Loyalty Programs, AB-846, and the CCPA Anti-Discrimination Clause

 
Shortly after the adoption of the California Consumer Privacy Act (CCPA), businesses identified the anti-discrimination clause and its implications for loyalty or discount programs as one of the core areas of concern. Almost a year later, there is still substantial uncertainty as to how the CCPA will ultimately treat loyalty programs. With the effective date of the California privacy law set for January 1, 2020, efforts have stepped up to clarify this section of the CCPA.

The section at issue in the CCPA is Section 1798.125 including the anti-discrimination language and the financial incentives exception. The anti-discrimination text prohibits a business from discriminating against a consumer because they exercise their rights under the CCPA. Among the specific acts listed are denying goods or services, charging different prices or rates (including through the use of discounts or other benefits), and providing a different level or quality of goods or services.

There are two limitations on the anti-discrimination language. The first is a qualifier in Section 1798.125(a)(2): “Nothing in this subdivision prohibits a business from charging a consumer a different price or rate, or from providing a different level or quality of goods or services to the consumer, if that difference is reasonably related to the value provided to the consumer by the consumer’s data.

The second exception is contained in Section 1798.125(b)(1) to allow financial incentives. It says:

“(b)(1) A business may offer financial incentives, including payments to consumers as compensation, for the collection of personal information, the sale of personal information, or the deletion of personal information. A business may also offer a different price, rate, level, or quality of goods or services to the consumer if that price or difference is directly related to the value provided to the consumer by the consumer’s data.”

The requirements for a financial incentive are notification of the consumer pursuant to Section 1798.135; prior opt-in consent to the material terms which may be revoked at any time; and that it is not unjust, unreasonable, coercive, or usurious.

It is the section that speaks to the value provided to the consumer by the consumer’s data that seems to render it unclear as to whether a loyalty program falls within its terms. Organizations might also need to reconsent all of the members of their loyalty program if its disclosures were not sufficient at the time the original opt-in consent, similar to how many businesses sought to do so prior to the effective date of the European Union General Data Protection Regulation (GDPR).

This is obviously an area that retailers such as grocery stores are following developments on closely.

CCPA Amendment on Loyalty Programs

AB 846 is the proposed bill in the California State Assembly to amend the text of the exception to the anti-discrimination clause. It was introduced on February 10, 2019 by Assembly Members Burke, Low and Mullin. The current list of coauthors includes Assembly Members Aguiar-Curry, Bonta, Fong and Blanca Rubio as well as Senators Morrell and Portantino. AB-846 has been amended twice already and there were a few suggested amendments by the Bill Analysis from the Assembly Privacy and Consumer Protection Committee.

The vote was 9-0 to pass as amended in the Privacy and Consumer Protection Committee with two not voting. Asm. Wicks, the author of AB 1760 (originally the Privacy for All Act of 2019) which was not heard by the committee, abstained from all votes on the CCPA amendments.

In the public hearing before the Assembly Privacy and Consumer Protection Committee, the proponent indicated a willingness to work with the opponents in order to address objections in order to make sure that loyalty programs can continue and that consumers do not get a negative opinion of the CCPA because of withdrawn discounts and rewards.

Here is a brief summary of the first version of the AB846 bill and the amendments to it:

First (Introduced) Version: The bill introduced on February 20, 2019 was an intent bill that noted that 80% of adults belong to a customer loyalty program, membership increased by 15 percent between 2015 and 2017, and 87% of customer loyalty program are open to sharing information in exchange for personalized rewards.

Second Version: This added legislative language to provide for the exception for loyalty programs. The original language of the section was:

“(b)(1) Notwithstanding subdivision (a), a business may offer incentives, including but not limited to, gift cards or certificates, discounts, payments to consumers, or other benefits associated with a loyalty or rewards program, as compensation for the collection, the sale, or the retention of personal information.”

Third version:

– The reasonably related exemption would now allow (1) a difference reasonably related to the value provided in the consumer’s data, or (2) the offering of a specific good or service whose functionality is reasonably related to the collection, use or sale of the consumer’s data.

– It expressly provided for businesses offering its goods or services for no fee.

– This version removed the prohibition on financial incentive practices that are unjust, unreasonable, coercive, or usurious in nature.

– It also eliminated the requirement for prior opt-in consent which could be revoked by the consumer at any time.

Suggested amendments from the Privacy & Consumer Protection Committee:

– Replace references to reasonably related to directly related

– Reinsert that a business shall not offer a different price, rate, level, or quality of goods or services that is unjust, unreasonable, coercive or usurious.

The final word of the CCPA on loyalty programs has not been written yet. We are closely following the progress on the proposed AB 846 to track developments in the California state legislature.

If California does not take action, businesses may need to wait until the California Attorney General issues its final regulations to get more clarity on the state of the financial incentives exception. The scope of the exception was not included on the list of the seven areas where the Attorney General was considering regulations, but it does have the authority to issue then in any area under the terms passed with AB-375 and SB-1121.

JULY 5, 2019 UPDATE: The latest version of the bill keeps in place the original Section 1798.125 but adds Section 1798.126 to the CCPA to accomplish the task of excluding loyalty programs from the nondiscrimination clause.

Additional Resources:

CCPA Summary
Data Portability for CCPA DSAR Access Responses
What is a CCPA business purpose or commercial purpose?
The Broad CCPA Definition of Sale
CCPA Definition of Consumer
CCPA Look Back Period Requirement
CCPA Household Definition & Challenges
CCPA Training Requirement – Section 1798.130(a)(6)
CCPA Regulations: Coming Soon from the California Attorney General