GAO-13-663, INFORMATION RESELLERS: Consumer Privacy Framework Needs to Reflect Changes in Technology and the Marketplace

INFORMATION

RESELLERS

Consumer Privacy

Framework Needs to

Reflect Changes in

Technology and the

Marketplace

Report to the Chairman, Committee

on Commerce, Science, and

Transportation, U.S. Senate

September 2013

GAO-13-663

United States Government Accountability Office

Highlights of GAO-13-663, a report to the

Chairman, Committee on Commerce, Science,

and Transportation, U.S. Senate

September 2013

INFORMATION RESELLERS

Consumer Privacy Framework Needs to Reflect

Changes in Technology and the Marketplace

Why GAO Did This Study

In recent years, information resellers—

companies that collect and resell

information on individuals—

dramatically increased the collection

and sharing of personal data for

marketing purposes, raising privacy

concerns among some in Congress.

Recent growth in the use of social

media, mobile applications, and other

technologies intensified these

concerns. GAO was asked to examine

privacy issues and information

resellers. This report addresses (1)

privacy laws applicable to consumer

information held by resellers, (2) gaps

in the law that may exist, and (3) views

on approaches for improving consumer

data privacy.

To address these objectives, GAO

analyzed laws, studies, and other

documents, and interviewed

representatives of federal agencies,

the reseller and marketing industries,

consumer and privacy groups, and

others. GAO focused primarily on

consumer information used for

marketing purposes.

What GAO Recommends

Congress should consider

strengthening the consumer privacy

framework to reflect the effects of

changes in technology and the

increased market for consumer

information. Any changes should seek

to provide consumers with appropriate

privacy protections without unduly

inhibiting commerce and innovation.

The Department of Commerce agreed

that strengthened privacy protections

could better protect consumers and

support innovation.

What GAO Found

No overarching federal privacy law governs the collection and sale of personal

information among private-sector companies, including information resellers.

Instead, a variety of laws tailored to specific purposes, situations, or entities

governs the use, sharing, and protection of personal information. For example,

the Fair Credit Reporting Act limits the use and distribution of personal

information collected or used to help determine eligibility for such things as credit

or employment, but does not apply to information used for marketing. Other laws

apply specifically to health care providers, financial institutions, videotape service

providers, or to the online collection of information about children.

The current statutory framework for consumer privacy does not fully address new

technologies—such as the tracking of online behavior or mobile devices—and

the vastly increased marketplace for personal information, including the

proliferation of information sharing among third parties. With regard to data used

for marketing, no federal statute provides consumers the right to learn what

information is held about them and who holds it. In many circumstances,

consumers also do not have the legal right to control the collection or sharing

with third parties of sensitive personal information (such as their shopping habits

and health interests) for marketing purposes. As a result, although some industry

participants have stated that current privacy laws are adequate—particularly in

light of self-regulatory measures under way—GAO found that gaps exist in the

current statutory framework for privacy. And that the framework does not fully

reflect the Fair Information Practice Principles, widely accepted principles for

protecting the privacy and security of personal information that have served as a

basis for many of the privacy recommendations federal agencies have made.

Views differ on the approach that any new privacy legislation or regulation should

take. Some privacy advocates generally have argued that a comprehensive

overarching privacy law would provide greater consistency and address gaps in

law left by the current sector-specific approach. Other stakeholders have stated

that a comprehensive, one-size-fits-all approach to privacy would be burdensome

and inflexible. In addition, some privacy advocates have cited the need for

legislation that would provide consumers with greater ability to access, control

the use of, and correct information about them, particularly with respect to data

used for purposes other than those for which they originally were provided. At the

same time, industry representatives have asserted that restrictions on the

collection and use of personal data would impose compliance costs, inhibit

innovation and efficiency, and reduce consumer benefits, such as more relevant

advertising and beneficial products and services. Nonetheless, the rapid increase

in the amount and type of personal information that is collected and resold

warrants reconsideration of how well the current privacy framework protects

personal information. The challenge will be providing appropriate privacy

protections without unduly inhibiting the benefits to consumers, commerce, and

innovation that data sharing can accord.

View GAO-13-663. For more information,

contact Alicia Puente Cackley at (202) 512-

8678 or

[email protected].

Page i GAO-13-663 Information Resellers

Letter 1

Background 2

Several Laws Apply in Specific Circumstances to Consumer Data

That Resellers Hold 7

Existing Privacy Laws Have Limited Scope over Personal Data

Used for Marketing 16

Views Differ on Specific versus Comprehensive Approaches to

Privacy Law and on Consumer Interests 31

Conclusions 46

Matter for Congressional Consideration 46

Agency Comments 47

Appendix I Objectives, Scope, and Methodology 48

Appendix II Examples of Data Collected and Used by Information

Resellers 52

Appendix III Comments from the Department of Commerce 54

Appendix IV GAO Contact and Staff Acknowledgments 56

Tables

Table 1: Fair Information Practice Principles 6

Table 2: Selected Examples of Consumer Data in Acxiom’s

Marketing Products, 2012 52

Table 3: Selected Examples of Marketing Lists Available from

Experian, 2012 53

Figures

Figure 1: Typical Flow of Consumer Data through Resellers to

Third-Party Users 3

Figure 2: Dates of Enactment of Key Federal Privacy Laws and the

Introduction of New Technologies 21

Contents

Page ii GAO-13-663 Information Resellers

Abbreviations

CFAA Computer Fraud and Abuse Act

COPPA Children’s Online Privacy Protection Act

ECPA Electronic Communications Privacy Act

EU European Union

FCRA Fair Credit Reporting Act

FIPPs Fair Information Practice Principles

FTC Federal Trade Commission

GLBA Gramm-Leach-Bliley Act

HIPAA Health Insurance Portability and Accountability Act

OECD Organisation for Economic Co-operation and Development

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Page 1 GAO-13-663 Information Resellers

441 G St. N.W.

Washington, DC 20548

September 25, 2013

The Honorable John D. Rockefeller IV

Chairman

Committee on Commerce, Science, and Transportation

United States Senate

Dear Mr. Chairman:

Some members of Congress and others have raised privacy concerns

about the collection and use of consumers’ personal information by

information resellers—companies with a primary line of business of

collecting, aggregating, and selling personal information to third parties. In

part, their concerns stem from consumers not always knowing the nature

and extent of the information collected about them and how it is used and

shared. The information reseller industry has grown significantly in recent

years, as has the amount of consumer information that these companies

assemble and distribute. Moreover, growing use of the Internet, social

media, and mobile applications has intensified privacy concerns because

these media greatly facilitate the ability to gather increasing amounts of

personal information, track online behavior, and monitor locations and

activities.

You asked us to review privacy issues related to consumer data

collected, used, and shared by information resellers. This report

examines (1) existing federal laws and regulations relating to the privacy

of consumer information held by information resellers, (2) any gaps that

may exist in this legal framework, and (3) views on approaches for

improving consumer data privacy. This report focuses primarily on privacy

issues related to consumer information used for marketing and for

individual reference services (also known as look-up or people-search

services); it does not focus on information used for other purposes, such

as fraud prevention and eligibility for credit or employment.

In 2006, we issued a report examining financial institutions’ use of information resellers,

which focused largely on consumer information used to make eligibility determinations for

credit, insurance, and employment, comply with certain legal requirements, and prevent

fraud. GAO, Personal Information: Key Federal Privacy Laws Do Not Require Information

Resellers to Safeguard All Sensitive Data,

GAO-06-674 (Washington, D.C.: June 26,

2006).

Page 2 GAO-13-663 Information Resellers

To address the first and second objectives, we reviewed and analyzed

relevant federal laws, regulations, and enforcement actions, and selected

state laws. We interviewed representatives of federal agencies, trade

associations, consumer and privacy groups, and information resellers to

obtain their views on federal data privacy laws related to information

resellers, including the adequacy of consumers’ ability to access, correct,

opt out, or request deletion of information. To address the third objective,

we identified and reviewed approaches for improving consumer data

privacy through legislative, regulatory, or self-regulatory means that

federal entities—including the White House, Federal Trade Commission

(FTC), and Department of Commerce (Commerce)—or representatives of

industry, consumer, and privacy groups have advocated. We also

interviewed representatives of these entities and reviewed relevant

studies, congressional hearing records, position papers, public

comments, and other sources. Appendix I contains a more extensive

discussion of our scope and methodology.

We conducted this performance audit from August 2012 through

September 2013, in accordance with generally accepted government

auditing standards. Those standards require that we plan and perform the

audit to obtain sufficient, appropriate evidence to provide a reasonable

basis for our findings and conclusions based on our audit objectives. We

believe that the evidence obtained provides a reasonable basis for our

findings and conclusions based on our audit objectives.

Information resellers—sometimes also called data brokers, data

aggregators, or information solutions providers—offer several types of

products to customers that include retailers, advertisers, private

individuals, nonprofit organizations, and law enforcement and other

government agencies. Consumer reporting agencies—including the three

nationwide credit bureaus, Equifax, Experian, and TransUnion—provide

consumer reports that commonly are used to determine eligibility for

credit, employment, and insurance. Some resellers offer products that

help companies comply with legal requirements or identify, investigate,

and prevent fraudulent transactions (for example, by enabling

confirmation of a customer’s identity). Some information resellers, such

as Spokeo and Intelius, also offer individual reference services that sell

personal identifying information about consumers to individuals or

companies.

In addition, many information resellers, such as Acxiom and LexisNexis,

offer products that companies use for marketing purposes. Resellers may

Background

Page 3 GAO-13-663 Information Resellers

focus on groups of likely customers who share common characteristics,

and therefore may have similar interests or preferences. For example,

resellers may offer information products that allow clients to target their

online advertisements and help ensure that promotional materials are

sent to the most relevant individuals. Resellers may offer retailers the

ability to add purchase and lifestyle information to their existing customer

databases. In addition, resellers may offer clients marketing lists with

contact information of prospective customers.

Resellers maintain large, sophisticated databases with information from a

variety of sources about individuals and families. The consumer

information that each reseller maintains and sells varies, but can include

names, addresses, family members, neighbors, credit histories, motor

vehicle records, insurance claims, criminal records, employment histories,

incomes, ethnicities, purchase histories, interests, and hobbies. (See

appendix II for a detailed list of examples of the types of consumer

information held by information resellers.) As shown in figure 1, resellers

obtain their information from three primary types of sources: public

records, publicly available information, and nonpublic information.

Figure 1: Typical Flow of Consumer Data through Resellers to Third-Party Users

Page 4 GAO-13-663 Information Resellers

• Public records, available to anyone, generally are obtained from

governmental entities. What constitutes a public record depends on

state and federal laws, but may include birth and death records,

property records, tax lien and assessor files, voter registrations,

licensing records, and court records (including criminal records,

bankruptcy filings, civil case files, and legal judgments).

• Publicly available information is not found in public records, but

nevertheless is publicly available through sources such as telephone

directories, business directories, classified advertisements,

newspapers or magazines, and other materials.

• Nonpublic information derives from proprietary sources. For example,

consumers may provide the information directly to businesses through

loyalty card programs at grocery or retail stores, website registrations,

warranty registrations, contests, surveys and questionnaires, and

purchase histories. Resellers (or a third party such as a website

operator acting on behalf of the reseller) also may collect nonpublic

information about consumers’ online locations and actions, including a

computer’s Internet protocol address, the browser used, activities

during a consumer’s visit to a website (such as search terms or

purchases), and activities conducted on other websites.

Consumer information can be derived from mobile networks, devices

(including smartphones and tablets), operating systems, and applications.

In addition, resellers may obtain personal information from the profile or

public information areas of websites, including social media sites such as

Facebook, LinkedIn, MySpace, and Twitter, or from information posted to

blogs or discussion forums. Depending on the context, information from

these sources may be publicly available or nonpublic.

There is limited publicly known information about the information reseller

industry as a whole. Characterizing the precise size and nature of the

industry can be difficult because definitions for resellers vary and data on

resellers often are limited or not comparable. For example, the U.S.

Census Bureau (Census) does not assign a business classification code

specific to information resellers. Instead, Census has assigned different

primary codes, including “data processing and preparation,” “direct mail

advertising services,” “credit reporting services,” and “information retrieval

Page 5 GAO-13-663 Information Resellers

services.”

FTC has called on the information reseller industry to improve the

transparency of its practices, and in December 2012 issued orders

requiring nine information resellers to provide FTC with information about

how they collect and use data about consumers.

Thus, Census data cannot be used to provide a reliable count

or other statistical information on the information resellers industry as a

whole. According to FTC and Commerce, there is no comprehensive list

or registry of companies that resell personal information. Several privacy-

related organizations and websites maintain lists of information

resellers—for example, Privacy Rights Clearinghouse lists more than 250

on its website—but none of these lists claim to be comprehensive. The

Direct Marketing Association, which represents companies and nonprofits

that use and support data-driven marketing, maintains a proprietary

membership list, which it says numbers about 2,500 organizations

(although that includes retailers and others that typically would not be

considered information resellers).

The Fair Information Practice Principles (FIPPs) are a set of

internationally recognized principles for protecting the privacy and

security of personal information. A U.S. government advisory committee

first proposed the practices in 1973 in response to concerns about the

consequences computerized data systems could have on the privacy of

personal information. While the FIPPs are principles as opposed to legal

requirements, they provide a framework for balancing the need for privacy

with other interests. The Organisation for Economic Co-operation and

FTC sought details

about the nature and sources of the consumer information that

information resellers collect; how they use, maintain, and disseminate the

information; and the extent to which the companies allow consumers to

access and correct their information or opt out of having their personal

information sold. According to FTC staff, the agency expects to issue a

report with findings by the end of 2013.

Census assigns business classification codes, including Standard Industrial Classification

and North American Classification System codes, to each company to classify its main

industry and line of business.

