What Information Do Data Brokers Have on Consumers, and How Do They Use It?
02:30 PM Russell Senate Office Building 253
WASHINGTON, D.C.— Chairman John D. (Jay) Rockefeller IV today announced the U.S. Senate Committee on Commerce, Science, and Transportation will hold a hearing on Wednesday, December 18, 2013, at 2:30 p.m. to examine the data broker industry and how industry practices may impact consumers. The hearing comes after a yearlong Commerce Committee examination of how data brokers collect, compile, and sell consumer information for marketing purposes.
In October 2012, Rockefeller launched an investigation into the data broker industry to give consumers a better understanding of how their personal information is handled, issuing information requests to nine representative data brokers. Rockefeller sent an additional set of inquiries in September 2013 to twelve popular personal finance, health, and family-focused websites to further explore data broker information collection practices, and further expanded the investigation in October 2013 by requesting that Experian provide specific information about the company’s customer vetting practices following news reports alleging that an Experian subsidiary sold data to an identity theft scheme.
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Senator John D. (Jay) Rockefeller IVChairmanU.S. Senate Committee on Commerce, Science, and Transportation
Senator John D. (Jay) Rockefeller IV
The disclosures about U.S. intelligence activities over the past few months have sparked a very public debate in this country about what kinds of information the government should be gathering, and how we protect the privacy of Americans who have done nothing wrong.
The Snowden disclosures have harmed our country’s national security, but they have made Americans think more than they usually do about how their lives – both online and offline – can be tracked, monitored and analyzed.
I am glad we are talking about these important privacy issues. We have all benefited from the rapid advances in computing technology. But we also cherish our personal freedoms. And we want to be able to protect ourselves and our loved ones from the unwanted gaze of the government and our neighbors.
What’s been missing from this conversation so far is the role that private companies play in collecting and analyzing our personal information.
A group of companies – known collectively as “data brokers” – are gathering massive amounts of data about our personal lives and selling this information to marketers.
We don’t hear a lot about the private-sector data broker industry, but it is playing a large and growing role in our lives. Let me provide a little perspective: In 2012, the data broker industry generated $156 billion in revenues. That’s more than twice the size of the entire intelligence budget of the United States Government – all generated by the effort to learn about, and sell, the details about our private lives.
One of the largest data broker companies, Acxiom, recently boasted to its investors that it can provide “multi-sourced insight into approximately 700 million consumers worldwide.”
When government or law enforcement agencies collect information about us, they are restrained by our Constitution and our laws; and they are subject to the oversight of courts, Inspectors General, and Congress.
But data brokers go about their business with little or no oversight. While there are laws on the books that protect the privacy of Americans’ health and financial information, they do not cover data brokers’ marketing activities.
Collecting consumers’ information for marketing purposes is not a new business. For decades before the Internet was invented, retailers, marketers - and yes, political candidates - compiled mailing lists that they used to send catalogues, coupon books, or other materials to their potential customers.
But the data broker industry has been revolutionized in recent years by the tremendous advances in computing and data analysis. And as consumers spend more and more time socializing and shopping online, they are generating rich new streams of personal data to collect and analyze.
These days, data brokers don’t just know our address, our income level, and maybe our political affiliation. They have collected thousands of data points about each one of us.
- They know if you have diabetes or suffer from depression;
- They know if you smoke cigarettes;
- They know your reading habits;
- They know how much you and your family members weigh;
- And they may even know how many whiskey drinks you have consumed in the last 30 days.
Like the pieces of a mosaic, data brokers combine data points like these into startlingly detailed and intimate profiles of American consumers. Under current laws, we have no right to see these pictures of ourselves that these companies have created.
For the past year, this Committee has been trying to bring some much needed oversight to the data broker industry. We have been pushing the data brokers to answer same kind of questions many Americans have been asking their government since the Snowden disclosures.
- What information are you collecting about us?, and
- How are you using this information?
Today’s hearing is the first time we are publicly discussing what we are learning in this investigation. The Commerce Committee staff has also prepared a report for me on the progress of this investigation. I ask unanimous consent to put a copy of this report in the record of this hearing.
One of the things we have learned in this investigation is that data brokers engage in many unobjectionable activities. They do what marketers have always done – they help businesses find potential customers.
But we also have found some practices that raise some serious consumer protection concerns. In particular, I am disturbed by the evidence showing that that data brokers segment Americans into categories based on their incomes, and they sort economically vulnerable consumers into groups with names like:
- “Rural and Barely Making It”
- “Tough Start: Young Single Parents”
- “Rough Retirement: Small Town and Rural Seniors” and
- “Zero Mobility.”
