It’s getting tougher to be a data broker.
Companies that collect, analyze and sell billions of details about the activities of consumers for marketing purposes have increasingly found themselves under government scrutiny this year.
The latest salvo comes from the Federal Trade Commission, which said on Tuesday that it had opened an inquiry into the practices of nine companies that collect and resell or analyze consumer data.
The agency issued 15-page administrative subpoenas to the information resellers. The orders require each company to provide extensive details about how it collects consumer data and how it uses, stores, analyzes and shares that data. The agency also asked for information about whether the company allows consumers to see and correct the records held about them.
After it reviews this information, the agency plans to issue a report to advise lawmakers on whether more regulation is needed; data brokers are currently largely unregulated.
The F.T.C.’s inquiry seeks far more comprehensive details than similar investigations this year in Congress. And executives at the companies may be more forthcoming about their practices with regulators because, unlike Congressional inquiries that often make their results public, the F.T.C. keeps the specifics it gathers confidential.
The subpoenas went to, among other companies, Acxiom of Little Rock, Ark., one of the world’s largest information resellers, which manages customer databases for major banks, automakers and retailers; eBureau, a company in St. Cloud, Minn., which, on behalf of clients like credit card companies, lenders, insurers and educational institutions, evaluates and scores online consumers in the market for those companies’ products; Intelius, a company in Bellevue, Wash., which offers people-search look-up services and background checks; and Peek-You, a company that analyzes social media sentiment.
“We are going to get a huge amount of data,” David C. Vladeck, the director of the Bureau of Consumer Protection at the F.T.C., said in a phone interview on Tuesday. “We are going to get answers.”
In an e-mail, Jennifer Barrett Glasgow, the chief privacy officer of Acxiom, said the company had not yet received the F.T.C.’s letter, but was looking forward to cooperating with the inquiry. “We consider this request as an avenue to promote a better understanding of why what we do is vital for the American economy as it creates enormous value for people and businesses while respecting and protecting consumers’ interests,” she wrote.
Gordon Meyer, the chief executive of eBureau, wrote in an e-mail that the consumer scoring company “welcomes the opportunity to describe, to the F.T.C., its practices and the benefits we provide to businesses as well as consumers.”
Representatives of other companies did not return e-mails seeking comment.
Companies and organizations in the United States spend more than $2 billion a year on third-party data about individuals, according to a report last year on personal identity management from Forrester Research, a market research firm. That figure does not include spending on market research and customer data analytics, the report said.
Industry representatives argue that their practices benefit consumers. Data brokers, they say, collect information about individuals’ purchasing histories, estimated salaries, property ownership, family size, leisure pursuits — and sometimes also their race or ethnicity, age, gender, health concerns, online browsing history and social networks — to help marketers tailor pitches to a person’s demonstrated tastes. When these bespoke ad systems work properly, the companies argue, marketers can identify male Southern Californians who surf and show them ads for board shorts even as they avoid sending coupons for ski vacations to people who prefer Alaskan cruises.
But, as consumers conduct more of their personal and commercial lives online, that type of data collection has been steadily increasing, fueled by new online surveillance techniques and more sophisticated analytics. Some companies, for example, have compiled several thousand different pieces of information on a majority of adults in the United States. Regulators say they are concerned that such comprehensive data collection could be used to profile, score or segment consumers, with the potential to unfairly limit the kinds of financial, insurance, health, education or other marketing offers certain consumers receive.
Mr. Vladeck of the F.T.C. offered one possibility he worried about: a hypothetical consumer who buys a deep-fat fryer online may get typecast by data broker systems as a health risk, and then is passed over for marketing pitches for insurance or other services.
F.T.C. Opens an Inquiry Into Data Brokers
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