Federal Trade Commission, Order to File Special Report, File No. P125404 (Dec. 14,

2012). The order was pursuant to the agency’s Resolution Directing Use of the

Compulsory Process to Collect Information Regarding Data Brokers, File No. P125404

(Dec. 14, 2012). The nine companies were Acxiom, CoreLogic, Datalogix, eBureau, ID

Analytics, Intelius, PeekYou, Rapleaf, and Recorded Future.

Page 6 GAO-13-663 Information Resellers

Development (OECD) developed a revised version of the FIPPs in 1980

that has been widely adopted (see table 1).

Table 1: Fair Information Practice Principles

Principle Description

Collection limitation The collection of personal information should be limited, obtained by lawful and fair means, and, where

appropriate, with the knowledge or consent of the individual.

Data quality Personal information should be relevant to the purpose for which it is collected, and should be accurate,

complete, and current as needed for that purpose.

Purpose specification The purposes for the collection of personal information should be disclosed before collection and upon

any change to those purposes, and the use of the information should be limited to those purposes and

compatible purposes.

Use limitation Personal information should not be disclosed or otherwise used for other than a specified purpose

without consent of the individual or legal authority.

Security safeguards Personal information should be protected with reasonable security safeguards against risks such as loss

or unauthorized access, destruction, use, modification, or disclosure.

Openness The public should be informed about privacy policies and practices, and individuals should have ready

means of learning about the use of personal information.

Individual participation Individuals should have the following rights: to know about the collection of personal information, to

access that information, to request correction, and to challenge the denial of those rights.

Accountability Individuals controlling the collection or use of personal information should be accountable for taking

steps to ensure the implementation of these principles.

Source: OECD.

Many organizations and governments have used these principles, with

some variation, as best practices. In the United States, the FIPPs served

as the basis for the Privacy Act—which governs the collection,

maintenance, use, and dissemination of personal information by federal

agencies—and as the basis for many of the privacy recommendations of

agencies such as FTC and Commerce. The FIPPs also served as the

basis for a framework for consumer data privacy that the White House

issued in February 2012. This framework presents a consumer privacy bill

Organisation for Economic Co-operation and Development, Guidelines on the Protection

of Privacy and Transborder Flow of Personal Data (Paris, France: Sept. 23, 1980). OECD

produces internationally agreed-upon instruments, decisions, and recommendations to

promote rules in areas where multilateral agreement is necessary for individual countries

to make progress in the global economy. Its 30 member countries include the United

States. OECD has been reviewing whether its privacy guidelines should be revised or

updated to take into account the change in the role of personal data in the economy and

society.

Page 7 GAO-13-663 Information Resellers

of rights, describes a stakeholder process to specify how the principles in

that bill of rights would apply, and encourages Congress to provide FTC

with enforcement authorities for the bill of rights.

Currently, no comprehensive federal privacy law governs the collection,

use, and sale of personal information by private-sector companies. There

are also no federal laws designed specifically to address all the products

sold and information maintained by information resellers. In contrast, a

baseline privacy law exists for personal information the federal

government maintains—the Privacy Act of 1974.

The act, among other

things, generally prohibits, subject to a number of exceptions, the

disclosure by federal entities of records about an individual without the

individual’s written consent and provides U.S. persons with a means to

seek access to and amend their records.

Many other industrialized

countries have implemented baseline privacy laws for information held by

private-sector companies. The 28 member countries of the European

Union have implemented into their national laws the union’s 1995 Data

Protection Directive, which provides a comprehensive framework on the

protection of personal data.

In the United States, the federal privacy framework for private-sector

companies comprises a set of more narrowly tailored laws that govern the

use and protection of personal information—that is, the laws apply for

specific purposes, in certain situations, to certain sectors, or to certain

types of entities. The primary federal laws with regard to consumer

privacy include the following:

It states that the personal information of

European Union citizens may not be transmitted to nations outside of the

union unless those countries are deemed to have “adequate” data

protection laws.

The White House, Consumer Data Privacy in a Networked World: A Framework for

Protecting Privacy and Promoting Innovation in the Global Digital Economy (Washington,

D.C.: Feb. 23, 2012).

Pub. L. No. 93-579, 88 Stat. 1896 (1974) (codified as amended at 5 U.S.C. § 552a).

5 U.S.C. § 552a.

European Union, Directive 95/46/EC of the European Parliament and of the Council on

the Protection of Individuals with Regard to the Processing of Personal Data and the Free

Movement of Such Data (Oct. 24, 1995).

Several Laws

Apply in Specific

Circumstances to

Consumer Data That

Resellers Hold

Primary Federal Privacy Laws

Page 8 GAO-13-663 Information Resellers

Fair Credit Reporting Act (FCRA).

Enacted in 1970, FCRA protects the

security and confidentiality of personal information collected or used to

help make decisions about individuals’ eligibility for such products as

credit or for insurance or employment.

FCRA applies to “consumer

reporting agencies” that provide “consumer reports” that contain credit

histories and other personal information and are used for eligibility

determinations.

Accordingly, FCRA applies to the three nationwide

consumer reporting agencies (commonly called credit bureaus) and to

any other information resellers that resell consumer reports for use by

others. FCRA limits resellers’ use and distribution of personal data—for

example, by allowing consumers to opt out of allowing consumer

reporting agencies to share their personal information with third parties for

prescreened marketing offers. The act also allows individuals to access

and dispute the accuracy of personal data held on them. Additionally, as

amended in 2003, FCRA imposes safeguarding requirements designed to

prevent identity theft and assist identity theft victims.

Gramm-Leach-Bliley Act (GLBA).

Pub. L. No. 91-508, Tit. VI, 84 Stat. 1114, 1128 (1970) (codified as amended at 15

U.S.C. §§ 1681-1681x).

Enacted in 1999, GLBA protects

nonpublic personal information that individuals provide to financial

See 15 U.S.C. § 1681.

FCRA defines a consumer reporting agency as “any person which, for monetary fees,

dues, or on a cooperative nonprofit basis, regularly engages in whole or in part in the

practice of assembling or evaluating consumer credit information or other information on

consumers for the purpose of furnishing consumer reports to third parties, and which uses

any means or facility of interstate commerce for the purpose of preparing or furnishing

consumer reports.” 15 U.S.C. § 1681a(f). The act defines consumer report as “any written,

oral, or other communication of any information by a consumer reporting agency bearing

on a consumer’s credit worthiness, credit standing, credit capacity, character, general

reputation, personal characteristics, or mode of living which is used or expected to be

used or collected in whole or in part for the purpose of serving as a factor in establishing

the consumer’s eligibility for (A) credit or insurance to be used primarily for personal,

family, or household purposes; (B) employment purposes; or (C) any other purpose

authorized under section 604 [of the FCRA],” subject to certain exclusions. 15 U.S.C. §

1681a(d).

Fair and Accurate Credit Transactions Act of 2003, Pub. L. No. 108-159, 117 Stat. 1952

(2003).

Pub. L. No. 106-102, 113 Stat. 1338 (1999) (codified as amended in scattered sections

of 12 and 15 U.S.C.).

Page 9 GAO-13-663 Information Resellers

institutions or that such institutions maintain.

GLBA sharing and

disclosure restrictions apply to entities that fall under GLBA’s definition of

a “financial institution” or that receive nonpublic personal information from

such a financial institution.

The act’s privacy provisions restrict the

sharing of nonpublic personal information collected by or acquired from

financial institutions, which include those resellers covered by GLBA’s

definition of financial institution. Under a “reuse and redisclosure”

provision, a nonaffiliated third party that receives nonpublic personal

information from a financial institution faces restrictions on how it may

further share or use the information.

For example, a third party that

receives nonpublic personal information from a financial institution to

process consumers’ account transactions may not use the information for

its marketing purposes or sell it to another entity for marketing purposes.

GLBA requires financial regulators to establish appropriate standards for

financial institutions relating to administrative, technical, and physical

safeguards to ensure the security and confidentiality of customer records

and information; protect against any anticipated threats or hazards to the

security or integrity of such records; and protect against unauthorized

access to or use of such records or information that could result in

substantial harm or inconvenience to any customer.

Health Insurance Portability and Accountability Act (HIPAA).

See 15 U.S.C. §§ 6801-6802. Subtitle A of Title V of the act contains the privacy

provisions relating to the disclosure of nonpublic personal information. 15 U.S.C. §§ 6801-

6809.

Enacted in 1996, HIPAA establishes a set of national standards for the

protection of certain health information. The HIPAA privacy rule governs

the use and disclosure of an individual’s health information for purposes

15 U.S.C. § 6802. GLBA defines a “financial institution” as any institution the business of

which is engaging in financial activities as described in section 4(k) of the Bank Holding

Company Act (12 U.S.C. § 1843(k)). 15 U.S.C. § 6809(3)(a). Such activities include

lending, providing financial or investment advice, and insuring against loss.

15 U.S.C. § 6802(c).

15 U.S.C. § 6801. For example, the FTC safeguards rule implements GLBA’s

requirements for entities that fall under FTC jurisdiction, including check-cashing

businesses, payday lenders, and mortgage brokers. See 15 C.F.R. Part 314.

Pub. L. No. 104-191, 110 Stat. 1936 (1996) (codified as amended in scattered sections

of 18, 26, 29, and 42 U.S.C.).

Page 10 GAO-13-663 Information Resellers

including marketing.

According to guidance from the Department of

Health and Human Services, the rule aims to strike a balance that permits

important uses of information in the provision of health care while

protecting patients’ privacy.

With some exceptions, the rule requires an

individual’s written authorization before a covered entity—a health care

provider that transmits health information electronically in connection with

covered transactions, health care clearinghouse, or health plan—may use

or disclose that individual’s protected health information for marketing.

In addition, HIPAA requires covered entities to safeguard protected

personal health information and protect against any reasonably

anticipated unauthorized uses or disclosures of such information, among

other things.

Children’s Online Privacy Protection Act (COPPA).

The act does not directly restrict the use, disclosure, or

resale of protected health information by information resellers or other

parties not considered HIPAA-covered entities.

Enacted in 1998,

COPPA governs the online collection of personal information from

children under 13 by operators of websites or online services, including

mobile applications.

45 C.F.R. Parts 160, 164.

Specifically, COPPA and its implementing

regulations apply to the collection of personal information—such as full

name, e-mail address, or geolocation information—that would allow

someone to identify or contact a child. The law requires covered website

and online service operators to obtain verifiable parental consent before

collecting such information. It also specifies what information must be

included in the notice provided to parents and how and when to acquire

Department of Health and Human Services, “Summary of HIPAA Privacy Provisions,”

last revised May 2003, available at

http://hhs.gov/ocr/privacy/hipaa/understanding/summary/.

The HIPAA privacy rule carves out specific exceptions to its definition of “marketing” that

include communications regarding refill reminders, communications to individuals from a

covered entity’s benefit plan that describe health-related products or services provided by

or included in a benefit plan, communications about participating providers in a provider or

health plan network, communications for treatment of individuals, and communications for

case management or care coordination for an individual. 45 C.F.R. § 164.501.

42 U.S.C. § 1320d-2(d)(2); see also 45 C.F.R. Part 164, Subpart C.

Pub. L. No. 105-277, Div. C, Tit. XIII, 112 Stat. 2681-728 (1998) (codified at 15 U.S.C.

§§ 6501-6506).

FTC issued regulations implementing COPPA, 16 C.F.R. Part 312.

Page 11 GAO-13-663 Information Resellers

parental consent. Although COPPA may not directly affect information

resellers, COPPA governs information collection by operators of websites

and online services, both of which are potential sources of personal

information for resellers and other parties. COPPA would not apply to the

collection of a child’s information from the child’s parent or other adults.

Electronic Communications Privacy Act (ECPA).

Among its

provisions, ECPA, which was enacted in 1986, prohibits the interception

and disclosure of electronic communications by third parties unless an

exception applies, such as one of the parties to the communication

having consented to the interception or disclosure.

For example, the act

would prevent an Internet service provider from selling the content of its

customers’ e-mails and text messages to an information reseller that

wanted to use the content for marketing purposes unless the customers

had given their consent for the disclosures. However, ECPA provides

more limited protection for information that is considered to be “non-

content”, such as a customer’s name and address.

Federal Trade Commission Act (FTC Act), Section 5.

Pub. L. No. 99-508, 100 Stat. 1848 (1986) (codified as amended in scattered sections of

18 U.S.C.).

Enacted in

1914, the FTC Act prohibits unfair or deceptive acts or practices in or

affecting commerce. Although the act does not explicitly grant FTC the

specific authority to protect privacy, it has been interpreted to apply to

deceptions or violations of written privacy policies. For example, if a

retailer had a written privacy policy stating it would not share customers’

personal information with resellers or other third parties for any purposes

and later breached the policy by selling the information to such parties,

FTC could prosecute the retailer for unfair and deceptive practices.

Likewise, the act would apply to resellers if they used personal

information for purposes prohibited by their written privacy policies. In

See 18 U.S.C. §§ 2701-2712.

18 U.S.C. § 2703(c)(2), cited by U.S. Department of Justice, Computer Crime and

Intellectual Property Section, Searching and Seizing Computers and Obtaining Electronic

Evidence in Criminal Investigations, Chapter 3 (2009), available at

http://justice.gov/criminal/cybercrime/docs/ssmanual2009.pdf.

15 U.S.C. § 45. Section 5 of the FTC Act, as originally enacted, only related to “unfair

methods of competition.” The Wheeler-Lea Act, passed in 1938, expanded the

Commission’s jurisdiction to include “unfair or deceptive acts or practices.” Wheeler-Lea

Amendments of 1938, Pub. L. No. 75-447, 52 Stat. 111.

