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FTC Launches Probe of Data Broker Privacy Practices

9 companies must respond to commission by Feb. 1

FTC chairman Jon Leibowitz is studying the privacy practices of data brokers. | Photo by Win McNamee/Getty Images

Last week's Congressional Bipartisan Privacy Caucus briefing on data brokers and privacy must have left quite an impression on Federal Trade Commission chairman Jon Leibowitz, who opened a probe today to study the privacy practices of the data broker industry.

The agency issued orders to nine data brokerages to provide information to the FTC about how they collect and use data about consumers by Feb. 1. Acxiom, Corelogic, Datalogix, eBureau, ID Analytics, Intelius, Peekyou, Rapleaf and Record Future all received the 15-page order.

If last year's privacy debate in Washington focused on Do Not Track, it's a good bet that next year's debate will turn on the privacy practices of data brokers—companies that collect, assemble and sell consumer information to third parties, both online and offline. Based on the information the FTC receives, it will prepare a study to make recommendations on whether and how the data broker industry could improve its privacy practices.

Groundwork for the data broker debate was laid in the FTC's February privacy report, "Protecting Consumer Privacy in an Era of Rapid Change," which recommended that Congress pass legislation to give consumers more control over the information held by brokers. One suggestion offered in the report was that the industry set up a centralized website where consumers could erase or modify the profiles and information collected about them.

Since then, privacy advocates and lawmakers have ratcheted up their interest into the privacy practices of data brokers. Reps. Ed Markey (D-Mass.) and Joe Barton (R-Tex.), co-chairs of the Congressional Privacy Caucus, launched an investigation in July sending letters to nine companies, some of whom are now subjects of the FTC probe.

"This era of big data can deliver tremendous benefits and many of the companies here provide significant benefits, but there are costs," Markey said at last week's caucus briefing. "What I fear is we've gone from an era of data keepers to an era of data reapers."

During the briefing, FTC's Leibowitz reiterated the agency's call for "targeted legislation" aimed at giving consumers more control over the information collected by data brokers.

"There is a lot of good that data brokers do, but it's also true that there is no interface with the consumers. They are invisible data catchers, and consumers have little or no interaction or the ability to ensure the information about them is accurate," Leibowitz said.

Privacy advocates are pushing hard for legislation to cover the entire system of data collection, from offline to online.

"Consumers are being tracked wherever they go," said Jeff Chester, executive director for the Center for Digital Democracy. "We need to address this far-reaching surveillance system that exists without consumer knowledge."

"Data brokers are dictating the experience and the offers people get online," added Latanya Sweeney, professor of government and technology at Harvard University.

Industry representatives are concerned that Washington's focus on data brokers could have unintended consequences on the multibillion-dollar business, beginning with a definition of data broker that could sweep in nearly every company that is doing business in today's data-dependent economy.

"Everyone these days is a data broker," said Terry Hadley, svp of government affairs and public policy for Experian, during the caucus briefing.

Instead of focusing on a company category, the industry representatives participating in the caucus suggested that lawmakers and regulators focus on data practices.

"We all process data. It's about the use of this information, that's what makes you a good or bad actor," said Jim Adler, vp of data systems and chief privacy officer at Intelius. "We should focus on uses and abuses so we don't get locked into inaccurate definitions."

The industry would also prefer to self-regulate. "Take a look at self-regulation," suggested Jerry Cerasale, svp of government affairs for the Direct Marketing Association. "We can move much more rapidly."

In a statement, the industry began to build the case for data-driven marketing, noting that the practice accounts for 8.7 percent of the total U.S. gross domestic product and 9.2 million U.S. jobs.

"E-commerce is exploding because responsible data-driven marketing is meeting consumers’ needs and providing precisely the products and services, discounts and offers that they desire—exactly when they want them,” Cerasale said in a statement. 

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