BACKGROUND:

What is a Data Broker?

  • Most consumers are familiar with the term "data broker" – an entity that obtains and shares extensive amounts of consumer information.
  • Data brokers sell this information for use in marketing, among other purposes.
  • Despite the potential consumer benefits, such as targeted marketing of products and services, these practices can raise privacy concerns.
  • The Federal Trade Commission (the "FTC") has characterized data broker activity as "consumer profiling."

FTC TAKES ACTION:

Findings After 18-Month Investigation:

  • Data brokers collect consumer data from extensive online and offline sources, often largely without consumers' knowledge.
  • Consumer data is often passed through several layers of data brokers who share the information with one another.
  • Once data is collected, the brokers combine and analyze online and offline information to make inferences about the consumers, including sensitive issues such as ethnicity, income, religion, political affiliation, age and health conditions.
  • Certain unanticipated uses of the information can pose risks to consumers.
  • Some of the data is stored for an indefinite period of time, thereby potentially creating another security risk.
  • Consumer choices regarding the collection, use and sharing of their data are often largely invisible and incomplete.

FTC RECOMMENDATIONS:

"Data Brokers: A Call for Transparency and Accountability":

  • As the title of the report indicates, the FTC is seeking to increase transparency in the data broker industry.
  • Accordingly, the report suggests that Congress should consider enacting legislation that would: 1) make data broker practices more visible to consumers; and 2) give consumers greater control over the vast amounts of personal information collected and shared by data brokers.
  • For data brokers that provide "marketing products," the FTC identifies several key points that future legislation should address:
    1. Creation of a Centralized Portal
    2. Consumer Access to their Data
    3. Opt-Out Tools
    4. Disclosure of Inferences Drawn from Data
    5. Identification of Data Sources
    6. Information Regarding Notice and Choice
    7. Requiring Affirmative Express Consent for the Collection and Use of Sensitive Data

TAKE AWAY:

  • The 110-page comprehensive report addresses various types of data brokers, such as those that provide "risk mitigation" products and "people search" products, in addition to marketing products.
  • The FTC's report is a call to Congress to make changes to effectuate transparency in the growing data broker industry.

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