Private Data-Collection Firms Get Public Scrutiny

Companies collecting huge amounts of information on consumers without their knowledge briefly find themselves in the spotlight

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Bill Clark / CQ Roll Call / Getty Images

Sen. Jay Rockefeller listens during the news conference to call, Dec. 11, 2012.

While the focus Wednesday was on a White House panel’s report recommending curbs to government spying programs, another less-noticed report peeled back the curtain on how private entities are collecting massive amounts of data about millions of Americans.

The 36-page report, published by the Senate Commerce Committeem focuses on the largely unregulated, multibillion-dollar data brokerage industry. Though many Americans may be unfamiliar with data brokerage firms — companies that gather personal data about individuals that they then sell to marketers — these firms have made it their business to know as much about consumers as possible. The Senate committee report and an accompanying hearing Wednesday mark one of the first attempts to shine a light on the activities of these companies, and any possible breaches of consumer or privacy rights that may be occurring as a result of their practices.

Data collection on consumers is not new — for decades, businesses have sought to collect information about consumers for marketing purposes. Companies across the financial, retail and health industries have routinely gathered information on individual social and shopping habits. But the Internet, together with advances in computing and data analysis, has revolutionized the data brokerage industry.

It’s now possible, even without consumer knowledge, to track information as specific as whether a consumer uses laxatives or yeast infection products, the number of whiskey drinks consumed in the past month, and the number of miles traveled in the last four weeks, according to the report. Privacy groups also told the committee that data companies are selling lists of rape victims, seniors with dementia and AIDS patients. The collection and exchange of intimate information about individuals’ lives enabled the industry to generate $156 billion in revenues in 2012 alone — more than twice the size of the entire intelligence budget of the U.S. government, said Sen. Jay Rockefeller (D-W. Va.), the committee chairman.

To better understand how firms in the data broker industry operate, the committee reached out to nine companies that sell consumer data for marketing purposes, asking questions about how data is collected and who buys it. Based on the company responses, committee staff concluded that data brokers “sell products that identify financially vulnerable consumers” and “operate behind a veil of secrecy.” The report criticizes the industry for failing to make its practices known to consumers or even allow them to view, correct or delete information held about them.

Three of the largest companies in the industry — Acxiom, Experian, and Epsilon — have yet to provide the committee with all the information requested. Epsilon said it was not participating in order “to protect our business, and cannot release proprietary competitive information.” Adi Kamdar, an activist at the U.S.-based online privacy campaign group Electronic Frontier Foundation, says that while protecting trade secrets may be a valid argument, “there are ways of going about that without breaching consumer privacy.”

Rockefeller said he was “disturbed” by some of the practices in the industry: specifically evidence showing that firms categorize Americans into income groups such as “Rural and Barely Making It,” “Rough Retirement: Small Town and Rural Senior” and “Zero Mobility.” The report noted that such profiles could be valuable “to predatory businesses seeking to target vulnerable consumers.” It pointed to several media accounts and cases from the Federal Trade Commission, including a 2007 New York Times story about data broker firm InfoUSA, which reportedly sold lists of consumers with profiles such as “Suffering Seniors” to individuals who used the lists to target elderly Americans with fraudulent sales pitches.

Tony Hadley, the in-house lobbyist for Experian, which is among the three largest data companies, said the services data brokerage firms provide are the “secret ingredient” to U.S. economic prosperity in a global marketplace. Hadley told the committee that “marketing data… brings lower prices and greater convenience to consumers by strengthening competition.

While data on consumers may be helping companies and organizations focus on legitimate marketing efforts, Rockefeller said one of his worries was that “under current laws, we have no right to see these pictures of ourselves that these companies have created.” Kamdar says this is one of the biggest issues facing the industry. “Companies like Experian or Axciom have profiles on hundreds of millions of people who have no idea who or what they are,” Kamdar says. And although some of the companies surveyed did give individuals opt-out rights — like Axciom, which recently launched a portal to allow consumers access to opt out — the report concluded that consumers are often not even aware that they are being tracked by data brokers so “it is not clear how they would be aware that they have opt-out rights, or how to exercise them.”

The Federal Trade Commission is also probing the industry, with plans to hold seminars on emerging consumer privacy issues in the spring. While the Senate report did not make any legislative recommendations, Rockefeller reiterated his commitment to continuing to scrutinize industry, calling secretive data collection practices “the dark underside of American life.”