Feds probing Pandora and other app makers


The US Department of Justice (DOJ) is apparently investigating whether some of the information collected by many iPhone and Android smartphone applications violates federal privacy laws. The probe was revealed by Pandora Media, which had to note that it had been subpoenaed as it updated its pending IPO at the SEC.

After the probe was disclosed by Pandora, the Wall Street Journal reported that federal prosecutors in New Jersey have convened the US grand jury probe of whether the apps illegally obtain or transmit information about their users without proper disclosures.

“Privacy groups and government bodies have increasingly scrutinized the ways in which companies link personal identities and data associated with particular users or devices with data collected through the internet, and we expect such scrutiny to continue to increase,” Pandora stated in the update to its IPO prospectus. It noted that it has already been named as a defendant in several purported class action lawsuits claiming various violations of computer fraud, computer trespass and privacy laws.

“In addition, in early 2011, we were served with a subpoena 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 and Android mobile platforms. While we were informed that we are not a specific target of the investigation, and we believe that similar subpoenas were issued on an industry-wide basis to the publishers of numerous other smartphone applications, we will likely incur legal costs related to compliance with the subpoena, management’s attention could be diverted and there is no guarantee that we will avoid costly litigation,” Pandora said of the federal probe. “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,” it added.

RBR-TVBR observation: This got a lot of publicity, but is likely of no real concern. Pandora is only one of many companies apparently under scrutiny, but had to go public with the probe because of its pending IPO. Should the feds determine that current practices for smartphone apps don’t meet the letter of the law the DOJ will likely have everyone sign consent agreements to modify their practices. Of course, then the class action law firms will file lots more lawsuits seeking to cash in.