Data Brokers Under Scrutiny
In December 2013, Senator Jay Rockefeller (D-W.Va.), as Chairman of the Senate Commerce Committee, released a 36-page report that calls for vigorous oversight of the data broker industry. The majority staff report, A Review of the Data Broker Industry: Collection, Use, and Sale of Consumer Data for Marketing Purposes, examined the practices of data brokers and how they affect American consumers.
Unsurprisingly, the Senate report found that data brokers collect massive amounts of information on hundreds of millions of consumers, including financial, political and health-related data as well as information on social media activity and consumer purchases.
Sen. Rockefeller called the Data Broker Industry “a darkside of American life,” saying that the tracking by data brokers is worse than surveillance by the U.S. government.
According to the report, “the refusal by several major data broker companies to provide the Committee complete responses regarding data sources and customers only reinforces the aura of secrecy surrounding the industry.”
The Senator said that the committee is putting three of the largest companies, Acxiom, Experian and Epislon, on notice for refusing to disclose specific business practices in the investigation, including sources and customers for their data.
The committee conducted a year-long inquiry into the practices of nine data brokers. It was initiated by Senator Rockefeller in October 2012. The nine companies targeted in the probe included Acxiom Corp., Datalogix, Epsilon, Equifax Inc., Experian Plc, Rapleaf, Reed Elsevier NV, Spokeo and TransUnion LLC.
Through their examination of the information from the nine companies, the committee concluded found that in addition to the massive amounts of detailed information about consumers, data brokers also group consumers into categories. The report said that some companies sell products that score consumers, often without their permission or knowledge, using information that is from publicly available data sources both on and offline including social media platforms, direct input from consumers and agreements with other data-collecting companies, retailers and financial institutions.
The report indicates that the financially vulnerable are particularly targeted when grouped into categories, or “buckets” with titles such as “Rural and Barely Making It,” “Ethnic Second-City Strugglers,” “Retiring on Empty: Singles,” “Tough Start: Young Single Parents,” and “Credit Crunched: City Families.”
Aside from profiles of consumer groups that make it easier and more appealing for marketers of high risk products to target the financially disadvantaged, such “bucket” categories go on and on, segmented the population into incredibly narrowed-down profiles of consumer groups that include other disturbing lists such as “rape sufferers”, “erectile dysfunction sufferers,” “alcoholism sufferers” and “ AIDS/HIV sufferers.”
Regarding this practice of categorizing consumers, during the hearing Rockefeller said, "I can't prove it's wrong, but there's something lethal about it. Consumers are stigmatized and then the deck is stacked against them and people are making money off it."
Further, the “veil of secrecy” surrounding data brokering adds fuel to the fire for greater transparency and more consumer control. The report concluded that consumers have “minimal means of learning – or providing input – about how data brokers collect, analyze, and sell their information.”
"Like the pieces of a mosaic, data brokers combine data points like these into startlingly detailed and intimate profiles of American consumers," Rockefeller said. "Under current laws, we have no right to see these pictures of ourselves that these companies have created."
The Committee’s report highlighted the absence of any general federal statute that gives consumers the right to know what information is collected and shared about them and for what purposes. Earlier in the year, the Government Accountability Office published similar findings in its 2013 report, Information Resellers: Consumer Privacy Framework Needs to Reflect Changes in the Technology and Marketplace.
The Federal Trade Commission (“FTC”) is conducting its own investigation of data brokers and is expected to release its report in early 2014.
While we await that report and proposed legislation that may come from Senator Rockefeller’s determination to see more industry transparency and consumer protection, the growth of the multi-billion dollar data brokering industry is likely to continue at a phenomenal rate.
According to the Senate report, one data broker reported that it has multi-sourced data on more than 700 million individuals worldwide and another reported that its database includes almost every U.S. household. Market research and analysis firm International Data Corporation (“IDC”) predicted in their recent report that spending on big data technologies and services will grow by 30% in 2014, surpassing $14 billion as demand for big data analytics skills continues to outstrip supply.
“I wake up to seven newspapers with nothing but NSA headlines,” Rockefeller, also a member of the Intelligence Committee, said. “I'm here to tell you that they are so secure in protection of privacy compared to these data brokers, it's not even close.”
The Senator has introduced privacy legislation in past years and is probable that he will introduce new legislation before he completes his term that ends this year. The report, however, did not make any legislative recommendations.
In a December 18, 2013 statement, Rockefeller said, "While there are laws on the books that protect the privacy of Americans' health and financial information, they do not cover data brokers' marketing activities--and I want to assure these data brokers that the oversight efforts this Committee has started will continue."
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This article is for information purposes only. It is not intended to be and should not be relied on as legal advice for any particular matter.