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You Know What Your Shoppers Did Last Summer

March 7th, 2013

The retailer knows all the information provided in a loyalty program, including the consumer’s name, address, phone numbers, E-mail addresses, etc. If the retailer performs (or purchases) independent research about the consumer (e.g., from social networking sites), then it “knows” this, too.

The data protection laws permit the consumer data subject to have access to the data “collected” or processed by the data processor. All in all, that’s a lot of data.

The law outside the United States and Canada expressly recognizes the right of consumers to know what data has been collected about them, and what has been done with it. Section 7 of the EU Data Protection Act gives data subjects the right to see a copy of the information an organization holds about them. The data subject must also be:

  • Told whether any personal data is being processed.
  • Given a description of the personal data, the reasons it is being processed and whether it will be given to any other organizations or people.
  • Given a copy of the information comprising the data.
  • Given details of the source of the data (where this is available).
  • Told why automated decisions about them have been made.

Thus, if a data subject is denied credit because of something a computer said, that person has a right to know that. Presumably, if a data subject is denied a discount, denied a coupon, denied an advertisement or provided with a different advertisement because of what the computer said (based on data collected), the consumer has the right not only to have access to the underlying data upon which the automated decision was made but also to at least the non-trade-secret portions of the algorithm that made the decision.

OK. But I don’t do business outside the United States or knowingly collect data about non-U.S. citizens, so I am safe, right? Not so fast.

Although there is no current law in the United States granting consumers general access to personal data collected (the Fair Credit Reporting Act and the Privacy Act grant some limited rights) by U.S. companies, those companies collecting data about U.S. citizens shouldn’t assume they are off the hook. The U.S. Federal Trade Commission’s Fair Information Practices Principles outline what U.S. companies should do to ensure they are not committing unfair or deceptive trade practices. The FTC states that a core principle is to ensure a data subject has an ability to both access data about himself or herself (to view the data in an entity’s files) and to contest that data’s accuracy and completeness. This principle was reinforced in the White House’s document, released almost exactly a year ago, entitled “Consumer Data Privacy in a Networked World.

Retailers need to be very concerned about these principles. The FTC, as part of its statutory mission to prevent trade practices that are either “deceptive” or “unfair,” has recently gone after a number of entities for doing things that were not—by its terms—against the law. For example, the FTC went after cell phone hardware manufacturer HTC for selling phones that failed “take reasonable steps to secure the software it developed for its smartphones and tablet computers, introducing security flaws that placed sensitive information about millions of consumers at risk.”

Now, no law requires phone software to be secure. No FCC regulation mandates it. Congress never gave the FTC express authority to regulate the security of cell phone software. But the FTC felt that, by selling what consumers believed to be a secure Android phone, HTC’s actions in bypassing some of the inherent security in the operating system constituted either a deceptive or an unfair trade practice. HTC settled the case by agreeing to fix the flaws and to make the OS more secure.

Similarly, there is no “law” that currently permits U.S. consumers to have access to all the data collected about them, but the FTC’s regulatory authority may grant the agency the power to enforce its Fair Information Practices Principles. If the principles are “fair,” then not following them is “unfair” and, therefore, potentially actionable under the FTC’s authority.

So retailers, even in the United States, might have to be prepared to tell customers exactly what they know about them. Remember, the truth will set you free. The burden of complying, not so much.

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.


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