White House Report Warns of Dangers of Data Collection By Marketers

Report Also Raises Awareness of Potentially Discriminatory Practices

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The White House released a long-anticipated report on big data and privacy Thursday. While it praised the online ad industry for its self-regulatory program for behavioral advertising, it suggested that so-called "data brokers" ought to follow suit and embrace transparency.

John Podesta
John Podesta Credit: Newscom

While the report didn't name specific names, it appeared to target data giants like Acxiom and Experian, which were among the companies named in a "60 Minutes" piece on data brokers and privacy that aired in March. A section of the 79-page report -- which was assembled by a group led by White House advisor John Podesta -- reads:

"This means ensuring that consumers are meaningfully aware of the spectrum of information collection and reuse as the number of firms that are involved in mediating their consumer experience or collecting information from them multiplies. The data services industry should follow the lead of the online advertising and credit industries and build a common website or online portal that lists companies, describes their data practices, and provides methods for consumers to better control how their information is collected and used or to opt-out of certain marketing uses."

The report also described how big data could potentially lead -- unintentionally in some cases -- to discriminatory practices. For example, it pointed to a mobile app called Street Bump that the city of Boston commissioned to collect data about road conditions, including potholes, via the accelerometer and GPS on the phones of residents who installed it.

Preemptively it realized that this would privilege residents of wealthier neighborhoods who were more likely to have smartphones and potentially fast-track them for repairs ahead of other less affluent areas. Officials then decided to deploy the app first to city-road inspectors before releasing it to the public.

It also gave an example in marketing of where digital "redlining" -- or the practice of denying or charging more for services to residents of certain neighborhoods -- might occur due to the use of big data. Citing a 2012 Wall Street Journal story in the footnotes, the report described instances of retailers charging different amounts to people based on where they lived.

In the original article, people who lived near a brick-and-mortar location of a Staples competitor were said to be given a lower price on Staples.com. Those seeing discounted prices also tended to live in more affluent areas, though the story characterized it as likely "an unintended side effect."

According to the report:

"There are perfectly legitimate reasons to offer different prices for the same products in different places. But the ability to segment the population and to stratify consumer experiences so seamlessly as to be almost undetectable demands greater review, especially when it comes to the practice of differential pricing and other potentially discriminatory practices."

The report ultimately identified six policy areas for prompt attention. Among them were advancing the Consumer Privacy Bill of Rights, which the Obama administration unveiled more than two years ago; getting Congress to enact national data breach legislation that would supercede the 47 state laws currently on the books; and amending the Electronic Communications Privacy Act, which says that law enforcement and regulatory agencies can obtain private digital communications without a warrant and hasn't been updated since 1986.

The report was mute on the subject of the National Security Agency and its big-data enabled surveillance activities.

Mr. Podesta said during a press call, "It was our task to look at these other sectors," according to the Washington Post. He added that it was "in no way hypocritical" for the White House to be addressing big data issues in the private sector and in other domains of the government.

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