H.R. 2019: Terms-of-service Labeling, Design, and Readability Act

This bill, known as the Terms-of-Service Labeling, Design, and Readability Act, aims to enhance the clarity and accessibility of terms of service (ToS) for online services and websites. Here’s an overview of what the bill proposes:

Short-Form Terms of Service Summary Statement

The bill requires covered entities—essentially businesses that provide commercial websites or online services—to generate a short-form summary of their terms of service. This summary must:

• Be truthful and clear.
• Include a graphic data flow diagram that visually represents how user data is shared.
• Make the full terms of service available in an interactive data format.

The summary must be published on the entity's website and must be understandable for individuals with low literacy and disabilities.

Content of the Short-Form Summary

The summary is required to cover several key points, including:

• The categories of sensitive information processed by the entity.
• The minimum sensitive information required for the service to function and any additional data needed for enhanced features.
• A summary of any legal liabilities for users and rights transferred to the entity, such as agreements related to arbitration and waiver of rights.
• Historical changes to the terms of service.
• Instructions for users on how to delete sensitive information if the entity provides such options.
• A list of data breaches that the entity has reported in the last three years.
• An estimate of the time required to read the entire terms of service document.

Graphic Data Flow Diagrams

Within 360 days of the bill's enactment, the Federal Trade Commission (FTC) is tasked with providing guidelines for how entities should create and display information about user data sharing practices through graphic data flow diagrams.

Interactive Data Format

The bill mandates that the terms of service must be marked up using an interactive data format to facilitate accessibility and usability.

Enforcement Mechanisms

The FTC will enforce these requirements. Violations of the bill would be treated as unfair or deceptive acts under existing law, allowing the FTC to take action against non-compliance.

Additionally, state attorneys general may bring civil actions if they believe that the interests of state residents are affected by violations. They have to notify the FTC before initiating such actions.

Definitions and Scope

Covered entities specifically exclude small businesses, as defined under the Small Business Act. The bill encompasses a wide range of sensitive information including health data, biometric data, geolocation, social security numbers, and more.

Timeline for Implementation

The FTC is required to implement various aspects of the law, including the short-form summary, graphic diagrams, and interactive formats, within 360 days of the law's enactment.

Relevant Companies

• GOOGL (Alphabet Inc.): As an entity that collects and utilizes vast amounts of user data, the requirements for clearer terms of service summaries and data flow diagrams could significantly affect its operations and transparency practices.
• AAPL (Apple Inc.): With services heavily reliant on user data and stringent policies regarding user privacy, this bill would impact how Apple presents its terms of service, especially to enhance clarity for users.
• FB (Meta Platforms, Inc.): Meta would need to adjust its ToS communication strategy to comply with mandated summary statements and graphic representations of data usage, given its history of user data handling procedures.