Should Congress Regulate Data Brokers And Targeted Ads?

    December 19, 2013
    Zach Walton
    Comments are off for this post.

If you listen to the anti-surveillance movement across the U.S., they would have you believe that the NSA is the biggest privacy threat facing Americans today. While many in Congress would agree with that sentiment, one Committee thinks another group poses a much larger threat.

On December 18, the Senate Commerce Committee released a new report on data brokers and their impact on consumers. It argues that data brokers violate the privacy of American consumers and enjoy a level of secrecy that would make even the NSA jealous.

Do you think data brokers violate Americans’ privacy? Should they be regulated? Let us know in the comments.

But wait, what’s a data broker? If you’re unaware of the practice, just think of it as a private investigator that looks into your life and sells that information to an interested party. Today, large data broker firms collect information on the habits of millions of Americans and sell this information to advertisers. These advertisers then use that data to deliver targeted ads to specific consumers. Some would say it’s all a part of keeping Internet services free, but some senators are concerned that data brokers are going too far.

In the Committee’s report, it found a number of troubling trends in how data brokers operate:

  • Data brokers collect a huge volume of detailed information on hundreds of millions of consumers, including financial, health, and other personal information; consumers have little or no awareness of these activities;
  • Data brokers then use this consumer information to create marketing products that group consumers in categories, some of which focus on consumers’ financial vulnerability;
  • Data brokers create products for use in online targeted marketing that are based on offline dossiers collected by the companies; and
  • Data brokers operate behind a veil of secrecy, subject to limited statutory consumer protections, and some perpetuate this secrecy by limiting customers from disclosing their data sources.
  • The one leading the charge against data brokers is Sen. Jay Rockefeller. He started to investigate data brokers in October of last year, and this latest report has given him more ammunition to use in his fight against the industry. During a hearing with the data broker industry, The Hill reports that Rockefeller, in regards to data broker firms, said “I can’t prove its wrong, but there’s something lethal about it.” He then went on to say that data brokers are even worse than the NSA when it comes to privacy violations.

    Another Senator – Ed Markey – joined in to say that the study and testimonies from witnesses made it known that there aren’t enough laws to protect consumers from having their information collected. He later said that it was “a real invitation for us to act.” What that act will take the form of is anybody’s guess at this point. The FTC has proposed data brokers create a site where consumers can see what kind of information these businesses have on Americans, but that’s about it at this point.

    Even if there isn’t any real talk of regulation yet, the data broker and ad industries are already on the defensive. During the hearing, Jerry Cerasale, senior vice president of government affairs for the Direct Marketing Association, pointed to a study released in October that found data brokers brought in $156 billion to the American economy and added 675,000 jobs in 2012.

    Besides the study, the industry also pointed to how the data broker industry regulates itself to protect consumer privacy. Granted, self regulation doesn’t always work as intended as there’s always going to be a black sheep among the flock of businesses selling data. Cerasale used this to push the idea that Congress shouldn’t regulate the collection of data, but rather regulate how data is used and punish those who misuse it.

    To really bring it home, the industry said that regulating data brokers would hurt small businesses. Cerasale told the Committee that targeted ads “helps break down the barriers to entry so small businesses can come in and compete with the big boys.”

    If that sounds familiar to you, then you’ve been paying attention to the cookie wars that took place this year. Earlier this year, Mozilla introduced a new cookie policy that would block all third-party cookies in its Firefox Web browser. The non-profit said it was all about protecting its users’ privacy, but the ad industry claimed it would have a negative effect on the many small businesses that rely on tracking to deliver targeted ads to individuals.

    Just like with cookies, the question we must ask ourselves when it comes to data brokers is just how much we value free Internet services. Facebook, Twitter, Spotify and more all rely on data brokers and targeted advertising to provide consumers with free services. Should data brokers let consumers know what information is being collected about them? Most Americans would probably agree that that would be a good idea. Would those same Americans be okay with the regulation of data brokers to the point that some free online services would have to start charging for their use? That’s a much harder sell.

    Privacy and marketing have been at odds ever since the Internet became the dominant driving force of advertising in our lives. Some think that you have to sacrifice one to preserve another, but there are ways to compromise. Let’s just hope this situation doesn’t end up like the Do Not Track negotiations.

