Antitrust Law Daily Wrap Up, TOP STORY: Privacy implications of data broker practices discussed at Senate Commerce Committee hearing, (Dec 18, 2013)

By Jeffrey May, J.D.

Congressional lawmakers expressed concern about the privacy implications of some data broker practices at a Senate Commerce Committee hearing held this afternoon.

Committee Chairman John D. Rockefeller IV (D-West Virginia) kicked off the hearing about data brokers—companies that gather data about consumers and then sell that information to marketers—questioning the lack of industry oversight. While data brokers engage in many unobjectionable activities, some of their practices raise serious consumer protection concerns, Rockefeller noted.

The hearing followed a year-long Commerce Committee examination of how data brokers collect, compile, and sell consumer information for marketing purposes. In anticipation of the hearing, the committee issued a majority staff report summarizing the investigation into how data brokers collect, compile, and sell consumer information.

The committee’s majority staff report found that data brokers:

• collect a huge volume of detailed information on hundreds of millions of consumers, including financial, health, and other personal information without consumers’ knowledge;

• use consumer information to create marketing products that group consumers in categories, such as “Rural and Barely Making It” and “Zero Mobility,” which sometime focus on consumers’ financial vulnerability;

• create products for use in online targeted marketing based on offline dossiers collected by the companies; and

• operate in secrecy with limited statutory consumer protections.

At the hearing, Rockefeller noted that several of the largest data brokers continue to resist oversight. Rockefeller put them on notice that he was not satisfied with their responses to the committee’s investigation and that he intended to take further steps to get the requested information.

FTC testimony. Jessica Rich, Director of the FTC Bureau of Consumer Protection, presented the Commission’s testimony, entitled “What Information Do Data Brokers Have on Consumers, and How Do They Use It?” The Commission is committed to understanding and addressing consumer privacy issues posed by the data broker industry, according to the testimony.

The Commission is pursuing a three-pronged strategy to protect consumer interests in the data broker context: (1) aggressive enforcement actions to ensure that data brokers comply with the Fair Credit Reporting Act (FCRA) where applicable; (2) conduct research and issue reports examining the practices of the data broker industry; and (3) educate businesses about their legal responsibilities and consumers regarding how their data is disseminated. Rich noted that the FTC’s own report on the data broker industry is expected to be released in the coming months.

With respect to enforcement activity, Rich discussed the agency’s 2012 action against Spokeo, Inc. for allegedly failing to take steps to protect consumers in the sale of Internet and social media data in the employment screening context in violation of the Fair Credit Reporting Act (FCRA) and deceptively posting “independent” endorsements of their service on news and technology websites in violation of the FTC Act. The consent order contained strong injunctive relief and an $800,000 civil penalty, according to the testimony. Also mentioned was the FTC’s case against ChoicePoint, Inc., which resulted in the FTC’s largest FCRA civil penalty to date.

Rich called for transparency in the industry. Providing more information to consumers will lead to more consumer trust, she suggested. Rich said that the agency is striving for flexible standards in light of technological changes in the data-driven economy.

World Privacy Forum testimony. Pam Dixon, Executive Director of the World Privacy Forum, urged action. She called for a multi-prong approach to bring fairness, accuracy, and transparency to consumers regarding data broker activities. This approach would include, among other things, better enforcement and a consumer opt-out requirement for data brokers.

Industry testimony. Tony Hadler, Senior Vice President of Government Affairs and Public Policy at Experian, the only corporate representative on the witness panel, defended the industry practices. “Experian believes responsible information sharing significantly enhances economic productivity in the United States and provides many benefits to consumers,” Hadley said. He added that the industry wants to be transparent, but in a meaningful way to consumers.

Companies: Experian plc.

MainStory: TopStory ConsumerProtection Privacy FederalTradeCommissionNews