Restaurants urge the FTC not to over-regulate loyalty programs

Representatives are asking the federal agency to treat guest programs differently in its attempt to better safeguard consumers' privacy.
The industry fears the agency will use a heavy hand. / Photo: Shutterstock

The National Restaurant Association and its legal affiliate are urging the Federal Trade Commission (FTC) to avoid strangling guest loyalty programs in its quest to better safeguard digitally stored consumer information.

“Allow the restaurant industry to continue to be free to voluntarily establish such mutually beneficial business-customer relationships,” the association and its Restaurant Law Center said in response to an FTC proposal to toughen data privacy regulations.

The magic of restaurant loyalty and rewards programs are the information they provide on a participant’s preferences and spending partners. The closer relationship that fosters is a plus for both parties, the advocacy groups stressed.

Indeed, they argued, restaurants aren’t collecting customer information to sell the data to third parties, the business practice the FTC is targeting in its announced effort to better protect consumers’ privacy.

“Restaurants are significantly smaller and far more under-resourced than the businesses that engage in such practices and would be disproportionately burdened by overlay prescriptive regulations,” their commentary read.

The matter is so critical, the groups concluded, that the FTC should hold off on setting new privacy safeguards and data-handling regulations until Congress can provide more clarity through new legislation on what should be the focus and extent of additional regulation.

One of the bills that’s alive in Congress is the American Data Privacy and Protection Act, a measure industry watchdogs have been striving to shape. They’ve voiced fears that loyalty programs could become collateral damage in the push for greater consumer control of personal data.

The FTC is looking at new data privacy safeguards at a booming time for restaurant loyalty programs. Chains raced to add or update the means of tracking and promoting consumer activity as the pandemic took hold and face-to-face dining room interactions were outlawed. The systems were a highly successful way of courting patrons, particularly for delivery, and many doubled as digital ordering platforms.

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