Should Congress Regulate Data Brokers And Targeted Ads?

    December 19, 2013

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