Page 12 GAO-13-663 Information Resellers

addition, the FTC Act’s unfairness authority could apply, even in the

absence of a privacy policy, in situations involving a likelihood of

substantial injury to consumers that is not reasonably avoidable and not

offset by countervailing benefits. In effect, FTC enforcement actions can

establish compliance requirements that companies can follow in order to

avoid future enforcement actions.

As they relate to specific types of consumer services or types of records,

other federal privacy laws that also may apply to information resellers’

practices and products include the following:

Driver’s Privacy Protection Act.

Enacted in 1994, the act generally

prohibits the use and disclosure of certain personal information in state

motor vehicle records.

The act also specifies permissible uses of

personal information, and that an authorized recipient of personal

information may “resell or redisclose” the information only for purposes

permitted by law.

For example, a state department of motor vehicles

cannot sell drivers’ personal information to resellers for marketing

purposes unless the department obtained consent from the individuals.

FTC has also required implementation of a comprehensive privacy policy as part of the

settlement of FTC charges. See In the Matter of Google Inc., FTC File No. 102 3136,

decision and order (Oct. 13, 2011).

While these are some relevant examples of subject-specific privacy laws, this is not a

comprehensive list of all federal privacy laws that could apply to information resellers.

Pub. L. No. 103-322, Tit. XXX, 108 Stat. 2099 (1994) (codified as amended at 18 U.S.C.

§§ 2721-2725).

See 18 U.S.C. § 2721.

Permissible uses include use by a government agency in carrying out its functions and

uses related to matters of motor vehicle or driver safety and theft. See 18 U.S.C. §

2721(b) for a complete listing of permissible uses.

In July 2013, the Court of Appeals for the Second Circuit determined that data brokers

could be liable for the use of personal information that they obtain from state departments

of motor vehicles and sell to others. The court held that the Driver’s Privacy Protection Act

imposes a duty on resellers to exercise reasonable care in responding to requests for

personal information drawn from motor vehicle records. Gordon v. Softech, Int’l, Inc., No.

12-661-cv. 2013 WL 3939442, at *12 (2d Cir. July 31, 2013).

Selected Additional

Applicable Laws

Page 13 GAO-13-663 Information Resellers

Family Educational Rights and Privacy Act.

Enacted in 1974, the act

governs access to and disclosure of students’ education records to

parents, students, and third parties. Specifically, the act provides that no

federal funds shall be made available to any school or institution that has

a policy of releasing students’ education records or personally identifiable

information contained in such records (other than directory information) to

third parties such as information resellers (other than to certain parties

and for certain purposes enumerated in the statute) without written

consent from the students’ parents.

Video Privacy Protection Act.

Enacted in 1988, the act prohibits a

video tape service provider from knowingly disclosing personally

identifiable information concerning video rental and sales records,

including the title or subject matter of any video tapes, to third parties,

subject to exceptions.

Computer Fraud and Abuse Act (CFAA).

However, a provider may disclose the names and

addresses of consumers to third parties if the consumer has had the

opportunity to prohibit such disclosure. The provider also may disclose

the content of rental materials if that information will be used only to

market goods and services directly to the consumer.

Pub. L. No. 93-380, Tit. V, § 513, 88 Stat. 57 (1974) (codified as amended at 20 U.S.C.

§ 1232g).

Enacted in 1986, CFAA

makes the knowing unauthorized access of computers a crime. CFAA is

not specifically a privacy law but can serve to restrict a third party from

20 U.S.C. § 1232g(b)(1). A student may provide consent to release education records

and personal information if he or she is 18 years of age or older or is attending a

postsecondary education institution. For students younger than 18, consent of their

parents is necessary. See 20 U.S.C. § 1232g(d).

For the purposes of this section, the term “directory information” relating to a student

includes the following: the student’s name, address, telephone listing, date and place of

birth, major field of study, participation in officially recognized activities and sports, weight

and height of members of athletic teams, dates of attendance, degrees and awards

received, and the most recent previous educational agency or institution attended by the

student. See 20 U.S.C. § 1232g(a)(5)(A).

Pub. L. No. 100-618, 102 Stat. 3195 (1988) (codified as amended at 18 U.S.C. § 2710).

18 U.S.C. § 2710.

Pub. L. No. 99-474, 100 Stat. 1213 (1986) (codified as amended at 18 U.S.C. § 1030).

Page 14 GAO-13-663 Information Resellers

collecting personal information from a website when the collection would

violate the site’s terms of service.

Telecommunications Act.

Enacted in 1996, the act requires

telecommunications carriers to protect the confidentiality of proprietary

information of customers.

While we did not conduct a comprehensive review of all state laws, we

identified relatively few state laws that broadly address consumer privacy

rights or regulate information resellers. Representatives of several privacy

advocacy organizations similarly noted that few state laws broadly

address information resellers or consumer privacy, such as the collection

or disclosure of personal information held by private companies.

However, some states have enacted laws designed to improve data

security and reduce identity theft, such as laws requiring consumer

notification of security breaches involving personal information.

Additionally, the act prohibits carriers from

using proprietary information from other carriers for their own marketing

efforts.

In addition, we reviewed the laws of four states that impose disclosure

requirements related to the sharing of personal information about

Courts have held that CFAA prohibits access to websites when that access exceeds the

sites’ terms of use or end-user license agreements. See, e.g., Snap-On Bus. Solutions

Inc. v. O’Neil & Assoc., Inc., 708 F.Supp. 2d 669 (N.D. Ohio 2010); Southwest Airlines Co.

v. Farechase, Inc., 318 F.Supp. 2d 435 (N.D. Tex. 2004); America Online, Inc. v. LCGM,

Inc., 46 F.Supp. 2d 444 (E.D. Va. 1998).

Pub. L. No. 104-104, 110 Stat. 56 (1996) (codified as amended in scattered sections of

15 and 47 U.S.C.).

47 U.S.C. § 222(a).

According to the National Conference of State Legislatures, as of August 2012, 46

states, the District of Columbia, Guam, Puerto Rico, and the Virgin Islands had enacted

legislation requiring data-breach notifications. In general, these states and territories

require companies to notify state or territorial residents if their personal information in the

companies’ custody was compromised. See National Conference of State Legislatures:

State Security Breach Notification Laws, available at http://www.ncsl.org/issues-

research/telecom/security-breach-notification-laws.aspx.

Selected State Privacy Laws

Page 15 GAO-13-663 Information Resellers

consumers.

California’s Shine the Light law requires certain businesses

to disclose, upon a California customer’s request, whether those

businesses have shared the customer’s personal information with third

parties for direct marketing purposes.

For certain specified categories of

information, the business also must notify the requesting consumer of the

categories of information shared with a third party.

Similarly, Utah’s

Notice of Intent to Sell Nonpublic Personal Information Act requires

commercial entities to disclose to consumers the types of nonpublic

personal information shared with or sold to third parties for

compensation.

Massachusetts and Nevada have laws or regulations

requiring businesses to safeguard and encrypt personally identifiable

consumer data. The Massachusetts regulations establish minimum

standards for safeguarding personal information in both paper and

electronic records and cover only personal information about residents of

Massachusetts.

The Nevada law generally covers any personal

information belonging to certain categories that a business maintains.

In 2011, the Supreme Court determined that a Vermont law that restricted the sale,

disclosure, and use of pharmacy records that reveal the prescribing practices of individual

doctors violated the First Amendment. The Vermont law provided that the prescriber-

identifying information could not be sold by pharmacies for marketing purposes or used for

marketing by pharmaceutical manufacturers. Pharmacies could share the information with

anyone for any purpose except marketing. The Court determined that these content-and-

speaker-based restrictions on speech were subject to heightened judicial scrutiny.

Vermont’s asserted interest in physician confidentiality did not withstand the heightened

scrutiny. Sorrell v. IMS Health, Inc, 131 S.Ct. 2653 (2011).

Cal. Civ. Code § 1798.83 (West). Any California resident with whom a business has an

established business relationship is entitled to disclosure of the business’s information-

sharing practices. The law applies to many businesses, but those with fewer than 20

employees and certain financial institutions that are in compliance with separate privacy

requirements are exempt.

These categories include, among other things, the customer’s height, race, religion,

telephone number, number of children, medical condition, Social Security number, bank

account number, and credit card balance. Cal. Civ. Code § 1798.83(e)(6).

Utah Code Ann. §§ 13-37-101 to -203 (West).

201 Mass. Code Regs. 17.01 to 17.05.

Nev. Rev. Stat. §§ 603A.010 to .920. The encryption and security measure requirements

do not apply to data transmitted over a secure, private communication channel for

approving or processing negotiable instruments, electronic fund transfers, or similar

methods.

Page 16 GAO-13-663 Information Resellers

For consumer data used for marketing purposes, the privacy protections

provided under federal law have been limited. Although the FIPPs call for

restraint in the collection and use of personal information, the scope of

protections provided under current law has been narrow in relation to (1)

individuals’ ability to access, control, and correct their personal data; (2)

collection methods and sources and types of consumer information

collected; and (3) new technologies, such as tracking of web activity and

the use of mobile devices. However, views differ on whether privacy

protections should be expanded and if this could best be done through

legislation or self-regulation.

Current federal privacy laws generally do not provide individuals the

universal right to access, control, or correct personal information that

resellers and private-sector companies use for marketing purposes. The

“collection limitation” and “openness” principles of the FIPPs state that

individuals should be able to know about and consent to the collection of

their personal information, while the “individual participation” principle

states they should have the right to access that information, request

correction, and challenge the denial of those rights. However, none of the

federal statutes that we examined generally requires information resellers

to allow individuals to review their personal information in the resellers’

possession intended for marketing or information retrieval purposes,

control its use, or correct it.

In relation to data used for marketing purposes, no federal statute

provides consumers the right to learn what information is held about them

and who holds it. As noted earlier, FCRA provides individuals with rights

to access information from consumer reports used for eligibility

determinations, but does not apply to personal information used for

marketing (other than prescreened marketing offers). For example, an

information reseller we interviewed said the company generally does not

offer consumers the ability to see the personal information held about

them for purposes not covered under FCRA. Additionally, in 2006 some

resellers told us that they gave individuals opportunities to order summary

reports that disclosed personal information maintained for non-FCRA

purposes, but the extent of the information provided varied.

GAO-06-674.

Existing Privacy Laws

Have Limited Scope

over Personal Data

Used for Marketing

Laws Provide Individuals

Limited Ability to Access,

Control, and Correct Their

Personal Data

Access rights

Page 17 GAO-13-663 Information Resellers

Consumers have limited legal rights to control what personal information

is collected, maintained, used, and shared and how. Under FCRA,

individuals can request that personal information not be shared with third

parties for marketing unsolicited prescreened credit or insurance offers.

GLBA’s privacy provisions generally limit financial institutions from

sharing nonpublic personal information with nonaffiliated third parties

without first providing certain notice and, in some cases, opt-out rights to

customers and other consumers. However, apart from these two cases,

individuals do not have a right to require that their personal information

not be collected, used, and shared for marketing purposes. Some trade

associations, information resellers, and other companies voluntarily have

developed opt-out mechanisms through which consumers can request

that their personal information be excluded from resellers’ marketing

databases.

The Digital Advertising Alliance also has a program that

calls for its members to provide consumer control over what data are

collected and used for online behavioral or interest-based advertising.

No federal law that we examined provides correction rights for information

used for marketing or look-up purposes. Correction refers to consumers’

ability to have resellers and other parties correct or delete inaccurate,

incomplete, or unverifiable information. For information covered under

FCRA, consumers have the right to dispute information held by resellers

that is incomplete or inaccurate, have a claim investigated, and have any

errors deleted or corrected. However, neither FCRA nor any other federal

For example, on September 4, 2013, Acxiom unveiled an online consumer site

(AboutTheData.com) that, according to Acxiom, will allow consumers to view and edit the

data about them that Acxiom clients use for digital marketing. Additionally, the site will give

consumers the ability to opt-out, or exclude their personal information from Acxiom's

marketing database, according to the company.

In online behavioral advertising, information about a consumer’s computer browser

habits helps build a profile about the computer user that can be used to target the specific

web-based advertisements shown to that computer user. Advertising and marketing trade

associations formed the nonprofit Digital Advertising Alliance in 2008 to develop and

administer principles for online data collection and use. In October 2010, the industry

created a self-regulatory program that was based on its Self-Regulatory Principles for

Online Behavioral Advertising (issued in 2009). The program calls on member companies

engaging in online behavioral advertising to provide (1) transparency about data

collection; (2) consumer control over whether data are collected and used; (3) security for

and limited retention of data collected and used; (4) consent to changes in an entity’s data

collection and use policies; and (5) limitations on the collection of specified categories of

sensitive data for online behavioral advertising purposes.

Control rights

Correction rights

Page 18 GAO-13-663 Information Resellers

law that we examined provides similar correction rights for information

used for marketing or look-up purposes.

The “data quality” and “purpose specification” principles of the FIPPs

state that personal information should be relevant and limited to the

purpose for which it was collected, and the “collection limitation” principle

calls for confining the collection of personal information. However, the

scope of current federal privacy laws is limited in addressing the methods

by which, or the sources from which, information resellers and private-

sector companies collect and aggregate personal information, or the

types of information that may be collected for marketing or look-up

purposes.

Federal laws generally do not govern the methods resellers may use to

collect personal information for marketing or look-up purposes. Examples

of such methods include “web scraping”—sometimes called data

extraction or web data mining—in which resellers, advertisers, and other

parties use software to search the web for information about an individual

or individuals, and extract and download bulk information from a particular

website that contains consumer information. The marketing material of

one company we reviewed advertised that for a fee it would provide

information on any individual by extracting data and photographs from

social media websites, blogs, or telephone and professional directory

sites that contain e-mail addresses and other contact information. A

website’s terms-of-use may legally restrict such practices or password

protections may help prevent them. Resellers or retailers also may collect

personal information through indirect means. For example, some retailers

ask consumers to provide their zip code when using a credit card at the

time of purchase. The zip code can be combined with the name on the

credit card to determine the consumer’s address, telephone number, or

other personal information that may be held in a marketing database.

