Data Brokers, Prepare to be Regulated

On March 26, 2012, the Federal Trade Commission (FTC) issued a much-anticipated report concerning consumer privacy; an area of increasingly important concern to the government.

The report, called “Protecting Consumer Privacy in an Era of Rapid Change,” was issued in the wake of a number of enforcement actions against companies and industries involving unfair or deceptive practices regarding the collection and use of consumer data. Google, Facebook, online advertising networks, mobile app developers, and other companies found themselves in the government’s crosshairs for failing to maintain reasonable data security.

Although the FTC directed its prior enforcement actions against “fat targets” such as Google and Facebook, in its report the Commission recommended legislation targeting the collection and distribution of consumer data by data brokers.

Data brokers are often smaller companies that partner with larger organizations that collect data directly from consumers.  Data Brokers are given access to the data, and then pass it on to third parties for marketing purposes, who may then pass it on again and again.

The proposed legislation would require a data broker to provide a consumer with access to any information held by that broker, and to provide some degree of control over how that information can be used.  The FTC recommended the creation of a centralized Web site where brokers could (1) identify themselves to consumers and describe how they collect and use consumer data; and (2) detail the access rights and other choices they provide with respect to the consumer data they maintain.

The FTC also announced other findings and proposals, calling on companies such as mobile service providers and developers to implement more meaningful disclosures and tighter controls on their collection and use of consumer data.

The bottom line is this:  the “Wild, Wild West” era of consumer data practices is about to end, and all companies that play a part in its collection and usage had best take heed.


Author: Seth Heyman
Seth D. Heyman is a California attorney with extensive experience in advertising and marketing law, corporate law, contracts, governmental regulations, international business, and Internet law. He has counseled numerous successful companies, both public and private, and was responsible for regulatory compliance, contract management, corporate governance, and HR best practices for multiple organizations in many diverse industries, including marketing, telecommunications, energy, and technology development. He offers insight and guidance on federal and state direct mail, TV, radio, telemarketing, and Internet marketing laws, as well as online promotions, Internet privacy, data protection regulations, and similar matters.

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