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FTC Warns Businesses and Consumers About Data Collection

Last week, the Federal Trade Commission (“FTC”) issued a report on the data broker industry, comprised of companies which obtain and share vast amounts of consumer information.  In the report, the FTC concluded that data brokers operate with a fundamental lack of transparency.  The FTC also called upon Congress to enact legislation that gives consumers greater control over the personal information that is collected about them.
 
With the growth of online purchases and social media, data collection about customers and potential customers is increasingly part of everyday business.  The FTC calculates that just one data broker adds 3 billion new data points to its database each month. 
 
In its report, the FTC noted that some of the information may be helpful and welcome -- such as businesses being able to recommend products or services (e.g., Amazon recommends books based upon your prior purchases). 
 
The FTC is more concerned, however, about the potential for abuse of privacy.   For example, gathering data and grouping individuals into a category like “Biker Enthusiasts” could be used to offer discounts on motorcycles.   In turn, the FTC warned, it could "also be used by an insurance provider as a sign of risky behavior."
 
With such concerns in mind, some of the FTC’s recommendations to Congress include:

•         Access:  Require data brokers to give consumers access to their data, including any sensitive data, at a reasonable level of detail.
•         Opt-Outs:  Require opt-out tools, that is, a way for consumers to suppress the use of their data.
•         Notice and Choice:  Require consumer-facing entities, such as retailers, to provide prominent notice to consumers when they share information with data brokers.
•         Sensitive Data:  Further protect sensitive information, including health information, by requiring retailers and other consumer-facing entities to obtain affirmative, express consent from consumers before such information is collected and shared with data brokers.
 
Whether Congress will act upon these recommendations remains to be seen.   Don't be surprised, however, if you see the FTC become more active in this area, particularly as an increased number of companies start collecting information online and through social media.  The FTC, well known for punishing companies for data breaches, is not shy.
 
We will continue to monitor the FTC as well as Congress to see if either takes any specific action.   In the meantime, if you are collecting data about customers or potential customers for your own use or for sharing, and you have questions about protecting that data, contact a member of our Emerging Technologies Practice Group.