Current law generally allows resellers to collect personal information from

sources that include warranty registration cards, consumer surveys, and

retailers, and online sources such as discussion boards, social media

sites, blogs, web browsing histories, and searches. Current law does not

require disclosure to consumers when their information is collected from

these sources, including when consumers are unaware that the

information will be used for marketing purposes.

Laws Largely Do

Not Address Data

Collection Methods,

Sources, and Types

Methods for collecting

personal data

Sources of personal data

Page 19 GAO-13-663 Information Resellers

The federal laws that address the types of consumer information that can

be collected and shared for marketing and look-up purposes have limited

reach and application. Under most circumstances, information that many

people may consider very personal or sensitive legally can be collected,

shared, and used for marketing purposes. This can include information

about an individual’s physical and mental health, income and assets,

mobile telephone numbers, shopping habits, personal interests, political

affiliations, and sexual habits and orientation. For example, in 2009

testimony before Congress, a representative of the World Privacy Forum

said that some marketers maintain lists that contain information on

individuals’ medical conditions, including mental health conditions.

HIPAA provisions apply only to covered entities and not, for example, to

health-related marketing lists used by e-health websites or other

noncovered entities. Information resellers that do not qualify as covered

entities can collect and use information about consumers’ health histories

and treatments for marketing purposes. Although federal laws generally

do not restrict the types of information resellers can collect and share for

marketing, many companies voluntarily follow guidelines that recognize

that sensitive personal information merits different treatment. For

example, industry principles for online behavioral advertising call for

consent from individuals for the collection of certain sensitive personal

information—including financial account numbers, pharmaceutical

prescriptions, and medical records.

The current privacy framework does not fully address new technologies.

Developments such as social media, web tracking technologies, and

mobile devices have enabled even cheaper, faster, and more detailed

data collection and sharing among resellers and private-sector

companies. In a 2013 report, FTC staff noted that the rapid growth of

mobile technologies provided substantial benefits to both businesses and

consumers, but also presented unique privacy challenges because

House Committee on Energy and Commerce, Subcommittee on Communications,

Technology, and the Internet, and Subcommittee on Commerce, Trade, and Consumer

Protection, Exploring the Offline and Online Collection and Use of Consumer Information,

111th Cong., 1st sess., Nov. 19, 2009; see testimony of Pam Dixon, Executive Director,

World Privacy Forum.

Digital Advertising Alliance, Self-Regulatory Principles Overview, Principles for Online

Behavioral Advertising, available at http://aboutads.info/obaprinciples. For personal

information of children, the principles purport to apply the protective measures in COPPA.

Types of information collected

Current Law Does Not

Directly Address Some

Privacy Issues Raised

by New Technology

Page 20 GAO-13-663 Information Resellers

mobile devices generally were personal to an individual, almost always

on, could facilitate large amounts of data collection and sharing among

many entities, and could identify a user’s geographical location.

Federal Trade Commission, Mobile Privacy Disclosures: Building Trust through

Transparency (Washington, D.C.: February 2013).

shown in figure 2, the original enactment of several federal privacy laws

predate these trends and technologies.

Page 21 GAO-13-663 Information Resellers

Figure 2: Dates of Enactment of Key Federal Privacy Laws and the Introduction of

New Technologies

Page 22 GAO-13-663 Information Resellers

Note: The most recent amendments to the federal laws referenced in figure 2 are as follows:

• Federal Trade Commission Act of 1914: last amended on July 21, 2010 (Pub. L. 111-203).

• Fair Credit Reporting Act of 1970: last amended on Dec. 18, 2010 (Pub. L. No. 111-319).

• Family Educational Rights and Privacy Act of 1974: last amended on Jan. 14, 2013 (Pub. L.

No. 112-278).

• Electronic Communications Privacy Act of 1986: last amended on Oct. 19, 2009 (Pub. L.

No. 111-79).

• Video Privacy Protection Act of 1988: last amended on Jan. 10, 2013 (Pub. L. No. 112-

258).

• Driver’s Privacy Protection Act of 1994: last amended on Oct. 23, 2000 (Pub. L. No. 106-

346).

• Health Insurance Portability and Accountability Act of 1996: last amended Mar. 23, 2010

(Pub. L. No. 111-148).

• Children’s Online Privacy Protection Act of 1998: has not been amended.

• Gramm-Leach-Bliley Act of 1999: last amended on July 21, 2010 (Pub. L. No. 111-203).

Because these laws were enacted to protect the privacy of information

involving specific sectors rather than address specific technologies, some

have been interpreted to apply in the case of new technologies. For

example, as discussed later in this report, FTC has taken enforcement

activity under COPPA and revised the statute’s implementing regulations

to account for smartphones and mobile applications. However, online

tracking practices and mobile devices remain areas in which privacy law

has not fully addressed issues raised by new technologies.

Currently, no federal privacy law explicitly addresses the full range of

practices to track or collect data from consumers’ online activity.

Cookies—small text files placed on an individual computer by the website

that the person visits—represent a common method of tracking online

activity. The information stored in cookies allows website operators to

determine whether users are repeat visitors, and allows for the recall of

information users may have entered such as name and address, credit

card number, site settings, and purchases in a shopping cart. Information

resellers can use the information in cookies to supplement information

from their databases—matching information by individuals’ name and e-

mail addresses—to augment profiles on individual consumers. Third

parties also can synchronize their cookie files with resellers’ cookie files

to obtain additional information to enhance consumer profiles. Some

advertisers use so-called third-party cookies—placed on a visitor’s

computer by a domain other than the site being visited—to track visits to

the various websites on which they advertise. Although not required by

law, some web browsers, such as Apple’s Safari and Mozilla’s Firefox,

have privacy settings that allow users to block third-party cookies or turn

Online Tracking

Page 23 GAO-13-663 Information Resellers

on do-not-track features.

Additionally, new methods of tracking consumers’ online behavior seek to

restrict consumers’ ability to prevent such tracking. For example,

according to a 2009 study, an online advertising company developed

flash cookies, which combat users’ ability to delete cookies.

However, honoring the do-not-track setting is

voluntary on the part of website operators.

While current law does not explicitly address the use of web tracking,

FTC has taken enforcement actions related to web tracking under its

authority to enforce the prohibition of unfair or deceptive acts or practices.

For example, in 2011, FTC settled charges with Google for $22.5 million

after alleging that Google violated an earlier privacy settlement with FTC

when it misrepresented to users of Apple’s Safari web browser that it

would not track and serve targeted advertisement to Safari users.

Such

cookies can contain up to 25 times more data than other cookies, do not

expire at the end of a browsing session, and cannot be erased through

web browser features such as “clear history.” The study found that many

popular websites, such as Google and Facebook, had been using flash

cookies to recreate deleted cookies.

For example, Safari blocks third-party cookies by default. Firefox users can approve or

deny cookie storage requests and disable third-party cookies. Additionally, Safari and

Firefox do-not-track features notify websites visited—and their advertisers—that web

users do not want to be tracked online. Mozilla also offers a downloadable program, called

Better Privacy, to combat and remove flash cookies. Finally, other companies have

developed privacy and security software programs to detect and block third parties from

tracking web users online.

According to FTC, Google had placed advertising tracking cookies on

individuals’ computers and falsely represented that because of Safari’s

default settings, individuals automatically would be “opted out” of cookie

tracking. Instead, Google’s tracking cookies circumvented Safari’s default

settings, which enabled the company to use these cookies to track

individuals and present them with targeted advertisements. As a result of

Shannon Canty, Chris Jay Hoofnagle, et al., “Flash Cookies and Privacy” (Aug. 10,

2009), available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1446862.

United States v. Google Inc., No. CV 12-04177-SI, 2012 WL 5833994 (N.D. Cal. Nov.

16, 2012).

Page 24 GAO-13-663 Information Resellers

the settlement, Google agreed to disable its use of advertising tracking

cookies.

Federal law also does not expressly prohibit “history sniffing,” which uses

software code on a webpage to record the browsing history of page

visitors. However, in 2012, FTC took an enforcement action against Epic

Marketplace, a large online advertising network, for deceptively failing to

disclose its use of history-sniffing technology.

In relation to collection and use of consumer data for marketing, no

federal privacy laws that we identified specifically govern mobile

applications and technologies.

The company allegedly

collected data about the web sites that consumers were visiting, including

sites relating to potentially sensitive topics such as impotence,

menopause, disability insurance, debt relief, and personal bankruptcy.

Epic Marketplace used this information to assign consumers into interest

segments that were used to target advertising.

Mobile applications. While various federal laws apply to activity

conducted through mobile applications or mobile technologies, no federal

law specifically governs mobile applications—software programs

downloaded onto mobile devices for uses such as providing news and

In December 2011, FTC finalized a settlement order with the online advertiser

ScanScout, which FTC alleged deceptively had claimed that consumers could opt out of

receiving targeted advertisements by changing their browser settings, whereas in fact,

ScanScout used flash cookies that browser settings could not block. In the Matter of

ScanScout, FTC File No. 102 3185, decision and order (Dec. 14, 2011). In October 2012,

a web analytics company settled FTC charges that it violated the FTC Act by using web

tracking software that collected personal data without disclosing the extent of information

that it was collecting, In the Matter of Compete, Inc., FTC File No. 102-3155, decision and

order (Feb. 20, 2013).

FTC alleged that Epic Marketplace’s use of history-sniffing technology was deceptive

because it collected data about sites outside of its network that consumers had visited,

contrary to Epic’s privacy policy, which represented that it would collect information only

about consumers’ visits to websites in its network. In the Matter of Epic Marketplace, Inc.,

and Epic Media Group, LLC, FTC File No. 112 3182, decision and order (Mar. 13, 2013).

Mobile Technologies

Page 25 GAO-13-663 Information Resellers

information and online banking and shopping.

Application developers,

operating system developers, mobile carriers, advertisers, advertising

networks, and other third parties may collect an individual’s information

through services provided on his or her device. They may use this

information to create a user profile to tailor marketing and they may sell

information collected from these devices to third parties. FTC has taken

enforcement action against companies for use of mobile applications that

violate COPPA and FCRA.

The agency has taken action under the FTC

Act in cases in which a mobile application developer collected or used

personal information in a manner inconsistent with the application’s

In addition, CFAA, which bans unauthorized access to

computers, also has been found to apply to mobile phones.

Location tracking. No federal privacy laws that we evaluated, with the

exception of COPPA, expressly address location data, location-based

technology, and consumer privacy. Smartphones and other mobile

devices can provide services based on a consumer’s location. We and

others have reported that this capability engenders potential privacy risks,

particularly if companies use or share location data without consumers’

On July 25, 2013, the Department of Commerce released a draft of a voluntary code of

conduct for mobile applications. The code sets out guidelines for short form notices that

application developers and publishers can use to inform consumers about the collection

and sharing of consumer information with third parties. See Department of Commerce,

National Telecommunications and Information Administration, Short Form Notice Code of

Conduct To Promote Transparency In Mobile App Practices, redline draft (July 25, 2013),

available at http://www.ntia.doc.gov/files/ntia/publications/july_25_code_draft.pdf.

FTC settled charges that a social networking service deceived consumers when it

illegally collected information from children under 13 through its mobile application, in

violation of COPPA. See United States v. Path, Inc., No. C13-0448 (N.D. Cal. Jan. 31,

2013). Additionally, FTC settled charges that a company compiled and sold criminal

record reports through its mobile application and operated as a consumer reporting

agency, in violation of FCRA. See In the Matter of Filiquarian Publishing, LLC, FTC File

No. 112 3195 (Apr. 30, 2013).

For example, in the Path enforcement action, in addition to the alleged violation of

COPPA, Path allegedly deceived users by collecting personal information from their

mobile device address books without their knowledge and consent. See United States v.

Path, Inc., No. C13-0448 (N.D. Cal. Jan. 31, 2013).

In 2011, the U.S. Court of Appeals for the Eighth Circuit held that a basic cellular

telephone—used only to place calls and send text messages—was a computer for the

purposes of CFAA. The judicial decision did not address more advanced devices, such as

smartphones, in the CFAA context. See U.S. v. Kramer, 631 F.3d 900 (8th Cir. 2011).

Page 26 GAO-13-663 Information Resellers

knowledge.

In 2010, Commerce recommended that the Administration

review ECPA to address privacy protection of location-based services.

Mobile payments. No federal privacy laws that we evaluated expressly

address mobile payments. Such services, which allow individuals to

transfer money or pay for goods and services using their mobile devices,

have become increasingly prevalent. According to a survey conducted by

the Board of Governors of the Federal Reserve System, 6 percent of

smartphone users used their telephones at cash registers to pay for

purchases in 2012.

As noted previously, ECPA generally prohibits the interception and

disclosure of individuals’ electronic communications, but this may not

apply if location data were not deemed content. ECPA also would not

govern the interception or access of information transmitted and stored by

entities not covered by ECPA, which typically would include developers of

location-based applications. However, COPPA regulations govern the

collection of geolocation data sufficient to identify street name and the

name of a city or town from children under 13, and FTC could pursue

enforcement action if a location-based provider’s collection or use of

geolocation information violated COPPA.

In 2012, we reported that the risks of mobile technologies included disclosure to third

parties for unspecified uses, the tracking of consumer behavior (location tracking can be

combined with tracking of online activity), and identity theft. For example, criminals can

use disclosed location and other sensitive information to steal identities. See GAO, Mobile

Device Location ID: Additional Federal Actions Could Help Protect Consumer Privacy,

A 2013 report by FTC noted that although mobile

payment can be an easy and convenient way for individuals to pay for

goods and services, privacy concerns have arisen because of the number

of companies involved in the mobile payment marketplace and the large

GAO-12-903 (Washington, D.C.: Sept. 11, 2012). A Federal Communications Commission

report also noted privacy risks, particularly because numerous third parties can access

consumers’ personal information through location-based applications. See Federal

Communications Commission, Location-Based Services: An Overview of Opportunities

and Other Considerations (Washington, D.C.: May 2012).

