie Data Supported Highly Targeted Ads
What to Know About the Open Internet Transparency Rule
AT&T Was First to Run Afoul of Open Internet Rule
Verizon Says It's Already Working on a Fix
FCC Will Monitor Verizon for Three Years
FCC Enforcement Won't End Tracking Cookies
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What's Really at Stake in the FCC-Verizon Supercookies Case

The FCC has fined Verizon $1.35 million for using "supercookies." Here are the FCC's reasons for fining Verizon and how supercookies aid online marketers.

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What Exactly Is a Supercookie?

Anybody who uses a Web browser should know what a cookie is. But what about a supercookie? As the name might suggest, a supercookie is capable of tracking far more user data than a traditional cookie and, perhaps most importantly for marketers, is nearly impossible to remove. It then phones home the information it collects to its owner, providing extremely useful data, including a person's demographics and other information of interest to online advertisers and marketers.

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The Data Was Given to Verizon and Third Parties

The FCC's chief complaint was that Verizon used supercookies to provide data not only to its own advertising units, but also its third-party clients. More importantly, the company disclosed "customer proprietary information" to clients and did so without their wireless customers' knowledge and consent, according to the FCC. In a statement, FCC Enforcement Bureau Chief Travis LeBlanc said Verizon's customers "should have a say in how their personal information is used."

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The Origin of Supercookies

According to the FCC's investigation, Verizon started injecting the supercookies into customer Internet traffic as early as December 2012. The company didn't say it was actually doing it, however, until October 2014. Subsequent reports in January 2015 found that at least one of the company's third-party partners (which was not identified) was "restoring cookie IDs that users had cleared from their browsers by associating them with Verizon's [supercookies], in effect overriding customers' privacy choices," according to the FCC.

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Customers Didn't Get a Chance to Opt Out Until Much Later

The FCC was particularly concerned that Verizon moved slowly in allowing customers to opt out of supercookies. The FCC said in a March 7 statement that Verizon didn't update its privacy policy until March 2015 to give its customers the "opportunity" to opt out of supercookie installation on their devices.

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Supercookie Data Supported Highly Targeted Ads

For marketers, the data Verizon collected was outstanding. By combining a person's Internet traffic and their unique customer information, third parties could target highly valuable customer segments. According to the Wall Street Journal, supercookie data was used to promote 1-800 Flowers ads ahead of Valentine's Day in 2014. But here's the scary part: The Journal claims Verizon was able to target the ads only to men between the ages of 25 and 44 who earned more than $75,000 per year.

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What to Know About the Open Internet Transparency Rule

Verizon became the second company to be charged under the Open Internet Transparency Rule. The rule, which was adopted in 2010, outlines the ways Internet providers can communicate information to customers. In Verizon's case, the company was said to have violated Section 8.3 of the rule, which states that all Internet providers must make enough information about their services available for "consumers to make informed choices" about the companies they choose. In this case, the FCC argues, Verizon failed.

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AT&T Was First to Run Afoul of Open Internet Rule

The FCC was quick to note that Verizon isn't the wireless provider charged with violating the Open Internet Transparency Rule. Last June, the FCC proposed a $100 million fine against AT&T for allegedly misleading its unlimited data plan customers. Specifically, the FCC said that AT&T failed to disclose to customers their service was subject to speed reductions after hitting a "data threshold." For its part, AT&T said at the time that it would "vigorously dispute the FCC's assertions."

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Verizon Says It's Already Working on a Fix

In its own case, Verizon has not necessarily denied many of the FCC claims, but it has said publicly that it's already addressed many of the agency's concerns. The company noted that it already has an opt-in program, and it will continue to provide advertising services. The company also issued a statement that said it has made "several changes" to its platforms to offer customers "more options." It's unclear, however, what that means.

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FCC Will Monitor Verizon for Three Years

Although Verizon says it's already implemented the changes the FCC wanted, the $1.35 million fine isn't the end of the matter. Instead, the FCC says it will monitor Verizon over the next three years to ensure it's in compliance with the transparency regulations. If Verizon stumbles, the company could face additional fines.

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FCC Enforcement Won't End Tracking Cookies

Although the FCC's ruling might sound like a big win for consumers, the reality is somewhat different. In fact, the FCC did not say that tracking was necessarily wrong or that it should be banned. Instead, the agency noted that tracking—and using supercookies—was just fine, as long as consumers opted in to the program and could opt out at will. So, while Verizon may have sustained some public relations damage, it can keep on doing what it's been doing.

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