Despite the fact that over a month has passed since Amazon announced that it would be purchasing Whole Foods for $13.4 billion, lawmakers are still worried about the changes this potential move could bring.

Rep. David Cicilline (D-RI) has requested a subcomittee hearing on the purchase in the U.S. House of Representative due to concerns over depressed wages and stifled innovation.

“Amazon’s proposed purchase of Whole Foods could impact neighborhood grocery stores and hardworking consumers across America,” Cicilline, the top Democrat on the House of Representatives Judiciary Committee’s antitrust panel, said in a statement released Friday. “Congress has a responsibility to fully scrutinize this merger before it goes ahead.”

Cicilline basically cites Amazon’s movement toward automation as to why this merger may be dangerous. He adds that the markets indicated initial fears that Whole Foods would run away with all of the market share in the U.S. grocery market. The day the purchase was announced, Target shares dropped by 9 percent, WalMart dropped 5 percent, and Kroger dropped 13 percent. It is worth noting, however, that Whole Foods only controls 1.7 percent of the current market.

The Federal Trade Commission (FTC) is currently reviewing the proposed merger, meaning there still is time for the deal to fall apart–or for Washington officials to step in and stop it. But precedent indicates that that may not be likely.

Lina Khan, an associate research scholar with Yale Law School, published a lengthy analysis of Amazon’s business practices and how it has avoided antitrust issues. One of her key arguments is that since the Reagan Administration, antitrust enforcement has focused on the final price of goods for consumers. Before that, regulators would analyze the structure of a market a merger was entering into and check to see how possible it was for new competitors to enter. Since Amazon is quite good at providing lower prices to its customers, the FTC has turned a blind eye to the company’s growth.

This may lead some to believe that the Amazon-Whole Foods merger will become another example of this trend, as both companies have presented evidence that price increases are unlikely. However, Cicilline is working to change what he believes is the increasingly narrow mentality of the subcommittee. He said in his statement:

Although the role of employment and inequality in antitrust enforcement has declined in recent decades, the Subcommittee should have an active oversight role in determining whether this trend serves the public interest, is faithful to the legislative intent of the antitrust laws, or whether additional enforcement is warranted to reverse the harmful effects of consolidation on workers and labor inequality.

Cicilline is not the first lawmaker to raise concerns with the merger. Rep. Ro Khanna (D-CA) called on the Department of Justice and FTC to review the merger–which he said could impact jobs and wages–the day the merger was announced.

“We need to reorient antitrust policy to factor in the harm that economic concentration causes for American workers,” he told Vice News. “We also need to be mindful that concentrated industries stifle innovation.”

Gabe Fernandez

Gabe is an editorial intern at Law Street. He is a Peruvian-American Senior at the University of Maryland pursuing a double degree in Multiplatform Journalism and Marketing. In his free time, he can be found photographing concerts, running around the city, and supporting Manchester United. Contact Gabe at Staff@LawStreetMedia.com.

The post Concerns Continue to Grow Over Amazon’s Whole Foods Purchase appeared first on Law Street.

The Federal Trade Commission means business when it comes to regulating Instagram advertisements.

The consumer rights advocacy group Public Citizen recently complained celebrities weren’t being upfront about which of their posts were sponsored. So, the FTC responded by reviewing the photos and sending warning letters to more than 90 Instagram users. The commission has discussed its standards for advertising on social media before, but has not directly confronted the celebrities named in complaints until now.

Public Citizen wasn’t alone in its push to make sponsored content more transparent—this past summer, the nonprofit Truth in Advertising filed a complaint against the Kardashian family for “deceptive marketing.” Though the FTC won’t name which celebrities received the letters, Public Citizen also included the Kardashians in its petition, in addition to well-known Instagrammers like Rihanna, Michael Phelps, Chris Pratt, Jennifer Lopez, Lindsay Lohan, Lebron James, Drake, Mark Wahlberg, and Blake Lively.

The 113 photos Public Citizen referenced in its complaint usually show the celebrities using a product from the brand that has paid them, with an accompanying caption endorsing it. Products range from makeup and hair care from companies like L’Oreal to athletic gear from Nike and Adidas to snacks from Lay’s and Dunkin’ Donuts.