See Department of Commerce, Internet Policy Task Force, Commercial Data Privacy

and Innovation in the Internet Economy: A Dynamic Policy Framework (Washington, D.C.:

December 2010).

Board of Governors of the Federal Reserve System, Consumers and Mobile Financial

Services 2013 (Washington, D.C.: March 2013).

Page 27 GAO-13-663 Information Resellers

amount of detailed personal and purchase information collected and

consolidated in the process.

Stakeholder views have diverged on whether significant gaps in the

current legal framework for privacy exist, whether more legislation is

needed, or whether self-regulation can suffice.

The marketing and information reseller industries generally have argued

that the current framework of sector-specific laws and regulations has not

left significant gaps in consumer privacy protections, citing several

reasons. First, they have stated that the list of federal and state laws

regulating uses of personal information is extensive. Second, some

industry representatives have stated that the existing legislative and

regulatory framework generally provides adequate privacy protections—

or the flexibility to address such protections—in relation to new

technologies.

Federal Trade Commission, Paper, Plastic or Mobile? An FTC Workshop on Mobile

Payments (Washington, D.C.: March 2013).

For example, they have noted that the FTC Act grants

FTC broad authority that can apply to a range of circumstances and

technologies—as with the enforcement actions discussed earlier to

address alleged misrepresentations of a company’s privacy policy

involving web tracking and history sniffing. Third, a representative of one

reseller said that any gaps that might exist in consumer privacy protection

were a result of gaps in enforcement of existing law rather than in the

legal framework itself. Finally, some have asserted that consumers’

expectations and notion of privacy have changed in the technological

age—for example, many consumers voluntarily share private information

in public online settings—which may mitigate the need for strict privacy

controls mandated by law that would apply to all consumers.

For example, Senate Committee on Commerce, Science, and Transportation, Privacy

and Data Security: Protecting Consumers in a Modern World, 112th Cong., 1st sess.,

June 29, 2011; see testimony of Stuart Pratt, Consumer Data Industry Association.

Views Differ on

Whether Existing

Legal Framework Has

Gaps and If Legislation

Is Needed to Improve

Privacy Protections

Extent of Gaps in Existing

Privacy Framework

Page 28 GAO-13-663 Information Resellers

In contrast, privacy advocates and others have stated that the current

privacy scheme left significant gaps. In July 2010 testimony, one privacy

advocate said that the current legal framework for privacy consisted of “a

confusing patchwork of distinct standards” that resulted in gaps in privacy

protection.

In a July 2011 letter to members of Congress, privacy

advocates and consumer organizations stated that the current legal

framework for privacy was inadequate, largely because laws had not

been updated to address privacy challenges arising from technological

developments.

Similarly, in public comments received by Commerce in

2010, some who commented suggested that changes in technology and

business models rendered parts of the U.S. privacy policy framework out

of date. Commerce noted in its privacy report that many of the key actors

in the Internet age—including online advertisers and their data sources,

cloud computing and location-based services, and social networks—

operated without specific statutory obligations to protect personal data.

Additionally, we have raised concerns about the relevance of the current

privacy framework in relation to the vast increases in the volume of

personal information collected and shared.

Industry and privacy advocates also have disagreed on the need for more

legislation or regulation and the efficacy of self-regulatory approaches to

protect privacy. Industry representatives have acknowledged the

importance of consumer privacy protections, but generally argued that

voluntary industry measures and self-regulation have mitigated the need

for additional privacy legislation. The Direct Marketing Association issued

Guidelines for Ethical Business Practice that include principles of conduct

House Committee on Energy and Commerce, Subcommittee on Commerce, Trade, and

Consumer Protection, The Best Practices Act of 2010 and Other Federal Privacy

Legislation, 111th Cong., 2nd sess., July 22, 2010; see testimony of Leslie Harris,

President and Chief Executive Officer, Center for Democracy and Technology.

Letter of consumer and privacy organizations to Senate Committee on Commerce,

Science, and Transportation (July 1, 2011).

Commerce, Commercial Data Privacy and Innovation in the Internet Economy (2010).

GAO-06-674.

Legislation versus

Self-Regulation

Page 29 GAO-13-663 Information Resellers

for its members.

And, as discussed earlier in this report, the Digital

Advertising Alliance has implemented a program related to online

behavioral advertising that provides consumers some control over their

information online.

At a recent Senate hearing, a representative of the

alliance stated that industry self-regulation was flexible and could adapt to

rapid changes in technology and consumer expectations, whereas

legislation and government regulation could be inflexible and quickly

become outdated in an era of rapidly evolving technologies.

Moreover,

the representative said that the self-regulatory program was backed by

robust industry enforcement mechanisms. Similarly, in June 2011, a

number of trade associations and business groups sent a letter to

Congress urging caution as Congress examined whether changes were

necessary to existing privacy laws.

Direct Marketing Association, Guidelines for Ethical Business Practice, available at

http://dmaresponsibility.org. The principles require that association members (1) maintain

appropriate security policies and practices to safeguard information, (2) provide

information on association policies about the transfer of personally identifiable information

for marketing purposes, and (3) honor requests not to have personally identifiable

information transferred for marketing purposes.

The letter argued that absent any

identifiable harm in the marketplace, privacy issues were best addressed

through industry self-regulatory programs and best practices. Specifically,

the letter noted that self-regulation and best business practices that were

technology-neutral serve as the preferred framework for enhancing

investment and competition while—at the same time—protecting

consumers’ privacy. Other stakeholders have testified that imposing

privacy protections by law or regulation—rather than through self-

regulatory means—would raise compliance costs for businesses, with

these increased costs falling hardest on small operators and start-up

In July 2013, the Digital Advertising Alliance issued guidance as to how its principles

apply in mobile environments, including mobile websites and applications.

Senate Committee on Commerce, Science, and Transportation, The Need for Privacy

Protections: Is Industry Self-Regulation Adequate?, 112th Cong., 2nd sess., June 28,

2012; see testimony of Robert Liodice, President and Chief Executive Officer, Association

of National Advertisers, Inc. on behalf of the Digital Advertising Alliance.

U.S. Chamber of Commerce, letter on changes to privacy law, available at

http://uschamber.com/issues/letters/2011/multiindustry-letter-changes-privacy-law.

Page 30 GAO-13-663 Information Resellers

companies.

In contrast, some privacy advocates and others have argued that

voluntary compliance or self-regulation is not sufficient to uniformly

protect consumer privacy rights. The World Privacy Forum issued a report

in 2011 stating that a majority of industry self-regulatory programs were

inadequate in protecting consumer privacy and failed in one or more

substantive ways.

(We discuss views about the economic effects of enhanced

regulatory protections in more detail later in this report.)

For example, the report asserted that self-regulatory

organizations formed their programs in secret, that the programs covered

only a fraction of an industry or an industry subgroup, and that self-

regulatory organizations lacked the ability to enforce the guidelines or

practices among members. The Privacy Forum report cited examples of

self-regulatory efforts that were no longer in existence, such as the

Individual Reference Services Group.

One academic privacy scholar

has argued that self-regulation largely affirms industry’s current and

prospective business practices, creates only narrow rights for consumers,

and does not cover new actors that may fall outside of the industry’s self-

regulatory regime.

Senate Committee, A Status Update on the Development of Voluntary Do-Not-Track

Standards, April 24, 2013; see testimony of Adam Thierer, Senior Research Fellow,

Mercatus Center, George Mason University. House Subcommittee, HR 5777, the Best

Practices Act, July 22, 2010; see testimony of Jason Goldman, Counsel, U.S. Chamber of

Commerce.

The Privacy Rights Clearinghouse has argued that

self-regulation is ineffective because some companies use the “notice-

and-choice model.” That is, they provide consumers with privacy policies

describing their data collection and use practices, but these policies are

often lengthy and dense, and consumers typically do not read or use

them to make informed choices. The organization has said that many

information resellers and other companies do little to inform consumers or

provide them with choices on the collection, handling, or disposition of

their data.

Robert Gellman and Pam Dixon, “Many Failures: A Brief History of Privacy Self-

Regulation in the United States” (World Privacy Forum: Oct. 14, 2011).

According to the report, the Individual Reference Services Group (a self-regulatory

organization formed in 1997 for companies providing information that identifies or locates

individuals) ceased functioning in 2001 because it said self-regulation was no longer

necessary due to the enactment of the Gramm-Leach-Bliley Act.

Chris Hoofnagle, “Can Privacy Self-Regulation Work for Consumers?” available at

http://techpolicy.com/CanPrivacySelf-RegulationWork-Hoofnagle.aspx.

Page 31 GAO-13-663 Information Resellers

In its March 2012 report on consumer privacy, FTC said that self-

regulation could play an important role in consumer privacy but said that

there had been little self-regulation to date and it had not gone far

enough. In particular, FTC said that efforts by the information reseller

industry to establish self-regulatory rules on consumer privacy had fallen

short, noting that basic privacy concepts like transparency about the

nature of companies’ data practices and meaningful consumer control

were absent. The report acknowledged that imposing new privacy

protections would result in costs for industry, but said that additional

protections also would build consumer trust in the marketplace, which in

turn would benefit businesses. FTC’s report urged industry to accelerate

the pace of self-regulation and made several recommendations for

businesses aimed at increasing consumer choice and control and helping

to promote privacy protection.

In addition to the differing views on whether to impose additional

legislative or regulatory privacy protections, debate has focused on the

appropriate approach for any such legislation or regulation. In general,

this debate can be framed around three sets of issues, addressed below:

(1) a comprehensive versus sector-specific approach to privacy

legislation; (2) how to address consumers’ interests in accessing,

controlling, and correcting their data; and (3) the potential impact of new

regulation on consumers and commerce.

Debate has been ongoing about what kind of legislative approach—

sectoral or comprehensive—would best effect enhanced consumer

privacy protections. As discussed previously, instead of being governed

by a comprehensive law that sets a baseline for privacy protections,

privacy in the United States is governed through a framework of subject-

specific laws that apply to discreet economic sectors and protect selected

types and uses of consumers’ personal data. Such a framework is

relatively rare among nations; according to Commerce, many countries

have comprehensive privacy models under a single legal framework.

While not recommending a comprehensive federal privacy statute per se,

in 2010 Commerce’s Internet Policy Task Force recommended the

adoption of a baseline commercial data privacy framework built on an

Views Differ on

Specific versus

Comprehensive

Approaches to

Privacy Law and on

Consumer Interests

Views on a Comprehensive

versus Sector-Specific

Approach to Privacy

Legislation

Page 32 GAO-13-663 Information Resellers

expanded set of the FIPPs. The task force’s report solicited public

comment on whether these baseline privacy principles should be enacted

by statute or through other means.

The 2012 White House privacy framework called on Congress to enact

baseline privacy legislation while also preserving existing sector-specific

laws. The Administration noted that the existing framework for consumer

data privacy in the United States was flexible and effectively addressed

some consumer data privacy challenges in the digital age. At the same

time, it noted that much of the personal data used on the Internet was not

subject to comprehensive federal statutory protection and that there was

a need to fill gaps across the range of environments in which individuals

have access to networked technologies. It said that baseline consumer

data privacy legislation that implemented the framework’s Consumer Bill

of Rights would provide a level playing field for companies, a consistent

set of expectations for consumers, and greater clarity and transparency

about the basis for FTC enforcement actions. At the same time, the

Administration argued that existing federal data privacy laws, such as

HIPAA and FCRA, provide effective and well-tailored privacy protections.

To avoid creating duplicative regulatory burdens, the Administration

supported exempting companies from consumer data privacy legislation

to the extent that their activities were subject to existing federal data

privacy laws. Thus, it said that baseline legislation would preserve

existing sector-specific federal laws that effectively protect personal data,

minimize the duplication of legal requirements, and provide consumers

with a clear sense of what protections they have and who enforces them.

FTC’s March 2012 privacy report also expressly called on Congress to

consider enacting baseline privacy legislation, while also urging industry

to accelerate self-regulation.

The report noted that adopting

baseline FIPPs would help fill gaps in current data privacy protections that

resulted from the current sectoral approach. Moreover, it noted that a

FIPPs-based framework might be more suitable for applying privacy

principles that could adapt to future changes in technology and other

conditions.

Department of Commerce, Notice of Inquiry: Information Privacy and Innovation in the

Internet Economy.

Page 33 GAO-13-663 Information Resellers

Some consumer and privacy groups and academic experts have cited

what they believe are several advantages to comprehensive privacy

legislation. First, they have said that only baseline legislation would fill

gaps in existing privacy protections and provide comprehensive

consumer privacy protections. Some consumer and privacy advocates

argued that the current sectoral privacy framework has produced highly

uneven results and many gaps in coverage. For example, the Center for

Democracy and Technology has noted that while strong privacy laws for

cable viewing and video records exist, the collection and use of much of

the data held by smartphone applications is subject only to Section 5 of

the FTC Act, which prohibits unfair or deceptive acts or practices in or

affecting commerce.

Privacy advocates and some business representatives also have argued

that comprehensive privacy legislation would be beneficial for businesses.

In congressional testimony in 2010, one consumer advocate said that the

lack of comprehensive privacy protections put U.S. companies at a

disadvantage overseas because many foreign companies and

governments were uncomfortable with, or in some cases legally restricted

from, engaging in business with them.

