Reprinted with permission from HB Litigation.

Have you ever wondered why the same advertisement seems to be following you around the Internet?  Toby Merrill of ACE Professional Risk attributes this phenomenon to the increased use of data analytics by advertisement companies.  Data analytics is being used to track online users’ preferences so that companies can specifically target users with advertisements that match their interests.  This type of data collection has led to the hot-button issues of whether companies are infringing on their customers’ privacy rights and whether this data is being wrongfully collected.

These are some of the themes that emerged during a panel discussion at HB’s recent conference titled NetDiligence^® Cyber Risk & Privacy Liability Forum (recordings available!).  The panel was moderated byToby Merrill, ACE Professional Risk, and comprised Katherine Race Brin, Federal Trade Commission; Linda Clark, Reed Elsevier; John Graham, Zurich North America Betty Shepherd, S.H. Smith & Company andGabriel Weinberg, DuckDuckGo.

How are companies using data analytics?
The panel recognized many positive ways that data analytics is currently being used.  The education industry is using it to enhance student learning.  Financial institutions are using it to protect credit card customers from fraud.  However, Zurich’s John Graham says “some companies are taking the posture of ‘let’s collect all the data that we can because we don’t even know what we are going to be able to use that for in the future.’”  The panel recognized that this type of mass collection creates a dangerous situation because companies are exposing themselves to liability if that information was wrongfully collected or if that information gets lost or stolen.

Gabriel Weinberg, creator of the online search engine DuckDuckGo, says that “businesses realize that [consumer behavior] data is valuable,” and “over the last five years … data collection has been pretty much hidden from consumers.”  He said that preferential data collection is a growing industry and that the FTC “has to deal with how to reconcile the data collection with what consumers want.”  Gabriel reflected on his own experience running a search engine and said that consumers “really care about [their behaviors being tracked] and [this issue] is not going to go away the same way people have dismissed privacy in the past.”

How is the FTC protecting consumer privacy?
FTC’s Katherine Race Brin said that her agency is focused on protecting consumer rights and has created a privacy report that outlines best practices that companies should follow when handling private information.  She says that the report outlines three main concepts that companies should consider.

First, companies should focus on “privacy by design,” which means that when a company designs a product or service they should be thinking about what data they are collecting or sharing as a result of this product or service.

Second, she said the FTC policy advocates “simplified consumer choice,” which means companies should provide consumers with “clear contextual [privacy] choice options.”

Third, Brin advised, companies should focus on “transparency,” which means simplifying privacy policies so that consumers can understand them.

Brin said the FTC is focused on bringing enforcement actions against companies whose practices are deceptive or unfair in violation of the Federal Trade Commission Act.  She continued by saying that the FTC has recently brought privacy actions against major online companies like Google and Facebook in order to ensure that these companies provided their consumers with privacy protections.

Every panelist agreed that the best way to ensure better privacy protection is to educate the consumers, along with the businesses, about the issues involved with preferential targeting.  It will be interesting to see how consumer privacy laws develop throughout the next decade and how the use of data analytics is affected by this demand for privacy.

HB’s next NetDiligence® Cyber Risk & Privacy Forum will take place in Marina del Rey, California, on October 10-11, 2013.  The event will be Co-Chaired by Mary Guzman, McGriff Seibels & Williams; Oliver Brew, Liberty Insurance; Chris Keegan, FINEX Global; Tim Francis, Travelers Bond & Financial Products; and Mark Schreiber, Edwards Wildman.

Tim Prosky is a 2015 J.D. candidate at Elon University School of Law in Elon, N.C.  He earned his degree in accounting from the University of South Carolina.  Prosky is a 2013 HB Litigation Conferences Summer Associate.