I want to know how and why data brokers are putting Americans consumers into categories like these. And I want to know which companies are buying these lists to target their marketing to these groups.
Some companies in the data broker industry have responded positively to our oversight efforts. Over the past year, they have provided complete answers to my questions, even the tough questions.
But several of the largest data brokers – Acxiom, Epsilon, and Experian – are continuing to resist my oversight. To date, they have not given me complete answers about where they get their consumer data, and to whom they sell it.
I am putting these three companies on notice today that I am not satisfied with their responses and am considering further steps I can take to get this information. And I want to assure them that the oversight efforts this Committee has started will continue.
Senator John R ThuneRanking MemberU.S. Senate Committee on Commerce, Science, and Transportation
Senator John R Thune
Thank you, Mr. Chairman, for holding this hearing. Thank you also to the witnesses for coming here to testify. Our economy is increasingly data driven and data brokers play a growing role in facilitating the provision of goods and services to consumers.
Data, or information, brokers are companies that collect data, including personal information about consumers, from a wide variety of sources – such as public records, websites, and retailers – and then re-sell such information for purposes that range from verifying an individual’s identity and preventing fraud to marketing products. As the Chairman noted in his initial letters to several data brokers in 2012, the purpose of his inquiry has been to better understand the industry, and I look forward to today’s hearing as we focus on how the information collected by data brokers is used for marketing purposes.
Without question, data driven marketing can provide benefits and greater convenience to consumers. It can lower the cost of products and services because businesses can target marketing more precisely. It also can help businesses create and sell products that consumers actually want, lowering start-up costs for new businesses. Data driven marketing is one important reason that many of us are able to use search engines and our email accounts for free. It also allows consumers to receive frequent shopper benefits and coupons. And, it promotes the targeting of resources to reduce the amount of junk mail and catalogues that aren’t tailored to a consumer’s particular interests – at least that’s the goal.
Put simply, this industry is at the center of something the Commerce Committee cares about – commerce. In today’s economy, data driven marketing is widely used across all sectors of the economy – financial, insurance, automotive, retail, technology, healthcare – it’s even used by non-profits, governments, and political campaigns. In fact, many media outlets have noted how the use of commercial data sources helped the President’s re-election in 2012.
As we’ll hear from the Direct Marketing Association, the marketing data industry is also helping to fuel job creation and technical innovation in our slowly recovering economy.
While the industry creates many benefits, this hearing will also explore important questions about the privacy implications of data brokers’ activities, including issues of transparency, profiling, and concerns about allegations of differential pricing. Questions have also been raised about whether consumers are aware of the instances in which their personal information may be collected, bought and sold, resulting in calls for more transparency into data broker practices. Advocates have also raised concerns that data brokers create profiles of individual consumers based on the aggregation of sensitive, sometimes personal data – including health conditions. These are important issues and I look forward to the discussion today.
In a rapidly changing marketplace, the Federal Trade Commission has done important work examining data brokers and related privacy issues, including developing educational efforts. They have also brought enforcement actions under the FTC Act and the Fair Credit Reporting Act. The FTC is also completing a study about practices in the data broker industry and will provide recommendations to Congress based on their findings next year. I look forward to their testimony. The Government Accountability Office (GAO) has recently produced a report on the data broker industry, which I understand will be submitted as part of the record for this hearing as well to help inform this committee.
I will be asking our witnesses how data broker practices for marketing purposes may impact consumers – both positively and negatively. I am also interested in hearing from our witnesses how the industry can work to balance the privacy concerns of individuals with the information needs of businesses and our economy.
Finally, Mr. Chairman, while I’ve expressed my thanks to all of our witnesses being here today, I do want to add a special note of thanks to Tony Hadley from Experian. This inquiry began with letters sent to nine companies, and over time it has also included letters to several consumer-facing websites. Having only one of those companies testify is a good way to keep the number of witness manageable in light of the busy Senate schedule this week. Mr. Hadley, I’m sure many of the other companies are grateful for your willingness to testify and help advance our understanding of the data broker industry. I certainly am. With that, I thank you again Mr. Chairman for holding this hearing, and I look forward to hearing from our witnesses.
Ms. Jessica RIchDirector, Bureau of Consumer ProtectionFederal Trade Commission
Ms. Pam DixonExecutive DirectorWorld Privacy Forum
Dr. Joseph TurowRobert Lewis Shayon Professor of Communication, Associate Dean for Graduate StudiesThe Annenberg School for Communication
Mr. Tony HadleySenior Vice President of Government Affairs and Public PolicyExperian
Mr. Jerry CerasaleSenior Vice President of Government Affairs and Public PolicyDirect Marketing Association (DMA)