Second, some advocates say that a

comprehensive law would offer uniformity—providing privacy protections

to consumers on a more reliable and consistent basis in a variety of

contexts. Comprehensive legislation also could create more uniformity to

the extent that it preempted state laws that were inconsistent with federal

policy.

One industry representative also

has suggested that comprehensive privacy legislation could help reduce

compliance costs because the current sectoral approach, with multiple

laws, makes compliance a complex and costly task for many

organizations. FTC noted in its 2012 privacy report that some business

representatives noted in public comments that baseline privacy legislation

would help provide legal certainty and serve as a key mechanism for

building trust among customers.

House Subcommittee, HR 5777, the Best Practices Act, July 22, 2010; see testimony of

Leslie Harris, President and Chief Executive Officer, Center for Democracy and

Technology.

Testimony of Leslie Harris, July 22, 2010.

Federal Trade Commission, Protecting Consumer Privacy in an Era of Rapid Change: A

Proposed Framework for Businesses and Policymakers (March 2012), p. 11. Available at

http://ftc.gov/os/2012/03/120326privacyreport.pdf.

Potential Advantages of

Comprehensive Privacy

Legislation

Page 34 GAO-13-663 Information Resellers

Industry stakeholders have argued a comprehensive privacy law would

amount to a one-size-fits-all approach to regulation, which could be overly

burdensome because no single law can be tailored to fit the practices of

each individual company and industry. For example, one information

reseller told us comprehensive baseline privacy legislation might not

make distinctions between types of and uses for personal data and said

that data used for marketing purposes generally were more benign and

thus the threshold for privacy protections should be lower for these

purposes.

Stakeholders also said that the current sector-specific system was well-

suited to addressing those gaps—for example through targeted

rulemaking or legislation that sought to address a specific new technology

or sector not adequately covered under current law. Moreover, they said

that a sector-specific approach provided greater flexibility to tailor

appropriate restrictions based on the types and uses of data. Some

industry representatives note that FCRA has been successful in providing

appropriate privacy protections tailored to specific types of data (those

used for certain eligibility determinations) that can be particularly sensitive

because they can affect a consumer’s ability to get credit, insurance, or

employment.

Other stakeholders also suggested refinements to existing sector-specific

laws. An information reseller with whom we spoke suggested that a

preferred alternative to implementing a comprehensive or baseline federal

privacy law would be to create more consistency in definitions and

approaches among the current sector-specific privacy laws. One privacy

advocate with whom we spoke said that because comprehensive privacy

legislation may be politically unfeasible, it may be beneficial instead to

focus on strengthening, extending, and updating existing sector-specific

legislation such as FCRA and HIPAA.

Other debate on privacy protections has focused on the third-party market

for and usage of consumer data, whether or how consumers can access

and control such usage or correct the data, and how or if limits should

apply to web tracking.

Changes in the marketplace for consumer data include a vast increase in

recent years in the number and types of companies that collect and share

such data with third parties. FTC has noted a distinction between first-

party data—data held by the party that originally requested or collected

it—and third-party data—data purchased or otherwise obtained by a third

Potential Disadvantages

of Comprehensive Privacy

Legislation

Views on How to Address

Consumers’ Interests in

the Use of and Control

of Their Data

Use of Consumer Data

Page 35 GAO-13-663 Information Resellers

party, often to be used for a purpose different than originally intended.

In a July 2010 testimony, a representative of one consumer advocacy

organization proposed certain limitations on the use of personal data for

purposes beyond which the data were provided. He noted that consumers

face obstacles in understanding how and why their information is being

collected, analyzed, and used, and that they cannot rely on privacy

policies and disclosures to provide clear disclosure or consent to

repurposing of a consumer’s information.

For example, as noted earlier, information from a retail store purchase or

a warranty registration card can be sold to a third party to be used for

marketing purposes. In the online environment, consumers who provide

their e-mail addresses and other personal information for a nonmarketing

purpose to a website may find that information sold to an advertising

network or data aggregator for purposes unrelated to that website. Some

information resellers may use the information that was provided to

determine the consumer’s identity and associated demographic

information, which can be used to customize future advertising, all without

the consumer’s awareness. In some cases, the information could be

sensitive—for example, activity on a health-related website that results in

the collection and use of information about a consumer’s interest in a

particular medical topic.

In its 2012 privacy framework, the Administration noted that consumers

have a right to expect that companies will collect, use, and disclose their

information in ways that are consistent with the context in which the

information was provided.

Representatives of two

privacy advocacy organizations with whom we spoke similarly noted that

consumers often were not aware of, and had not always consented to,

personal information being repurposed for marketing and other uses.

Federal Trade Commission, Protecting Consumer Privacy in an Era of Rapid Change,

pp. 42-44.

That is, companies should limit their use and

disclosure to those purposes consistent with the relationship that they

have with consumers and the context in which consumers originally

disclosed the information. In addition, it noted that if companies used or

House Subcommittee on Commerce, Trade, and Consumer Protection, HR 5777, The

Best Practices Act, 111th Cong., 2nd sess., July 22, 2010; see testimony of Edmund

Mierzwinski, U.S. PIRG Consumer Program Director.

The White House, A Framework for Protecting Privacy (2012).

Page 36 GAO-13-663 Information Resellers

disclosed the information for other purposes, they should provide

transparency and choice by disclosing those other purposes in a manner

that is prominent and easily understandable to consumers. In its 2012

privacy report, FTC articulated a “context of the interaction” standard for

determining when a practice required consumer choice. Under this

standard, a requirement for consumer choice would depend on the extent

to which the practice was consistent with the context of the transaction or

the consumer’s existing relationship with the business, or was required or

specifically authorized by law.

Representatives of information resellers, marketers, and other industries

that use consumer data have argued that repurposing of consumer

information generally is not inappropriate or harmful. According to one

reseller with whom we spoke, personal information that consumers

provide to unrestricted websites—such as certain social media sites,

blogs, or discussion boards—becomes publicly available information, and

therefore can be used by a third party for various purposes, without any

legal or ethical limitations on its use. Other industry representatives have

noted that companies often clearly disclose to consumers that information

consumers provide may be used for marketing purposes. For example,

some resellers with whom we spoke said that disclosure on how personal

information may be used generally was given when consumers provided

personal information through such venues as loyalty card programs,

contests and surveys, and website and warranty registrations. However,

they acknowledged that some consumers might not read these

disclosures. In addition, some industry representatives have noted that

information resellers avoid web extraction in most cases and that some

forms of web scraping violate the Direct Marketing Association’s

mandatory ethical standards, which prohibit a company from selling or

sharing personally identifiable information obtained from social media

channels or online referral marketing without prior permission from the

referred individuals.

Stakeholders’ views have differed on the extent to which consumers

should be able to access data held about them. In its 2012 report, FTC

said that companies should provide reasonable access to the consumer

data they maintain, a position that many privacy groups have echoed.

Federal Trade Commission, Protecting Consumer Privacy in an Era of Rapid Change,

pp. 38-39.

Access and Correction

Page 37 GAO-13-663 Information Resellers

The agency noted that consumer access rights should be proportional to

the sensitivity and the intended use of the data at issue—for example,

consumers typically would have less access to data held about them for

marketing purposes than they would for data covered under FCRA and

used for eligibility determinations. FTC called on information resellers that

compile data for marketing purposes to explore creating a centralized

website where resellers would identify themselves and describe how they

collect and use consumer data, and the access rights and other choices

that consumers have. Some industry representatives with whom we

spoke said that such a centralized website would serve to confuse most

consumers and be costly to businesses. Representatives of two privacy

advocacy groups noted that while a centralized website would encourage

transparency, it likely would not provide consumers with comprehensive

or meaningful information. FTC staff told us that the agency has been

discussing the feasibility of such a centralized website with stakeholders.

Debate also has developed on consumers’ right to correct information

held about them for marketing purposes. As noted earlier, no federal law

that we examined gives consumers the right to correct or delete

inaccurate, incomplete, or unverifiable information used for marketing or

look-up purposes not covered by FCRA. Some privacy advocates and

members of Congress have argued that consumers should have the

inherent right to correct inaccurate information about them that is being

held and sold. In addition, one privacy advocate noted that uses of data

not covered by FCRA can include fraud prevention and identity

verification, and that inaccuracies in these databases can cause

inconvenience or harm to a consumer. For data used for marketing,

another privacy advocate has noted that companies may base some

individual product pricing on a consumer’s profile, so inaccurate data

could affect the price offered. However, both FTC and the Direct

Marketing Association have expressed the belief that special measures

are not needed to ensure the accuracy of data maintained and used for

marketing purposes because the only resulting harm to consumers might

be to receive irrelevant advertising.

Federal Trade Commission, Protecting Consumer Privacy in an Era of Rapid Change,

pp. 38-39; and letter from Direct Marketing Association to members of Congress on

August 13, 2012, available at http://the-dma.org/news/August-13-2012-DMALetter.pdf.

The Administration expressed a

similar view in its 2012 privacy framework, which noted that in providing

consumers the opportunity to correct inaccurate data, companies may

consider the scale, scope, and sensitivity of the data and whether

Page 38 GAO-13-663 Information Resellers

consumers would be exposed to any financial, physical, or other material

harm if the data were inaccurate. In addition, some resellers have stated

that because they acquire information continuously from a variety of

sources, providing consumers with an opportunity to correct erroneous

information would not be effective unless consumers also corrected the

information at the sources from which it had been drawn.

Some of the most publicized debate related to privacy and new

technologies has been on the issue of consumers’ ability to control the

tracking of their web activity. Areas of disagreement include the

effectiveness of voluntary initiatives that currently allow consumers to

exert some control over web tracking and the use of information collected

during such tracking. The Digital Advertising Alliance maintains a website

(http://aboutads.info/choices) that allows consumers to opt out of

behavioral advertising by its participating companies. The alliance also

developed an icon to let web page users know that their visit to that page

was being tracked and their actions used to infer their interests and target

future advertising. Users can click the icon to learn more about behavioral

advertising and control whether they receive such advertising and from

which companies.

Debate also has developed in recent years about the implementation of

“do not track,” another method for facilitating consumer choice. Under this

approach, consumers would be able to choose whether to allow the

collection and use of data about their online searching and browsing

activities (through cookies or other mechanisms). Typically, this would

involve the placement of a “flag” on the consumer’s browser signaling the

consumer’s choices for tracking and receiving targeted advertisements.

FTC supported the concept of a universal “do not track” mechanism in its

2010 and 2012 privacy reports, noting that it could be accomplished

The Digital Advertising Alliance said it believes that

these initiatives provide consumers with meaningful and effective choice

tools. However, some privacy advocates have pointed to limitations to this

mechanism, noting that the opt-out option focuses on what behavioral

advertising consumers see rather than the extent to which their web

habits are tracked. In addition, the option applies only to companies that

are participants of the Digital Advertising Alliance, although the alliance

notes that this includes most online advertising networks.

According to the Digital Advertising Alliance, in 2012 more than 5.2 million unique users

accessed the resources at www.aboutads.info, and nearly 1 million exercised a choice

using the site’s opt-out mechanism.

Web Tracking

Page 39 GAO-13-663 Information Resellers

either through legislation or through robust, enforceable self-regulation.

On the self-regulatory side, some Internet browsers, including Mozilla

Firefox, have introduced do-not-track features. The World Wide Web

Consortium has been developing a universal web protocol for “do not

track.”

Disagreements among stakeholders on a number of different

issues (such as scope, technological specifications, and which parties

should respond to a request) have delayed widespread adoption or

standardization of “do not track.”

Additionally, various proposals have been made in Congress and

elsewhere that would require FTC to promulgate regulations to implement

a “do not track” mechanism.

Although the specific methods and

parameters of the proposals vary widely, proponents have made several

general assertions in their favor. They note that the use of third-party

cookies and behavioral advertising greatly increased in recent years—for

example, the Wall Street Journal identified more than 3,000 tracking files

placed on a test computer by the top 50 websites.

Federal Trade Commission, Protecting Consumer Privacy in an Era of Rapid Change

(2012) and Protecting Consumer Privacy in an Era of Rapid Change: A Proposed

Framework for Businesses and Policymakers; preliminary staff report (Washington, D.C.:

December 2010).

Advocacy

organizations such as the Center for Democracy and Technology have

argued that Internet users may not be fully aware of the extent of such

tracking by third parties and that users should have to affirmatively

consent to the tracking of their online behavior. Some members of

In the World Wide Web Consortium, member organizations and the public work together

to develop web protocols and standards. The consortium’s Tracking Protection Working

Group is responsible for proposing recommendations and technologies to improve user

privacy and control by expressing preferences for blocking or allowing web tracking. See

http://w3.org/2011/tracking-protection/.

Senate Committee on Commerce, Science, and Transportation, A Status Update on the

Development of Voluntary Do-Not-Track Standards, 113th Cong., 1st sess., April 24,

2013; see testimony of Justin Brookman, Director, Consumer Privacy, Center for

Democracy and Technology.

For example, see the Do Not Track Me Online Act, H.R. 654, 112th Cong., 1st session.

The bill was referred to committee on February 11, 2011, where it died. See the Do-Not-

Track Online Act of 2011, S. 913, 112th Cong., 1st session. The bill was referred to

committee on May 9, 2011, where it died. See also, Do-Not-Track Online Act of 2013, S.

418, 113th Cong., 1st session. The bill was referred to committee on February 28, 2013.

Julia Angwin, “The Web’s New Gold Mine: Your Secrets,” Wall Street Journal, July 30,

2010.

Page 40 GAO-13-663 Information Resellers

Congress also have raised concerns about supercookies (that is, flash

cookies) and whether these would be covered by the prohibition of unfair

or deceptive acts or practices in Section 5 of the FTC Act.

