February 23, 2014 11:02 pm

Senators seek new rules for data brokers

A consumer stands in a pharmacy, trying to decide which medicine would be best for her child’s cough. All the while, her mobile phone is sending a signal to the store, indicating where she is.

The system alerts a pharmacist to assist the shopper after noticing that she has been standing in the same place for four minutes.

At the same time, the location of the phone is transmitted to a so-called data broker company that has tracked, analysed and sold thousands of details about her life.

By tapping into this database, the retailer knows this woman has not bought bath soap for six weeks and sends an instant coupon to her phone, along with a special offer for the chocolate bar she typically buys only once a month.

That is the vision outlined by some of world’s leading mobile phone tracking and analytics companies. There are more than 1.5bn smartphones in the world, each possessing the GPS, WiFi or other technologies that track and transmit a user’s precise location as they go about their day.

Accessing then deploying the location information is a potential boon for bricks-and-mortar retailers, trying to compete with online rivals such as Amazon.

For consumers, that data collection can translate into more precisely targeted coupons and better customer service.

But there is also the potential for data brokers to add location data to the vast dossiers they keep on individuals, often without their knowledge that such information is being tracked, scored and sold.

These details can include everything from an individual’s income and religious affiliation to whether a person smokes cigarettes or suffers from depression.

“The collection is invisible, passive,” noted Ashkan Soltani, an independent privacy and security re­searcher, at a workshop last week at the US Federal Trade Commission on how retailers and other businesses use mobile phone signals to track consumers.

Seth Schoen, a senior staff technologist at the Electronic Frontier Foundation privacy watchdog, argued that consumers should have to opt in to such tracking.

There are potentially dire consequences should a person’s location be tracked long-term, he warned, comparing a data trail to pollution.

“You can’t necessarily see it, and you aren’t necessarily harmed by it in the short term,” he said. “That is much more significant over time.”

Mobile device tracking is the latest digital privacy issue to face increased scrutiny, particularly in the US.

Another FTC workshop this spring will investigate how data brokers score consumers to predict trends and how health-related information is being collected and used.

The investigations come as lawmakers and regulators are trying to rein in the largely unregulated data broker industry.

A US Senate commerce committee hearing in December revealed that data brokers were selling increasingly sensitive information, including lists of rape victims sold for 7.9 cents per name, and those with genetic diseases.

Companies can use those details to change what offers they make and adjust the prices they charge.

Consumer privacy advocates fear the data could be used to affect whether a person gets a job, health insurance or a loan, among other things.

Senator John Rockefeller, chairman of the commerce committee, has launched an investigation into six data brokers that sell products identifying people based on their financial or health problems.

In the US, no overarching federal privacy laws regulate the tracking and sale of personal information. Specific regulations govern the use of information collected about children or information that could be used to make decisions regarding credit, employment, insurance or housing.

Consumers, meanwhile, do not have the right to know what information is collected about them. They often cannot opt out of the tracking or use of those details.

This month, Senators Rockefeller and Edward Markey, also of the commerce committee, introduced the Data Broker Accountability and Transparency Act, which would require data brokers to be more transparent and accountable for the consumer information that they track and sell.

If passed, the bill would also allow consumers to view what data brokers hold about them, correct it or opt out of the collection.

“This booming shadow industry that generated more than $150bn in 2012 and operates with very little scrutiny and oversight, is making tremendous profits off practices that can be disturbing and totally unfair to consumers,” Mr Rockefeller says.

But industry lobbyists have been quick to respond.

Peggy Hudson, senior vice-president of government affairs at the New York-based Direct Marketing Association, says: “Im­posing an access and correction regime on marketing data is not necessary to protect consumer privacy and doing so would make it harder for companies to keep data secure at a time when consumers are more concerned about identity theft than ever before.”

Copyright The Financial Times Limited 2015. You may share using our article tools.
Please don't cut articles from FT.com and redistribute by email or post to the web.

VIDEOS

SHARE THIS QUOTE