Data brokers that collect, analyze and sell huge amounts of information on the activities of consumers for marketing purposes operate with “a fundamental lack of transparency,” the Federal Trade Commission (FTC) said in a report Tuesday.
The report is the result of a lengthy investigation of the data-broker industry, and it recommends that Congress enact legislation that requires the companies to disclose more information about themselves and the data they collect.
The legislation, the FTC recommends, should give consumers access to the information collected about them by data brokers, allow consumers to suppress information and inform consumers what inferences are being made about them.
The FTC report adds momentum to the push in Washington, D.C., to put new curbs on how information collected about people is used by companies.
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In May, the White House issued its own report that focused largely on how companies gather and use vast stores of data online about individuals, and that those practices could be used to discriminate against certain racial, ethnic or socioeconomic groups.
The White House report called for a renewed push to pass a Consumer Privacy Bill of Rights, which President Obama first proposed in 2012. Several of the recommendations in the FTC report are similar to those in the White House privacy proposal.
In February, after a Senate investigation of the data-broker industry, Sen. John Rockefeller, D-W.Va., and Sen. Edward Markey, D-Mass., introduced a bill that would require data brokers to disclose more information about their practices and to give consumers more control over their information collected and sold by the companies.
Data brokers analyze data collected about consumers to make automated assumptions about them, the report said. While the conclusions may determine the products and services offered to a person, the report said, the conclusions can be mistaken.
Consumers are placed in data-driven social and demographic groups for marketing purposes with labels like “financially challenged,” “diabetes interest” and “smoker in household,” the report said.
“The extent of consumer profiling today means that data brokers often know as much — or even more — about us than our family and friends, including our online and in-store purchases, our political and religious affiliations, our income and socioeconomic status,” Edith Ramirez, the FTC chairwoman, said in a statement. “It’s time to bring transparency and accountability to bear on this industry on behalf of consumers, many of whom are unaware that data brokers even exist.”
Privacy advocates said the FTC could have gone further in its recommendations. Marc Rotenberg, executive director of Electronic Privacy Information Center, said the agency’s report placed too much responsibility on individual consumers to monitor the activities of data brokers.
The problem, Rotenberg said, is that data brokers — unlike websites and retailers, for example — do not deal directly with consumers.
“The consumer,” he said, “is not the customer but the product.”
Data brokers, Rotenberg suggests, should be required to contact an individual when his or her information is about to be sold to an insurer, prospective employee or government agency, for example.
“There should be much clearer rights and stronger protections for the individual,” he said. “The FTC didn’t go far enough. This was a missed opportunity.”
Since the FTC investigation began in December 2012, companies in the industry have taken some steps to disclose more information about their activities and the information they collect on individuals.
Acxiom, the largest data broker, set up a website that allows a consumer to see some of the information it has on people, as well as some of the data-generated assumptions it makes about them, like what household goods he or she is most likely to buy.
The nine data brokers examined in the FTC report were Acxiom, CoreLogic, Datalogix, eBureau, ID Analytics, Intelius, PeekYou, Rapleaf and Recorded Future.