Representatives of the advertising and some other industries have

cautioned against many of the proposals for a do-not-track mandate. The

Digital Advertising Alliance has argued that the current opt-out

mechanism it provides is an effective means for consumers to control the

collection and use of their web viewing data, and that such self-regulation

is a more flexible and efficient approach than legislative mandate.

Industry representatives also have asserted that limiting consumer web

tracking could adversely affect consumers’ online experiences—for

example, by not facilitating advertising relevant to their interests or

reducing advertising revenues used to provide free content.

Representatives of the marketing and reseller industries have argued that

regulatory restrictions on the use of consumer data unintentionally could

reduce the benefits consumers reap from the use and sharing of personal

information. First, advertising representatives have noted that marketing

and advertising that can be targeted to individual consumers helps

underwrite the cost of web applications and online services that are

available free to consumers.

Senate Committee, A Status Update on the Development of Voluntary Do-Not-Track

Standards, April 24, 2013; see testimony of Luigi Mastria, Managing Director, Digital

Advertising Alliance.

Second, the ability to collect and share

personal information has resulted in many products and services that are

useful or enjoyable to consumers. For example, representatives of

individual reference (look-up) sites have noted that their products allow

users to reconnect with friends and family members or learn more about

prospective romantic partners. Similarly, representatives of leading

Internet service providers have noted that location-based services such

House Subcommittee, H.R. 5777, The Best Practices Act, July 22, 2010; see testimony

of Michael Zaneis, Vice President of Public Policy, Interactive Advertising Bureau.

Views on the Potential

Impact of New Regulation

on Consumers and

Commerce

Benefits of Information

Sharing for Consumers

Page 41 GAO-13-663 Information Resellers

as those available on mobile devices can offer a vastly improved user

experience when the user reveals his or her current position. Third, some

resellers have said that consumers benefit from targeted behavioral

advertising because it provides them with information about products and

services relevant to their specific interests, needs, or preferences—all at

a time when the consumer is likely interested in such products or

services. A 2013 poll commissioned by the Digital Advertising Alliance

found that about 68 percent of respondents indicated they would prefer

that at least some of the Internet advertisements they saw were directed

toward their interests, compared with about 16 percent who preferred to

see random advertisements.

100

The U.S. Chamber of Commerce has

noted that public policymakers must consider benefits to consumers in

weighing the trade-offs between protection of privacy rights and other

factors.

101

However, some privacy advocates expressed the belief that the benefits

to consumers have been overstated and were skeptical that most

consumers highly desired targeted advertising. Some advocates also

raised concerns that the profiling and scoring techniques used to deliver

specific advertisements to specific consumers might have discriminatory

effects because they presented information, sales, or opportunities only to

consumers with certain characteristics.

Stakeholder views again diverged in relation to the potential economic

effects of strengthened privacy regulations. The Direct Marketing

Association and other industry representatives have said that companies’

ability to readily collect, use, and share consumer information has had

economic benefits and fostered innovation that could be inhibited by

legislative proposals or regulation that restricted the collection and use of

this information. In 2010, commercial and nonprofit marketers spent about

$154 billion on direct marketing advertising expenditures, according to the

100

In addition, approximately 16 percent said they were not sure. The poll surveyed 1,000

likely voters nationwide on April 2-3, 2013. Slight weights were added to age, race,

gender, region, party, education, and religion to more accurately reflect the population.

Zogby Analystics, Interactive Survey of U.S. Adults, commissioned by the Digital

Advertising Alliance (2013), available at

http://www.aboutads.info/resource/image/Poll/Zogby_DAA_Poll.pdf.

101

House Subcommittee, HR 5777, the Best Practices Act, July 22, 2010; see testimony

of Jason Goldman, Counsel for Telecommunications and E-Commerce, U.S. Chamber of

Commerce.

Innovation and

Economic Benefits

Page 42 GAO-13-663 Information Resellers

Direct Marketing Association, accounting for about 51 percent of all

advertising expenditures in the United States.

102

Additionally, industry

representatives have noted that the Internet has become an increasingly

important part of the U.S. economy—for example, retail e-commerce

sales totaled about $225 billion in 2012, according to Commerce—and

data-driven marketing helped facilitate this activity. According to a study

by the Network Advertising Initiative, behaviorally targeted advertising

generated almost three times more revenue and was twice as effective at

converting browsers into buyers than nontargeted online advertising.

103

According to a study commissioned by the Interactive Advertising

Bureau—an organization of media and technology companies engaging

in online advertising—advertising-supported Internet activity that uses

consumer data has significant economic benefits, including job

creation.

104

In addition, representatives of the information reseller industry have said

that the use of consumer information for data-driven marketing helps to

foster competition online and ensures that large and small businesses

can reach consumers across the Internet. According to a 2011 study by a

global consulting firm, the availability of consumer data has enabled much

of recent economic innovation and growth.

105

102

Direct Marketing Association, The Power of Direct Marketing: ROI, Sales,

Expenditures, and Employment in the U.S., 2011-2012 edition (New York, N.Y., October

2011), pp. 31 and 239.

For example, the study

cited the emergence of real-time location data as creating an entirely new

set of location-based services, from navigation applications to people

tracking. In a 2013 congressional hearing, representatives of two industry

103

Howard Beales, “The Value of Behavioral Targeting,” March 24, 2010, available at

http://www.networkadvertising.org/pdfs/Beales_NAI_Study.pdf.

104

Hamilton Consultants, Inc., John Deighton, and John Quelch, “Economic Value of the

Advertising-Supported Internet Ecosystem” (Cambridge, Mass.: June 10, 2009), available

at http://iab.net/media/file/Economic-Value-Report.pdf. The study estimated that the

Internet created more than 1.2 million new jobs—including jobs that conduct advertising

and commerce on the Internet—in the United States over the last 10-15 years.

105

James Manyika, Michael Chui, et al., Big Data—The Next Frontier for Innovation,

Competition, and Productivity, May 2011, available at

http://mckinsey.com/insights/business_technology/big_data_the_next_frontier_for_innovat

ion.

Page 43 GAO-13-663 Information Resellers

associations stated that stricter privacy controls would increase

compliance costs for businesses, particularly smaller businesses.

106

However, privacy and consumer groups generally have argued that even

with restrictions on the use of consumer data, industries that use such

data would find a way to expand their businesses and remain profitable.

They noted that the industry’s claims that increased privacy protections

would be too burdensome and stifle innovation have not been

accompanied by convincing evidence. Moreover, some privacy and

consumer groups have stated that effective privacy regulations actually

can have positive effects on the economy and innovation. They noted that

privacy-enhancing technology, such as data encryption, that safeguards

personal information online has led to greater consumer participation

online, including more e-commerce.

107

They also argued that enhanced

privacy protections may encourage companies to develop innovative

services that rely less on personal information. The White House privacy

framework noted that consumers who feel protected from misuse of their

personal information likely would be more open to engaging in commerce

and various online technologies. Privacy advocates have cited the

example of encryption technology to enable secure online payments as

increasing consumers’ willingness to engage in online financial

transactions.

108

In addition, one privacy organization noted that

competition among companies to address consumers’ privacy concerns

could encourage innovations.

109

106

Senate Committee, A Status Update on the Development of Voluntary Do-Not-Track

Standards, April 24, 2013; see testimony of Luigi Mastria, Managing Director, Digital

Advertising Alliance, and testimony of Adam Thierer, Senior Research Fellow, Mercatus

Center, George Mason University.

107

See letter of consumer and privacy organizations. Industry representatives also have

talked about the importance of consumer trust. For example, in A Status Update on the

Development of Voluntary Do-Not-Track Standards, April 24, 2013; see testimony of

Harvey Anderson, Senior Vice President Business and Legal Affairs, Mozilla.

108

Department of Commerce, Notice of Inquiry: Information Privacy and Innovation in the

Internet Economy, 75 Fed. Reg. 80042, Dec. 21, 2010. Notice and all comments are

available at http://ntia.doc.gov/federal-register-notices/2010/information-privacy-and-

innovation-internet-economy-notice. See comments of the Electronic Privacy Information

Center at pp. 13-14; and comments of Consumer Watchdog at p. 3.

109

See http://ntia.doc.gov/federal-register-notices/2010/information-privacy-and-

innovation-internet-economy-notice comments of the Electronic Privacy Information

Center at pp. 13-14.

Page 44 GAO-13-663 Information Resellers

Similarly, the Federal Communications Commission stated in a 2012

report that companies that could demonstrate clear and consistent

transparency in collection and use of personal information could be

competitive and more attractive to consumers.

110

In public comments

solicited by Commerce in 2010 on information privacy and innovation in

the Internet economy, online businesses and advertisers noted the

importance of respecting customers’ privacy if they wanted to retain their

business, and information and communications technology companies

stated that privacy protections were necessary to encourage individuals

to adopt new devices and services.

111

According to a representative of

one privacy organization, even in those cases in which privacy

regulations served to inhibit one line of marketing—as with the effect on

telemarketers of regulation creating the National Do Not Call Registry—

advertisers and marketers have been able to rapidly shift to other

profitable marketing avenues.

112

Views vary on the economic effects of greater harmonization of U.S.

privacy rules with those of our trading partners. One of the

recommendations of Commerce’s Internet Policy Task Force in 2010 was

that the U.S. government should increase cooperation with other

countries’ privacy enforcement authorities and work toward mutual

recognition of other commercial data privacy frameworks.

113

110

See Federal Communications Commission, Wireless Telecommunications Bureau,

Location-Based Services: An Overview of Opportunities and Other Considerations

(Washington, D.C.: May 2012).

The task

force noted that a significant number of stakeholders from whom they

solicited comments noted difficulties in complying with multiple foreign

data protection rules and regulations. These difficulties included

restrictions on transferring data between jurisdictions and significant costs

111

Department of Commerce, Notice of Inquiry, Information Privacy and Innovation in the

Internet Economy (Privacy and Innovation NOI), 75 Fed. Reg. 21226, Apr. 23, 2010,

available at http://ntia.doc.gov/frnotices/2010/FR_PrivacyNOI_04232010.pdf.

112

In 2003, FTC began implementing the National Do Not Call Registry, which allows

consumers to register to prevent unwanted telemarketing calls. The registry was the result

of FTC’s Telemarketing Sales Rule, which implemented the Telemarketing and Consumer

Fraud and Abuse Prevention Act of 1994, and the Federal Communication Commission’s

rules and regulations implementing the Telephone Consumer Protection Act of 1991.

113

Department of Commerce, Internet Policy Task Force, Commercial Data Privacy and

Innovation in the Internet Economy: A Dynamic Policy Framework (Washington, D.C.:

2010).

International Harmonization

Page 45 GAO-13-663 Information Resellers

to track and comply with data protection laws in each country.

Specifically, some who commented noted gaps in protection for

consumers whose data were transferred across borders, because it was

not always clear who had jurisdiction over data and what protections

existed for foreign consumers. To overcome these obstacles, they

recommended a number of options, with the majority advocating for

greater harmonization and the ability to work together across systems

(interoperability).

114

As noted previously, the European Union’s 1995 Data Protection

Directive provides a comprehensive privacy framework and states that

the personal information of European Union citizens may not be

transmitted to nations not deemed to have “adequate” data protection

laws. The United States does not have an adequacy finding from the

European Commission (the executive body of the European Union).

However, companies that participate in the U.S.-EU Safe Harbor

Framework are deemed to provide adequate data protections and may

transfer personal data from the European Union.

The Administration’s 2012 privacy framework echoed

these concerns and noted that creating interoperability between different

nations’ privacy regimes was critical to the continued growth of the digital

economy. Underlying the approach to achieving international

interoperability, it said, were mutual recognition of commercial data

privacy frameworks, cooperation in enforcing these frameworks, and

mechanisms that allow companies to demonstrate accountability.

115

114

Such measures would augment existing frameworks for interoperability of data. For

example, the July 2000 U.S.-EU Safe Harbor intergovernmental agreement facilitates

interoperability between the privacy regimes in the United States and the European Union.

The framework provides a method for U.S. companies to transfer personal data outside

the European Union in a way that is consistent with EU data protection laws.

Some industry

observers have warned against enacting a strict privacy regime like the

one in the European Union. For example, according to a representative of

an information reseller, moving to a strict privacy regime similar to that of

the European Union would hinder commerce and innovation and have a

strongly detrimental effect on certain industries and the overall U.S.

economy. A representative of another information reseller said that the

U.S. privacy regime has worked well and agreed that making it more like

that of the European Union would have detrimental, unintended

consequences, such as harming economic growth and innovation.

115

FTC has the authority to enforce the substantive privacy requirements of the U.S.-EU

Safe Harbor Framework.

Page 46 GAO-13-663 Information Resellers

The advent of new and more advanced technologies and changes in the

marketplace for consumer information have vastly increased the amount

and nature of personal information collected and the number of parties

that use or share this information. While the views of stakeholders differ,

based on our review, we found that gaps exist in the current statutory

privacy framework. In particular, the current framework does not fully

address changes in technology and marketplace practices that

fundamentally have altered the nature and extent to which personal

information is being shared with third parties. Moreover, while current

laws protect privacy interests in specific sectors and for specific uses,

consumers have little control over how their information is collected, used,

and shared with third parties for marketing purposes. As a result, current

privacy law is not always aligned with the Fair Information Practice

Principles, which Commerce and others have said should serve as the

foundation for commercial data privacy.

Thus, the current privacy framework warrants reconsideration in relation

to a number of issues, including consumers’ ability to access, correct, and

control their personal information used for marketing; the types of

personal information collected and the sources and methods for collecting

it; and privacy controls related to relatively new technologies, such as

web tracking and mobile devices. At the same time, different legislative

approaches to improving privacy—including comprehensive or sector-

specific—involve trade-offs and have advantages and disadvantages.

The challenge will be providing appropriate privacy protections without

unduly inhibiting the benefits to consumers, commerce, and innovation

that data sharing can accord.

Congress should consider strengthening the current consumer privacy

framework to reflect the effects of changes in technology and the

marketplace—particularly in relation to consumer data used for marketing

purposes—while also ensuring that any limitations on data collection and

sharing do not unduly inhibit the economic and other benefits to industry

and consumers that data sharing can accord. Among the issues that

should be considered are

• the adequacy of consumers’ ability to access, correct, and control

their personal information in circumstances beyond those currently

accorded under FCRA;

• whether there should be additional controls on the types of personal

or sensitive information that may or may not be collected and shared;

Conclusions

Matter for

Congressional

Consideration

Page 47 GAO-13-663 Information Resellers

• changes needed, if any, in the permitted sources and methods for

data collection; and

• privacy controls related to new technologies, such as web tracking

and mobile devices.

We provided a draft of this report for review and comment to the

Department of Commerce and the Federal Trade Commission. In written

comments, which are reprinted in appendix III, Commerce agreed that

evolving technology and business practices are changing the ways that

consumers’ personal information is collected and used, and that

strengthened privacy protections could better protect consumers and

support innovation. It also noted that the Administration’s privacy

framework supports privacy legislation that would create baseline

protections for consumers while preserving existing sector-specific federal

laws. In addition, the Federal Trade Commission provided technical

comments, which we incorporated as appropriate.

As agreed with your office, unless you publicly announce its contents

earlier, we plan no further distribution of this report until 30 days from the

report date. At that time, we will provide copies to other interested

congressional committees, as well as the Secretary of Commerce and the

Chairman of the Federal Trade Commission. We will also make copies

available to others upon request. In addition, this report will be available

at no charge on our website at http://www.gao.gov.

Should you or your staff have questions concerning this report, please

contact me at (202) 512-8678 or [email protected]. Contact points for

our Offices of Congressional Relations and Public Affairs may be found

on the last page of this report. Key contributors to this report are listed in

appendix IV.

Sincerely yours,

Alicia Puente Cackley

Director

Financial Markets and

Community Investment

Agency Comments

Appendix I: Objectives, Scope, and

Methodology

Page 48 GAO-13-663 Information Resellers

This report examines (1) existing federal laws relating to the privacy of

consumer information held by information resellers, (2) any gaps that may

exist in this legal framework, and (3) views on approaches for improving

consumer data privacy. For the purposes of this report, we defined

information resellers as companies with a primary line of business of

collecting, aggregating, and selling publicly available and private personal

information to third parties. This report focuses primarily on privacy issues

related to consumer information used for marketing and for individual

reference services—sometimes called look-up or people-search services.

We generally excluded from our review privacy issues related to

consumer data collected and used by information resellers for purposes

such as fraud prevention, eligibility determination for credit or

employment, and legal compliance.

To determine laws that relate to the privacy and safeguarding of

consumer information held by information resellers, we reviewed relevant

federal and selected state laws and determined their applicability to

information resellers’ collection and use of consumer information used for

marketing and individual reference services. Specifically, we reviewed

various law review and legal journal articles, conducted searches of the

Westlaw database, and reviewed and analyzed a legal treatise compiling

laws relating to data privacy, including any laws applicable to government

records, electronic surveillance, medical data, financial information,

commercial transactions, and online activity.

In conducting our analyses, we determined that privacy laws are

applicable for specific purposes, in certain situations, to certain sectors, to

certain types of entities, or to certain types of records; and categorized

our findings into two major groups that included (1) primary federal

privacy laws, and (2) other federal privacy laws that also may apply to

information resellers’ practices and products, consumer services, or types

of records. We also reviewed and analyzed relevant state laws governing

consumer privacy and data security, and identified those states that also

enacted privacy legislation beyond data breach notification. We reviewed

selected Federal Trade Commission (FTC) enforcement actions related to

its deception and unfairness authority. To determine whether gaps may

We reviewed laws in terms

of their general purpose, applicability to resellers or the collection and use

of consumer information, as well as applicable agency regulations.

D. Reed Freeman and J. Trevor Hughes, Privacy Law in Marketing (2013).

Appendix I: Objectives, Scope, and

Methodology

Appendix I: Objectives, Scope, and

Methodology

Page 49 GAO-13-663 Information Resellers

exist in the current privacy framework, we analyzed these federal laws

and related regulations to assess the extent of privacy protections under

federal law and any limitations in their scope, including the adequacy of

consumers’ ability to access, correct, opt out, or request deletion of

information.

To obtain views on approaches to improving consumer data privacy—as

well as gather additional information on potential gaps in the privacy

framework for consumer privacy—we identified and analyzed relevant

studies and reports, Congressional testimony, legislative and regulatory

proposals, position papers, and other documents from governmental and

nongovernmental stakeholders. We solicited views on these issues from

representatives of various organizations that represent the interests of

information resellers, advertisers, and consumers, as well as federal

agencies. We reviewed the Fair Information Practice Principles (FIPPs), a

set of internationally recognized principles for protecting the privacy and

security of personal information, and the framework for consumer data

privacy issued by the White House in February 2012. We also reviewed

relevant public comments that the Department of Commerce (Commerce)

and FTC received from notices soliciting such comments. In addition, we

reviewed correspondence from information resellers in response to the

Bipartisan Congressional Privacy Caucus’s inquiry into nine resellers’ use

of consumer information.

To address all three objectives, we also used Internet search techniques

and keyword search terms to identify sources and types of available

information about the reseller industry, including the definition of

information resellers; number and nature of companies that serve as

information resellers; industry revenues; product offerings; internal

controls and practices; extent of consumer information collected and

maintained; and who is buying information resellers’ products and for

what purposes. In doing so, we generally obtained information from

various online research sources such as LexisNexis, Proquest, and

Gartner, which consisted of company dossiers, journals, trade

publications, periodicals, studies, white papers, and aggregated

databases relevant to the reseller industry. We also analyzed U.S.

On July 25, 2012, the Bipartisan Congressional Privacy Caucus sent letters to

information resellers requesting data about the collection and use of consumers’ personal

information. The nine resellers that responded to the congressional inquiry were Acxiom,

Epsilon, Equifax, Experian, FICO, Harte-Hanks, Intelius, Merkle, and Meredith.

Appendix I: Objectives, Scope, and

Methodology

Page 50 GAO-13-663 Information Resellers

Census Bureau data to obtain information on business classification

codes (including Standard Industrial Classification and North American

Classification System codes) assigned to reseller companies to classify

their main industry and line of business. On the basis of our analyses, we

determined that the data do not provide a reliable count or other statistical

information on the information reseller industry, and there is limited

publicly known information about the industry as a whole.

We obtained documentation from, and interviewed representatives of,

federal agencies, including the Consumer Financial Protection Bureau,

Commerce, and FTC; trade associations, including the Consumer Data

Industry Association and Direct Marketing Association; consumer and

privacy advocacy organizations, including the Center for Digital

Democracy, Electronic Privacy Information Center, Privacy Rights

Clearinghouse, U.S. Public Interest Research Group, and World Privacy

Forum; Privacy Times, a newsletter that covers privacy law and policy;

and Safe Shepherd, a company that provides products and services to

protect privacy. In addition, we interviewed (in some cases, receiving

written responses to questions we provided) six information resellers—

Acxiom, Epsilon, Experian Marketing, Intelius, LexisNexis (Reed

Elsevier), and Spokeo. These companies were selected because, based

on our analyses, they constituted a mix of the largest and most widely

recognized resellers that maintain a range of products and services that

collect and sell consumer information for purposes including marketing,

individual reference services, or both. The information resellers we

included and the products they offer do not necessarily represent the full

scope of the industry. We reviewed marketing materials and other

documentation from these companies. Additionally, we reviewed our 2006

and 2008 reports on information resellers as well as recent work on

issues related to consumer and data privacy, and other related subjects.

We conducted this performance audit from August 2012 through

September 2013, in accordance with generally accepted government

auditing standards. Those standards require that we plan and perform the

See GAO, Personal Information: Agency and Reseller Adherence to Key Privacy

Principles, GAO-06-421 (Washington, D.C.: Apr. 4, 2006). Personal Information: Key

Federal Privacy Laws Do Not Require Information Resellers to Safeguard All Sensitive

Data, GAO-06-674 (Washington, D.C.: June 26, 2006); and Privacy: Government Use of

Data from Information Resellers Could Include Better Protections, GAO-08-543T

(Washington, D.C.: Mar. 11, 2008).

Appendix I: Objectives, Scope, and

Methodology

Page 51 GAO-13-663 Information Resellers

audit to obtain sufficient, appropriate evidence to provide a reasonable

basis for our findings and conclusions based on our audit objectives. We

believe that the evidence obtained provides a reasonable basis for our

findings and conclusions based on our audit objectives.

Appendix II: Examples of Data Collected and

Used by Information Resellers

Page 52 GAO-13-663 Information Resellers

Tables 2 and 3 illustrate some of the consumer information included in

the marketing products offered by two large information resellers, Acxiom

and Experian Marketing.

Table 2: Selected Examples of Consumer Data in Acxiom’s Marketing Products, 2012

Category Selected Elements

Individual data Name, address, telephone number, e-mail, gender, education, occupation, voter party,

ethnic code/language preference, age, date of birth.

Household demographics Adult age ranges, children’s age ranges, gender, number of adults and number of

children in the household, marital status.

Household purchase behavior Frequency of purchase indicator, types of purchases indicator, charitable giving

indicator, community involvement indicator, average direct mail purchase amount, direct

mail frequency indicator.

Household life event indicators New parent, expectant parents, new teen driver, college graduate, empty nester, new

mover, recent home buyer, recent mortgage borrower, getting married, divorced, child

leaving home, buying a new car.

Household wealth indicators Estimated household income ranges, income producing assets indicator, estimated net

worth ranges.

Household vehicle data Year, make, model, estimated vehicle value, vehicle lifestyle indicator, model and brand

affinity, used vehicle preference indicator.

Household social media predictors Social media sites likely to be used by an individual or household, heavy or light user,

whether they engage in public social media activities such as signing on to fan pages or

posting or viewing YouTube videos.

Source: Acxiom.

Note: According to Acxiom, detailed transaction-level data, Social Security numbers, driver’s license

numbers, and known instances of personally identifiable information about children under age 18 are

excluded from these marketing products.

Appendix II: Examples of Data Collected and

Used by Information Resellers

Appendix II: Examples of Data Collected and

Used by Information Resellers

Page 53 GAO-13-663 Information Resellers

Table 3: Selected Examples of Marketing Lists Available from Experian, 2012

Category Marketing Lists

Hobbies and interests Astrology/psychic reading, boating, gardening, photography, politics, religion, self-

improvement, volunteering.

Pet owners Cats, dogs, other pets.

Reading preferences Bible/devotional, children’s, history, mystery, nonfiction, romance, science fiction.

Collecting Art/antiques, die cast miniatures, dolls, plates, sports memorabilia, stamps/coins.

Cooking and entertaining Baking, gourmet cooking, recipes, wine appreciation.

Health and fitness Healthy living, interest in fitness, natural/herbal remedies, personal care/beauty care,

reduce fat/cholesterol, vegetarian, weight conscious.

Music preference Christian, classical/opera/big band, country, jazz/new age, oldies, rhythm and blues, rock

Sweepstakes and gambling Casino gambling, lotteries, sweepstakes.

Sports and recreation Boating/sailing, camping/hiking, fishing, golf, hunting, motorcycles, racing/autos,

running/jogging, skiing, swimming, tennis, outdoors.

Occupation Beauty (cosmetologists, barbers, manicurists) civil servants, clergy, clerical/office

workers, doctors/physicians/surgeons, executives/administrators, farming/agriculture,

health services, middle management, nurses, professional/technical, retail service,

retired, sales, marketing, self-employed, skilled/trade/machine operator/laborer,

teacher/educator.

Financial investments Certificates of deposit/money market funds, mutual funds/annuities, Individual

Retirement Accounts, life insurance, real estate, stocks or bonds.

Ailments Allergies, Alzheimer’s disease, angina, arthritis/rheumatism, asthma, back pain, cancer,

clinical depression, diabetes, emphysema, erectile dysfunction, epilepsy, frequent

heartburn, gum problems, hearing difficulty, high blood pressure, high cholesterol,

irritable bowel syndrome, lactose intolerant, ulcer, menopause, migraines/frequent

headaches, multiple sclerosis, osteoporosis, Parkinson’s disease, prostate problems,

psoriasis/eczema, sinusitis/sinuses.

Visual impairments Contact lenses, eyeglasses, visual impairments/correction.

Source: Experian Marketing Services.

Note: According to Experian Marketing Services, its marketing lists derive primarily from (1) self-

reported survey data provided directly by the consumer with consent; (2) purchase categories

provided by retailers after the retailer has provided its customer a notice and ability to opt-out of such

information sharing; and (3) public records. Marketing lists are not composed of fewer than 50

addresses and Experian policy and user agreements allow recipients of the lists to use them only for

direct marketing purposes.

Appendix III: Comments from the Department

of Commerce

Page 54 GAO-13-663 Information Resellers

Appendix III: Comments from the

Department of Commerce

Appendix III: Comments from the Department

of Commerce

Page 55 GAO-13-663 Information Resellers

Appendix IV: GAO Contact and Staff

Acknowledgments

Page 56 GAO-13-663 Information Resellers

Alicia Puente Cackley, 202-512-8678 or [email protected]

In addition to the contact named above, Jason Bromberg (Assistant

Director), Michelle Bowsky, William R. Chatlos, Rachel DeMarcus, Beth

Faraguna, Kun-Fang Lee, Patricia Moye, Barbara Roesmann, Rachel

Siegel, and Jena Sinkfield made key contributions to this report.

Appendix IV: GAO Contact and Staff

Acknowledgments

GAO Contact

Staff

Acknowledgments

(250682)

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