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Data Brokers Target the “Urban Scramble”

The Federal Trade Commission (FTC) yesterday released a sweeping and detailed report on the opaque inner workings of the data broker industry. The report documents how nine U.S. data brokers acquire and share vast amounts of consumer data, which is then used to market to certain consumer segments.

The report found that data brokers “collect and store billions of data elements covering nearly every U.S. consumer,” combining information from a wide array of online and offline sources, including from commercial, government, and publicly-available entities. Using complex statistical models, data brokers derive further details about each individual, such as the person’s predicted interests or, potentially, sensitive personal characteristics.

Consumers are then lumped into segments and sold to marketers. Many segments are relatively innocuous — like Winter Activity Enthusiasts — but some allow marketers to target using sensitive personal attributes, such as ethnicity, income, gender and health status.

One broker created a segment called Timeless Traditions, which focuses on mostly retirement-age immigrants, who speak some English but prefer Spanish, and have lower than average incomes. Another segment, Metro Parents, describes mainly single parents with only a high school or vocational degree, who were handling “the stresses of urban life on a small budget.” The Urban Scramble segment focuses on low-income Latinos and African-Americans.

The report even found that “[s]ome of the data brokers offer an ‘Assimilation Code,’ which indicates a consumer’s degree of assimilation to the English language.”

These practices are largely unregulated, as Commissioner Julie Brill points out in her statement accompanying the report:

Nothing in the Commission’s report suggests that data brokers or their clients are running afoul of anti-discrimination laws. It is foreseeable, however, that data that closely follow categories that are not permissible grounds for treating consumers differently in a broad array of commercial transactions will be used in exactly this way.

The FTC recommended “that Congress consider enacting legislation to make data broker practices more visible to consumers and to give consumers greater control over the immense amounts of personal information about them collected and shared by data brokers,” but stopped short of recommending updates to civil rights protections. Nonetheless, the report made clear that the Commission is watching these practices closely.

Another sign of the Commission’s continuing interest is a public workshop, scheduled September 15, which will focus on the effect of big data on low income and underserved communities.

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