FTC's Slaughter Blasts 'Fundamental Unfairness' Of 'Data Economy'

The Federal Trade Commission may consider restricting so-called “surveillance advertising” by requiring companies to limit the amount of data they collect about consumers, Commissioner Rebecca Kelly Slaughter suggested Friday.

“A minimization framework would not outright ban surveillance advertising, but it would effectively disable it,” she said at a speech delivered at the annual conference of the National Advertising Division, a unit of the BBB National Programs.

“If companies cannot indiscriminately collect data, advertising networks could not build microtargeting profiles,” Slaughter added. “Without the monetization aspect of microtargeting, the incentive to indiscriminately collect data falls away.”

She qualified her remarks by adding she has “no certainty that a rulemaking record would support a minimization rule or any other particular approach.”

In her speech, Slaughter repeatedly criticized business models that rely on collecting and monetizing data about consumers.

“The pervasive nature of commercial surveillance, its substantial injuries to consumers, its unavoidable nature, and the paucity of benefits that outweigh those injuries demonstrate a fundamental unfairness at the heart of the data economy,” she said.

She said “indiscriminate” data collection raises a host of concerns that go beyond privacy, including that consumer data can facilitate civil rights violations, the spread of misinformation and competitive harms.

“Overcollection encourages leveraging huge amounts of data as a surveillance business model and then turning those data into products, some of which have: reproduced patterns of discrimination against protected classes in areas of key economic opportunities; increased the severity of data breaches; and fueled misinformation campaigns,” she stated.

“There are also less dramatic harms of pervasive data collection,” Slaughter added. “For example, ads in mobile apps and websites drain consumers phones’ battery life and may make them pay more in phone bills.”

Her comments come as some lawmakers and advocates are urging the FTC to pass regulations that would address online data collection. Two weeks ago, nine Senate Democrats specifically asked the agency to pass rules that would require companies to obtain consumers' consent before gathering their data.

Slaughter made clear in her remarks that she favors data minimization rules, as opposed to regulations requiring companies to notify consumers about data practices and obtain their consent.

“Notice and choice will not address the broader surveillance practices upon which the current digital advertising economy is built,” she stated.

"The practice of nearly unconstrained data collection, retention, and sharing is harmful to consumers -- whether or not the collection itself has been disclosed in some way," she added.

The ad industry's self-regulatory privacy codes have long taken a notice-and-consent approach that involves requiring companies to disclose data collection practices and allowing consumers to opt out of receiving targeted ads. Since 2012, the ad industry's self-regulatory principles have also prohibited companies from collecting information about consumers in order to determine their eligibility for employment, credit, health care or insurance. 

The industry's Privacy for America coalition says it supports a legislative framework that moves away from the current notice-and-consent model, but would continue to allow companies to use tracking data for advertising.

Slaughter also said that contextual targeting doesn't "raise the same concerns that surveillance advertising does.

“Good advertising serves a real purpose; it existed before pervasive tracking and behavioral advertising and will exist after it,” she said.

Slaughter also cited a report by researchers at Carnegie Mellon, the University of Minnesota and University California Irvine, who found that a large media company was only able to increase revenue by 4% when tracking cookies were available.

"This study belies advertiser claims that regulation of the data ecosystem -- turning off the data spigot -- will harm a vibrant publishing marketplace online," she said.

In response to an audience question about whether she would ban all “behavioral advertising other than contextual advertising,” she said she thinks there is “probably room for general targeting,” comparable to the types of “general targeting in television, radio, newspapers.”

She added that such targeting isn't based on users' browsing histories, or ads they've clicked on before, but general demographics.

Slaughter again qualified her response, saying that the FTC would have to see evidence in a record, and that there might be “important considertions and trade-offs.”

David LeDuc, vice-president for public policy at the self-regulatory group Network Advertising Initiative, which represents ad-tech companies, says the organization agrees with some of the goals expressed by Slaughter -- such as limiting harmful uses of data, and moving away from a notice-and-choice privacy framework.

He added: "We certainly don't agree that the best solution, or a practical solution, is to ban all data driven advertising."

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