United States: FTC Issues Long-Awaited "Big Data" Report: Lays Out Legal Regime, Suggests Further Enforcement

According to the Federal Trade Commission ("FTC"), companies using big data analytics face questions about both legal compliance and broader big data policy issues. In a report, Big Data: A Tool for Inclusion or Exclusion? , released on Wednesday, January 6, the FTC synthesized lessons from a fall workshop, sixty-five public comments, and an earlier FTC seminar on alternative credit scoring products in an effort to educate business on some of the risks and opportunities around big data.

Before addressing the FTC's specific legal and policy considerations, much of the report discusses the "life cycle" of big data and a number of potential uses, positive and negative, for big data. Some of the specific privacy risks worth highlighting include the FTC's concern that analytics products could be used to expose sensitive information by predicting sexual orientation or religious affiliation. Following up on the White House's report on big data and differential pricing, the report notes that big data could be used to implement new forms of price discrimination on low-income consumers. Big data could also inadvertently weaken the effectiveness of consumer choice by allowing companies to draw inferences about consumers in spite of their efforts to opt-out of data collection.

In response to these concerns, the FTC advises companies to be aware of how big data practices could be covered by existing consumer protection laws like the Fair Credit Reporting Act ("FCRA"), an array of equal opportunity laws, and the FTC Act. It stresses that any regulatory inquiry under these laws remains highly fact-specific.

  • Fair Credit Reporting Act: The FCRA applies to companies that compile, sell, or use consumer reports to make eligibility determinations for certain benefits or transactions, and the report notes that companies are increasingly relying upon predictive big data analytics products for eligibility determinations. The FTC highlights several examples where the involvement of third-party analytics services or the use of non-traditional information such as social media data implicate the FCRA. The report also disputes an earlier position by the FTC that information that does not identify a specific consumer may not be a consumer report where that information is used in any part to analyze eligibility.
  • Equal Opportunity Laws: Considerable space is devoted to discussing the applicability of different equal opportunity laws to big data analytics, and that disparate impact analysis under these laws may be especially important within the context of big data. (Disparate impact occurs when companies employ a facially neutral practice that has a disproportionate effect on a protected class, absent a legitimate business need that cannot be achieved by less disparate means.) The FTC also cautions that advertising and marketing practices can implicate equal opportunity laws for creditors, and marketing that impacts subsequent lending patterns or the terms and conditions of a credit offer can be cited as evidence of discrimination.
  • Section 5 of the FTC Act: Finally, the FTC reiterates its position that companies must ensure their use of big data analytics is not unfair or deceptive to consumers. The report stresses the need for reasonable security measures and that companies must be on guard against selling or sharing analytics products or services if they know (or have reason to know) their customers could be using them for discriminatory or fraudulent purposes.

Beyond legal compliance, however, the report also discusses a set of special policy considerations raised by big data. Worried that errors and biases can emerge and expand throughout the entire big data life cycle, the FTC encourages businesses to think about the following four questions:

  1. How representative is your data set? Citing the Boston Street Bump application that was designed to detect potholes via a smartphone app, the FTC explains that once the app team realized that because lower income individuals were less likely to carry smartphones, they also realized their application data was not representative of road conditions across Boston. According to the FTC, companies should be aware of how "digital divides" and "data deserts" could produce skewed and unfair results.
  2. Does your data model account for biases? Even prior to the widespread use of big data, computer models could reproduce existing biases in employment determinations simply by incorporating pre-existing discriminatory actions into new decision-making. The FTC recommends companies think carefully about how both data sets and algorithms are being generated.
  3. How accurate are your predictions based on big data? The FTC cautions that while big data has improved the ability to detect correlations among data points, it cannot always explain which correlations are meaningful. The report highlights efforts by lenders to improve access to credit by using non-traditional indicators such as rental or utility bill payment history, but notes that there could be legitimate reasons for consumers to withhold paying or otherwise dispute a bill, which could throw off these innovative credit models.
  4. Does your reliance on big data raise ethical or fairness concerns? The notion that big data analytics raises larger ethical issues emerged in the White House's 2014 Big Data Report and continues to be of concern to the FTC. The report suggests that companies consider assessing what factors go into an analytics model and balance any predictive value against fairness considerations. It also asks companies to consider how they might deploy big data in ways to advance opportunity.

It is worth noting that Commissioner Ohlhausen issued a separate concurring statement, acknowledging concerns about big data analytics but encouraging policymakers to "test hypothetical harms with economic reasoning and empirical evidence." She argues that big data analytics may actually combine with competitive markets to resolve rather than exacerbate industry's misunderstandings of low-income populations.

In any event, this latest report continues the FTC's pattern of interest in exploring how big data practices could have detrimental effects on low-income and underserved populations, and promises further enforcement under the legal regimes cited above. 

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
Arnold & Porter
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Arnold & Porter
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions