The FTC databroker report--a chilling analysis of a out-of-control US commercial data surveillance complex; but more action required

By: Jeff Chester | May 27 2014

The Federal Trade Commission has issued a powerful and disturbing privacy wake-up call. The report reveals the largely invisible Big Data-driven complex that regularly spies on every American, comprehensively following our activities both online and off. It delivers a critical “black eye” to the data-broker industry, which has cynically expanded its surveillance on Americans without regard to their privacy. Unlike the White House’s Big Data reports issued earlier this month, the FTC study provides a much more realistic—and chilling—analysis of an out-of-control digital data collection industry.  

However, the commission’s calls for greater transparency and consumer control are insufficient. The real problem is that data brokers—including Google and Facebook—have embraced a business model designed to collect and use everything about us and our friends—24/7.  Legislation is required to help stem the tide of business practices purposefully designed to make a mockery of the idea of privacy for Americans.

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Here are the key findings from the FTC report that illustrate how the data industry requires major reform: 

VIII.    FINDINGS AND RECOMMENDATIONS


This report reflects the information provided in response to the Orders issued to nine data brokers,
information gathered through follow-up communications and interviews, and information gathered through
publicly available sources. Based primarily on these materials about a cross-section of data brokers, the
Commission makes the following findings and recommendations:


A.    Findings


1.    Characteristics of the Industry


⊲⊲ Data Brokers Collect Consumer Data from Numerous Sources, Largely Without
Consumers’ Knowledge: Data brokers collect data from commercial, government, and
other publicly available sources. Data collected could include bankruptcy information,
voting registration, consumer purchase data, web browsing activities, warranty
registrations, and other details of consumers’ everyday interactions. Data brokers do not
obtain this data directly from consumers, and consumers are thus largely unaware that
data brokers are collecting and using this information. While each data broker source
may provide only a few data elements about a consumer’s activities, data brokers can put
all of these data elements together to form a more detailed composite of the consumer’s
life.


⊲⊲ The Data Broker Industry is Complex, with Multiple Layers of Data Brokers
Providing Data to Each Other: Data brokers provide data not only to end-users, but
also to other data brokers. The nine data brokers studied obtain most of their data
from other data brokers rather than directly from an original source. Some of those
data brokers may in turn have obtained the information from other data brokers.
Seven of the nine data brokers in the Commission’s study provide data to each other.
Accordingly, it would be virtually impossible for a consumer to determine how a data
broker obtained his or her data; the consumer would have to retrace the path of data
through a series of data brokers.


⊲⊲ Data Brokers Collect and Store Billions of Data Elements Covering Nearly Every
U.S. Consumer: Data brokers collect and store a vast amount of data on almost every
U.S. household and commercial transaction. Of the nine data brokers, one data broker’s
database has information on 1.4 billion consumer transactions and over 700 billion
aggregated data elements; another data broker’s database covers one trillion dollars in
consumer transactions; and yet another data broker adds three billion new records each
month to its databases. Most importantly, data brokers hold a vast array of information
on individual consumers. For example, one of the nine data brokers has 3000 data
segments for nearly every U.S. consumer.


⊲⊲ Data Brokers Combine and Analyze Data About Consumers to Make Inferences
About Them, Including Potentially Sensitive Inferences: Data brokers infer
consumer interests from the data that they collect. They use those interests, along
with other information, to place consumers in categories. Some categories may seem
innocuous such as “Dog Owner,” “Winter Activity Enthusiast,” or “Mail Order
Responder.” Potentially sensitive categories include those that primarily focus on
ethnicity and income levels, such as “Urban Scramble” and “Mobile Mixers,” both
of which include a high concentration of Latinos and African Americans with low
incomes. Other potentially sensitive categories highlight a consumer’s age such as
“Rural Everlasting,” which includes single men and women over the age of 66 with “low
educational attainment and low net worths,” while “Married Sophisticates” includes
thirty-something couples in the “upper-middle class . . . with no children.” Yet other
potentially sensitive categories highlight certain health-related topics or conditions, such
as “Expectant Parent,” “Diabetes Interest,” and “Cholesterol Focus.”


⊲⊲ Data Brokers Combine Online and Offline Data to Market to Consumers Online:
Data brokers rely on websites with registration features and cookies to find consumers
online and target Internet advertisements to them based on their offline activities. Once
a data broker locates a consumer online and places a cookie on the consumer’s browser,
the data broker’s client can advertise to that consumer across the Internet for as long
as the cookie stays on the consumer’s browser. Consumers may not be aware that data
brokers are providing companies with products to allow them to advertise to consumers
online based on their offline activities. Some data brokers are using similar technology
to serve targeted advertisements to consumers on mobile devices.




 

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