- 1798.100 – Consumers right to receive information on privacy practices and access information
- 1798.105 – Consumers right to deletion
- 1798.110 – Information required to be provided as part of an access request
- 1798.115 – Consumers right to receive information about onward disclosures
- 1798.120 – Consumer right to prohibit the sale of their information
- 1798.125 – Price discrimination based upon the exercise of the opt-out right
Does the CCPA require that the benefits conferred by a loyalty program be “reasonably related” to the value of a consumer’s data to the business?
The CCPA makes clear that a business can offer different prices or rates to consumers as part of a financial incentive program if those different prices or rates are “directly related to the value provided to the business by the consumer’s data.”1 The CCPA does not, however, directly prohibit the offering of a financial incentive if the value provided to the business by the consumer’s data is not “directly related” to the value of the financial incentive.
The CCPA also states that a business may not, through a financial incentive program (or any other activity), discriminate against a consumer because the consumer “exercised any of [their] rights” under the CCPA (e.g., access, deletion, or opt-out of sale), unless the difference in price, rate, or quality that forms the basis of the discrimination is “reasonably related to the value provided to the business by the consumer’s data.”2
In commentary published with the issuance of the regulations implementing the CCPA, the California Attorney General informally suggested that the Act might be interpreted as requiring that the benefit provided by all loyalty programs should be “reasonably related to the value of the consumer’s data to the business.”3 The California Attorney General did not explain, however, the basis for his assertion, and such a position would directly conflict with the text of the CCPA (described above) which applies the “reasonable relationship” test only to situations in which “discriminat[ion]” is prompted by the “exercise . . . of the consumer’s rights.”4 Furthermore, in other statements made by the Attorney General, he concedes that the “reasonable related” standard applies only in the context of discrimination.5
As a result, there is a strong argument that the price or rate discounts offered through a loyalty program do not need to be reasonably related to the value that a business derives from data, so long as the business does not discriminate against a consumer that attempts to exercise a privacy right.
Does the CCPA require that the benefits conferred by a loyalty program be “directly related” to the value of a consumer’s data to the business?
The CCPA states that a business “may offer” different prices or rates to consumers if those prices or rates are “directly related to the value provided to the business by the consumer’s data.”1 Interestingly, the CCPA does not prohibit a business from the opposite activity. In other words, it does not state that a business is prohibited from offering different prices or rates if the benefits of a loyalty program are not directly related to the value provided to the business.
Can a company exclude Californians from a loyalty program?
Some retailers have expressed confusion about whether a loyalty program might be considered a “financial incentive” program under the CCPA. If a loyalty program were classified as a “financial incentive program,” it might, among other things, require the business to confirm that differences in “price, rate, level, or quality of goods or services” offered to consumers are “directly related to the value provided to the business by the consumer’s data.”1
Most loyalty programs have a strong argument that they are not financial incentive programs as the main purpose of the program is to provide benefits in recognition of (or in exchange for) repeat purchasing patterns, and not “for the collection of personal information.” Nonetheless, some retailers have expressed concern that privacy advocates, or plaintiffs attorneys, might attempt to argue that all loyalty programs amount to financial incentives. In order to avoid the cost of defending such an argument, they have considered excluding Californians from the scope of their loyalty programs.
While the CCPA prohibits discriminating against a consumer that exercises one of their rights under the Act,2 the CCPA does not confer a right to join loyalty programs. As a result, a company can elect to exclude Californians completely from loyalty programs in order to avoid the risk that the program might be alleged to be a financial incentive program.
Do loyalty programs count as “financial incentives” for the purposes of the CCPA?
The CCPA states that a business may offer “financial incentives, including payments to consumer as compensation, for the collection of personal information . . . .”1 If a financial incentive is offered, the CCPA requires the business to:
- Notify the consumer of the financial incentive;2
- Obtain the consumer’s “opt in consent” to the “material terms” of the financial incentive program;3 and
- Permit the consumer to revoke their consent “at any time.”4
The CCPA also implies that a financial incentive that amounts to a difference in “price, rate, level, or quality of goods or services” might have to be “directly related to the value provided to the business by the consumer’s data.”5
Some retailers have expressed confusion about whether a loyalty program might be considered a financial incentive insofar as such programs typically offer differences in price, level, or quality of goods or services to their members. The intent of most loyalty programs, however, is not to provide benefits “for the collection of personal information,” but to provide benefits in recognition of (or in exchange for) repeat purchasing patterns. Any collection of information is ancillary to the purpose of the loyalty program and typically is used by the company either to administer the program or to track accrued benefits. As a result, a strong argument could be made that most loyalty programs do not qualify as a payment for the collection of personal information and, hence, are not “financial incentive” programs.
For more information and resources about the CCPA visit http://www.CCPA-info.com.
This article is part of a multi-part series published by BCLP to help companies understand and implement the General Data Protection Regulation, the California Consumer Privacy Act and other privacy statutes. You can find more information on the CCPA in BCLP’s California Consumer Privacy Act Practical Guide, and more information about the GDPR in the American Bar Association’s The EU GDPR: Answers to the Most Frequently Asked Questions.
1. CCPA, Section 1798.125(b)(1).
2. CCPA, Section 1798.125(b)(2).
3. CCPA, Section 1798.125(b)(3).
4. CCPA, Section 1798.125(b)(3).
5. CCPA, Section 1798.125(b)(1).
If a business offers a financial incentive when collecting a consumer’s personal information, does it have to estimate the value of the financial incentive?
The CCPA generally prohibits a business from “discriminat[ing]” against a consumer that chooses to exercise “any of the consumer’s rights” – i.e., the right of access, the right of deletion, or the right to opt out of the sale of information.1 An exception to the rule against discrimination arises if a company provides a different price or a different level of service and the difference is “reasonably related to the value provided to the business by the consumer’s data.”2 When that occurs, the CCPA requires that the business “notify consumers of the financial incentives” that are offered, and approximate that the discriminatory “difference is reasonably related to the value provided to the business by the consumer’s data.”3
Unlike situations in which a company discriminates against a consumer that is exercising a privacy right, when a financial incentive is tied to the collection of consumer information the CCPA states only that a business must notify consumers of the financial incentive and comply with the general notice obligations found within the CCPA that apply anytime personal information is collected.4 While a business is required to notify a consumer of any “material terms” that may relate to the financial incentive, it is not required to estimate the value of the financial incentive or show that the value relates to the value of the data to the business.5
Is a business required to provide a financial incentive in order to collect a consumer’s personal information?
The CCPA states that a business “may offer financial incentives” to a consumer for the “collection of personal information,” the “sale of personal information,” or the “deletion of personal information.” The CCPA does not state, however, that a business “must” offer consumers a financial incentive prior to information collection.