A recent Federal Trade Commission report on data brokers is raising some big questions about exactly what information is being collected about consumers—and what should be done about it.

Consumers can’t manage this process by themselves. It’s too big. It’s too complex. There are too many moving parts.

The report, “Data Brokers: A Call for Transparency and Accountability” [PDF], released  Tuesday, argued that consumer data brokers—which sell information that allows marketers to better target and analyze various industry segments—currently operate “with a fundamental lack of transparency.” The FTC concluded that legislation may be needed to protect consumers.

“It’s time to bring transparency and accountability to bear on this industry on behalf of consumers, many of whom are unaware that data brokers even exist,” FTC Chairwoman Edith Ramirez said in a statement.

But some industry groups see things differently. More details below:

Risks of profiling: The FTC outlined potential risks posed by data tracking and the profiling of consumers based on that data—for example, that such data could be used to discriminate based on market segments. “For example, while the data segment of ‘Smoker in Household’ could be used to market a new air filter, a downstream entity also could use the segment to suggest that a person is a poor credit or insurance risk, or an unsuitable candidate for employment or admission to a university,” the study stated. “This would be especially pernicious if the segment included a high concentration of minorities.” The report recommended that Congress pass legislation to improve industry transparency as well as to allow consumers to access their data or opt out of data tracking. “Consumers can’t manage this process by themselves,” FTC Commissioner Julie Brill said, according to The Washington Post. “It’s too big. It’s too complex. There are too many moving parts.”

No actual harm? In comments on the report, the Direct Marketing Association, a leading trade group focused on data-driven marketing, argued that the FTC failed to make a concrete case for its conclusion that the industry needs stronger regulation. “One interesting thing about this report is that after thousands of pages of documentation submitted over the two years of thorough inquiry by the FTC, the report finds no actual harm to consumers, and only suggests potential misuses that do not occur,” Peggy Hudson, DMA’s senior vice president of government affairs, said in a statement. The statement  highlighted DMA’s own efforts to tackle privacy issues and emphasized that the commission’s “calls for notice, choice, and transparency are consistent with existing hallmarks of the ethical standards for our industry.”

Shared goals: Another trade group with interests in the debate, the Software and Information Industry Association (SIIA), said it shared the FTC’s transparency and accountability goals but discouraged new regulation, arguing that the industry can achieve those goals on its own. “SIIA and industry leaders are committed to building on current best practices to ensure consumer trust and confidence in the marketplace,” association President Ken Wasch said in a statement.

Pushing for protection: Consumer advocacy groups, meanwhile, applauded the report and emphasized the need for action—with or without Congress. The Center for Democracy and Technology, for example, noted that “the potential for abuse [of data brokering] is high” despite its benefits to consumers, such as enabling targeted advertising. While supporting new legal requirements for data brokers, CDT noted that some consumer protections are already on the books. “[T]he FTC should continue to pay close attention to data brokers and to aggressively enforce the Fair Credit Reporting Act (FCRA) and Section 5 of the FTC Act to go after practices that violate existing law,” the center’s G.S. Hans wrote on the group’s blog. The American Civil Liberties Union agreed, telling The Washington Post, “This report’s intentions are good, but waiting for Congress to pass new regulations isn’t going to help protect Americans’ privacy rights anytime soon. The FTC needs to start using its existing authority to root out bad practices now.”

(iStock/Thinkstock)