    Should data brokers continue to regulate themselves? Are free Internet services worth the wholesale dissemination of your personal info among advertisers? Let us know in the comments.

    Image via Acxiom

    • All Politicians are Phony

      I think if you don’t want your data out there then they should not publish it. Under any circumstance. Publishing information about people is the same as a person digging through someone’s garbage and collecting information that could be used. It is stealing and use without express consent.

      There should be an opt out selection that is on file at all the ISP providers.

      Think of it like the phone books used to be. If you didn’t want your information published, then you asked the phone company to unlist you. Then it was done.

      Information on the net is often faulty information. There is so much made up information it is not even funny. People need to be protected from people pulling scams on the internet. It happens all the time.

    • http://www.websites4accountants.com Kenny

      This is just another tempest in a teapot. Maybe they’re stupid, but I think it’s much more likely that politicians think WE’RE stupid and they are using this issue to distract us from their own incompetence and misdeeds.

      This is not a government invasion of privacy. There is a difference between the government covertly data mining it’s citizens and a service provider openly data mining it’s customers.

      Nothing is free. Google and Yahoo provide free services paid for with advertising and data mining. Everybody knows this. If you DON’T know it you should immediately bring your computer back to the store you bought it from and when the customer service rep asks you why you want to return it just tell them you’re too stupid to own it.

      The idea that they should allow users to “opt out” is patently absurd. Should they be required to allow you to cut off their revenue stream and still provide the service for free? Of course not! That’s just ridiculous. It’s no different than telling a farmer he has to give away apples to people that don’t want to pay for them.

      As long as the data mining is overt I have no issue with it. If you don’t want your data mined you always have the option of turning off your cookies and using pay to play services.

      • PayTheUpfrontPrice

        Kenny. It’s good to read the thoughts of a man with the ability to reason. I do agree that power needs to be checked from time to time, but government intervention is rarely a solution and usually adds to the problem.

        History has proven that the free market, when left to work its own problems out, does just that. The idea that politicians and bureaucrats are more capable than the free market is a utopian dream of the left.

    • AJ

      I have thought for several years that the data brokers, especially the credit bureaus have too much power and too little oversight. All citizens shoudl own their data/information and the credit bureaus and data brokers should allow us full and open access any time we want. We should also be able to have them fix all mistakes within 8 hours of notification and credit reports should be free as often as we want them. it’s ridiculous that I would have to jump through hoops to get access or make corrections, or heaven forbid, I was the victim of identity theft. A friend’s wife was and she still is working through it after 5 years.

    • http://ri-website-designers.com Mike A

      “As long as the data mining is overt I have no issue with it.”

      How is it “overt” that there are 15 trackers, according to my Ghostery plugin, on this site? And how is the information they are gathering “overt?” And how is what they do with that information “overt?”

    • http://wredlich.com/ny Stop Wasting Money

      It is absurd for a Senator to compare data brokers to the NSA. The private sector does not have the authority to kick open your door and arrest you.

      Amazon’s proposed drones deliver packages that you request. The government’s drones deliver bombs.

    • MK

      Data mining is a $156 Billion industry? All from the use of my information (among many, many others)? So, where’s my cut?

    • JP

      We need to move past the all or nothing position. Regulation is required to support level playing field. The board game Monopoly is really no fun to play without rules. Currently users are told that data will be collected, it’s in the EULA, but it’s all or nothing option. Select NO, and the app or software is not installed. That’s like offering someone a choice of pillows in their coffin. Soft or extra soft, your still dead when you use it.

      Most people do not have issue that their action are being tracked, but that it’s not anonymous. While others enjoy the custom ad’s that appear in their search reasults or sweet spam mail.

      Users should have clear options, with degrees of partispation and legal protections.

      Just a word on regulations; these days “regulation” is treated like a dirty word, but for the most part regulations are laws or rules. Our society is based on the idea that we as a people have elected to come together to live under a set of laws and provisions. Without the rule of laws, we have anarchy. Anarchy is not caused by laws, it is caused by the lack of law or enforcement of it.