This is page 2 of:

The Case Of The Walmart Drunk: Big Data, Big Duties, Big Headaches

May 30th, 2013

The point here is that stores that collect data–any data–may be deemed to “know” what is in that data. And once you “know” something, this may create a duty to act on what you “know.” Have facial recognition software linked to a CRM database? Great to know your customer. Unless that customer is a registered sex offender trolling the store. Now you “know” that John Smith, who happens to be a registered sex offender, is in the children’s shoes area. You may even “know” (because it’s on the Internet, right?) that John Smith is an offender. Duty to act? Who knows. But the collection and aggregation of data for business purposes may imply a duty to use that data for other purposes as well.

In 2004, Kroger was sued by a customer for failing to notify her about a recall of tainted meat. The customer alleged that Kroger had her contact information in its CRM database, and when it learned that the meat she had bought (and it had a record that she bought it) may have been tainted by mad cow disease, it had a duty to search its CRM database and notify customers of the recall. Kroger countered by alleging that its CRM database was not nearly sophisticated enough to do this–and that by the time the company looked up the names and addresses of all purchasers who bought the potentially tainted beef, the consumers would have already consumed the product and the damage would have been done.

Fast forward to 2013. CRM databases are much more powerful and much more accessible. Customers register their cellphone and other contact information. Customers receive SMS and other alerts from merchants about sales, specials and other information. Big data allows merchants not only to know past customer behavior, but also to predict future behavior. Location-aware applications may allow merchants to know where a customer is, where they have been, and where they are heading.

The collection and use of this information for business purposes will undoubtedly create a duty to use the same information for other purposes as well. Product recalls are just the start. Just as Target was collecting information on consumers such that the company was able to determine that customers were likely to be pregnant (and target ads on that basis), such information may impose a duty not to sell (or maybe just not to target for sale) alcohol or certain over-the-counter drugs to those people. I can imagine Target being targeted for litigation for fetal alcohol syndrome saying, “You targeted me for alcohol sales when you knew I was pregnant.” Acting like a nanny over your customers creates a duty to act like a nanny.

You know all that great CRM and other customer data you are collecting? Names, addresses, email addresses, video and facial recognition, cellphone records and the like? It’s all great for making money. It also may create new duties and new liabilities galore. And all of this may keep lawyers in business for many years to come.

In addition to the duty to act on the data (or patterns of data) you are collecting, entities that collect data also have a duty to responsibly store, protect and limit access to that data. So the bottom line is to collect what you need, use it responsibly, and then get rid of it. And be careful what you collect–it may come back to haunt you.

If you disagree with me, I’ll see you in court, buddy. If you agree with me, however, I would love to hear from you.


Comments are closed.


StorefrontBacktalk delivers the latest retail technology news & analysis. Join more than 60,000 retail IT leaders who subscribe to our free weekly email. Sign up today!

Most Recent Comments

Why Did Gonzales Hackers Like European Cards So Much Better?

I am still unclear about the core point here-- why higher value of European cards. Supply and demand, yes, makes sense. But the fact that the cards were chip and pin (EMV) should make them less valuable because that demonstrably reduces the ability to use them fraudulently. Did the author mean that the chip and pin cards could be used in a country where EMV is not implemented--the US--and this mis-match make it easier to us them since the issuing banks may not have as robust anti-fraud controls as non-EMV banks because they assumed EMV would do the fraud prevention for them Read more...
Two possible reasons that I can think of and have seen in the past - 1) Cards issued by European banks when used online cross border don't usually support AVS checks. So, when a European card is used with a billing address that's in the US, an ecom merchant wouldn't necessarily know that the shipping zip code doesn't match the billing code. 2) Also, in offline chip countries the card determines whether or not a transaction is approved, not the issuer. In my experience, European issuers haven't developed the same checks on authorization requests as US issuers. So, these cards might be more valuable because they are more likely to get approved. Read more...
A smart card slot in terminals doesn't mean there is a reader or that the reader is activated. Then, activated reader or not, the U.S. processors don't have apps certified or ready to load into those terminals to accept and process smart card transactions just yet. Don't get your card(t) before the terminal (horse). Read more...
The marketplace does speak. More fraud capacity translates to higher value for the stolen data. Because nearly 100% of all US transactions are authorized online in real time, we have less fraud regardless of whether the card is Magstripe only or chip and PIn. Hence, $10 prices for US cards vs $25 for the European counterparts. Read more...
@David True. The European cards have both an EMV chip AND a mag stripe. Europeans may generally use the chip for their transactions, but the insecure stripe remains vulnerable to skimming, whether it be from a false front on an ATM or a dishonest waiter with a handheld skimmer. If their stripe is skimmed, the track data can still be cloned and used fraudulently in the United States. If European banks only detect fraud from 9-5 GMT, that might explain why American criminals prefer them over American bank issued cards, who have fraud detection in place 24x7. Read more...

Our apologies. Due to legal and security copyright issues, we can't facilitate the printing of Premium Content. If you absolutely need a hard copy, please contact customer service.