FTC To Congress: Regulate Marketing Data Providers

dbThe Federal Trade Commission (FTC) welcomed direct marketers and data companies back from the holiday weekend with a 100-plus page report (called “Data Brokers: A Call for Transparency and Accountability”) and a recommendation that Congress enact legislation to ensure industry transparency and customer control over how their data is used.

The report singled out nine companies, each part of the FTC report interview process that began in 2012: Acxiom, Corelogic, Datalogix, eBureau, ID Analytics, Intelius, PeekYou, Rapleaf and Recorded Future

The FTC’s call to action comes just three months after Senators John D. (Jay) Rockefeller IV, D-WV, and Edward Markey, D-Mass., introduced legislation designed to do exactly that. Nothing notable has happened to the bill since its February introduction.

However, the FTC’s report might change that. It’s an attempt “to build on what Sen. Rockefeller has been talking about – a means of greater transparency,” said FTC Chairwoman Edith Ramirez during a press conference. “We do hope to work with anyone in Congress who is interested in moving (this) forward. We’ll also work closely with the data broker industry in that they’re in the position to implement the best practices we’ve recommended.”

The data industry’s growing size and interconnectedness, as well as its attempts to merge offline and online data, seem to have catalyzed the FTC’s call for legislation.

“When you look at how complex this industry is, the sheer magnitude is astonishing,” Ramirez said. “We learned to what degree data brokers are blurring the lines between online and offline behavior. … Now we see it in much more concrete manner. … They are using our offline behavior in a way to target us online.”

Another fear was the possibility that consumer data used ostensibly for marketing could be applied to other unintended purposes. “For example, a category like Biker Enthusiasts could be used to offer discounts on motorcycles to a consumer, but could also be used by an insurance provider as a sign of risky behavior,” the FTC posited in a press release.

On this count, the Direct Marketing Association (DMA) argued there’s already legislation like the Fair Credit Reporting Act (FCRA) designed to protect consumers from this practice.

“Marketing data is used exclusively for marketing purposes. Data that influences eligibility decisions is currently regulated by federal law, notably the FCRA, Health Insurance Portability and Accountability Act (HIPAA) and Gramm-Leach-Bliley Act (GLB),” the DMA said in a statement.

Peggy Hudson, the DMA’s SVP of government affairs added: “After thousands of pages of documentation submitted over two years of thorough inquiry by the FTC, the report finds no actual harm to consumers, and only suggests potential misuses that do not occur.”

Finally, the FTC was wary of the way in which data marketing firms share data with each other, noting “seven of the nine data brokers in the Commission study had shared information with another data broker in the study.”

But data marketing companies have rejected government attempts to legislate the industry (Experian’s SVP of government affairs and public policy, Tony Hadley, told AdExchanger in February, “There is no need for special measures to ensure the accuracy of data that is used for marketing purposes”), and lawmakers are confounded by the industry’s complexity.

One problem has been the label “data broker,” which many data companies reject as being too broad.

“We define data brokers (as companies whose) primary business is the collection of consumer information from a variety of sources and who then share it for the purposes of marketing products, verification of an individual’s identity or the detection of fraud,” Ramirez said, adding this includes companies that collect information and sell it, but aren’t interacting directly with the consumer.

The DMA told AdExchanger in response: “In our opinion … it seems like nearly every company that does modern marketing would be classified as a ‘data broker.'”

Notably, many companies that have traditionally been considered data brokers, like Acxiom and Epsilon, seem to be pivoting. This calls into question the extent to which data collection will remain their “primary business.” Acxiom, for instance, has focused its resources on its data-management platform, and is starting to become a tech company. And Epsilon has positioned itself as a marketing services provider.

Speaking of Epsilon, it and fellow data giant Experian Marketing Services were conspicuous absences from the FTC’s report. Jay Mayfield, an FTC spokesman, told AdExchanger, “The idea was to choose a set of data brokers (that were) representative of the industry as a whole – some large, medium and small to give a snapshot” of data functions, such as “people search” or “risk mitigation.”

Acxiom, for its part, responded to the FTC’s report via its chief privacy officer, Jennifer Barrett Glasgow: “We generally agree with the FTC report observation about the industry, which, for the most part, refer to practices that have been part of our code of conduct – as well as the industry’s code of conduct – for many years,” she stated. “We have been long-time supporters of transparency,” citing Acxiom’s consumer-access portal AboutTheData.com as a “concrete, tangible expression of our commitment to give consumers voice and choice.”

This portal, though owned and maintained solely by Acxiom, reflects the FTC’s call for the creation of a centralized and online portal through which consumers can opt out of having their data collected.

Ryan Joe contributed.

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