Monday, April 21, 2014

Big Data, Big Abuse Potential

SMAC, n.  (1) a variation of crack-cocaine; (2) a highly addictive, volatile, potentially life-transforming multi-composite drug, sometimes used illegally, universally available in medicine, commerce, education, and family economics; (3) social, mobile, analytics and cloud computing; (4) Big Data.

On April 11, 2014, the U.S. Federal Trade Commission (FTC) announced a public “workshop” on September 15, 2014, to examine effects of Big Data on “low income and underserved consumers.”  The workshop invites comments, reports, and original research to explore current practices in the uses of Big Data on high-income consumers and privacy rights generally.  The FTC will explore concerns that been raised about whether Big Data may be used to categorize consumers in ways that may affect them unfairly, or even unlawfully. (For more info, visit their website.)

The workshop will address consumer protection issues that could result in new regulations or laws affecting virtually all companies (whether or not they are “tech companies):

How are organizations using Big Data to categorize consumers?

What benefits do consumers gain from these practices? Do these practices raise consumer protection concerns?

What benefits do organizations gain from these practices? What are the social and economic impacts, both positive and negative, from the use of Big Data to categorize consumers?

How do existing laws apply to such practices? Are there gaps in the legal framework?

Are companies appropriately assessing the impact of big data practices on low income and underserved populations? Should additional measures be considered?

This workshop comes after the FTC examined privacy issues associated with big data practices in its 2012 report Protecting Consumer Privacy In An Era of Rapid Change: Recommendations for Businesses and Policymakers, and its ongoing examination of the data broker industry.

The proliferation of smart phones, tablets, intelligent mobile devices (including wristbands, headphones, automobiles and wearable telecom devices) and online social media have enabled the collection and analysis of huge datapoints.   The Internet of Things will include sensors (some of which are mobile) that are collecting data streams in real time.  Data brokers collect different related information that can be assembled into a mosaic of demographic information that might include race, religion, national origin, sex, sexual orientation, health conditions (subject to HIPAA), disability, veteran status and other commercially “relevant” criteria.  Big Data thus enables the pinpoint analysis of individual conduct as well as the conduct of individuals according to demographic, geographical, financial, educational and economic variables.

The FTC is looking at issues of the use of insights from Big Data (including credit risk scores, demographic information and other assessments) for illegal purposes.  While the FTC has been clear about potential abuses by financial institutions, the issues apply to all companies using Big Data.

Business executives (and law departments) should be asking how their own practices of collecting, analyzing and using Big Data might be abusive or illegal.

Now is a good time to conduct an internal review of your Big Data strategies.

What criteria do you use for market segmentation?  Consider how you use any Big Data (or direct customer data) in a manner that might discriminate against certain demographics in pricing, new product availability, service priority, credit card lines of credit, retirement account services, financial services, volume discounts, “early bird” or “favored customer” sales.

What criteria do you use for making preferential offers?  Do you limit access to “unfavored” customers in terms of access to higher quality products, services or content?

What policies do you have that might create (intentionally or not) a “disparate impact” (which, under one theory of law enformceemnt, constitutes intentional wrongful discrimination)?

Have you integrated your Big Data initiatives with your corporate social responsibility (CSR) and governance, risk management and compliance (GRC) programs.