According to a release on the FTC’s website:

The FTC’s Endorsement Guides provide that if there is a ‘material connection’ between an endorser and an advertiser – in other words, a connection that might affect the weight or credibility that consumers give the endorsement – that connection should be clearly and conspicuously disclosed, unless it is already clear from the context of the communication. A material connection could be a business or family relationship, monetary payment, or the gift of a free product. Importantly, the Endorsement Guides apply to both marketers and endorsers.

The release adds that Instagrammers should be clear that their post is an ad within the first three lines of the photo caption, and should avoid writing too many hashtags that could bury disclaimers. The use of hashtags and captions like “#sp” (short for “sponsored”), “Thanks [Brand],” or “partner” do not directly communicate that the post is sponsored and can confuse followers, the FTC says.

In its Endorsement Guides, the FTC writes that ads should be “honest and not misleading”—and consumers should know when they’re reading an endorsement that has been paid-for, because it can affect the way they “[evaluate] the endorser’s glowing recommendation.”

This doesn’t mean your favorite actors, athletes and reality stars are headed to court or getting banned from Instagram anytime soon. Often, it’s the sponsor behind the post that ends up taking the heat for its sneaky ad campaigns. In July, Warner Bros. settled charges that it failed to disclose information about paying “influencers,” like Youtube star PewDiePie, to recommend one of its video games. In March, the department store Lord & Taylor settled charges over its failure to inform consumers that it had sent popular Instagram users free clothing in exchange for promotion of one of its clothing lines.

Victoria Sheridan

Victoria is an editorial intern at Law Street. She is a senior journalism major and French minor at George Washington University. She’s also an editor at GW’s student newspaper, The Hatchet. In her free time, she is either traveling or planning her next trip abroad. Contact Victoria at VSheridan@LawStreetMedia.com.

The post The FTC Isn’t Kidding About Instagram Ads appeared first on Law Street.

Have you ever scrolled though your Instagram feed and stopped on an image of one of the Kardashian/Jenner sisters (yes, it’s ok to admit that you follow one, if not all of them) posing with some new fit tea, hair pill, or waist trainer? Was the photo perhaps missing a clearly visible sponsored content label?

Chances are your answers to both of these questions are yes, which is why the famous celebrity clan has been warned that if they don’t remedy their deceptive advertising practices in a week, a formal complaint will be filed with the FTC.

Even the government is no fan of the Kardashians’ detox tea ads on Instagram https://t.co/YAqyvFxO1s pic.twitter.com/ydRfwxMeaM

— Her Campus (@HerCampus) August 7, 2016

On August 17, Truth in Advertising.org sent the family’s matriarch/mom-ager, Kris Jenner, and 27 companies–including Puma, Calvin Klein, JetSmarter, Fit Tea, LuMee, and Balmain–a letter notifying them about the deceptive marketing campaigns. The nonprofit reviewed accounts for Kim, Khloe, Kourtney, Kylie, and Kendall, and found “a plethora of posts that do not clearly or conspicuously disclose their relationships with the companies being promoted in the posts as is required by federal law.”

TINA.org writes:

We intend to notify the Federal Trade Commission that these individuals and companies are engaged in deceptive marketing campaigns unless, by August 24, 2016, the issues described above are fully corrected by clearly and conspicuously disclosing that all applicable posts – past, present, and future – are paid advertisements or the result of material connections between the Kardashian/Jenner individuals and the companies featured in the posts.

Read TINA.org’s letter to the Kardashian-Jenner family here.

The sisters, who have a combined Instagram following of more than 316 million, reportedly make an upwards of $300,000 per sponsored post. According to TINA.org, youngest sister Kylie had the most problem posts, followed by Kim. Also, Puma, with which Kylie has an endorsement deal, lead all companies in improperly marked paid content with 13 posts.

While the girls have occasionally used tags such as #sp and #spon to mark their sponsored posts, the FTC told Bloomberg the subtle disclaimer isn’t enough. Using the hashtag #ad is okay, but only if it’s at the beginning of a post.

Since receiving the letter, the Kardashian-Jenners have already begun retroactively amending posts to contain #ad at the end. However,  since the number of impressions garnered on a post significantly decreases after the initial posting, this remedy may be a waste of time. On August 24 it will be interesting to see if TINA.org is satisfied with changes, or if the group decides to move forward with filing an official FTC complaint.

Alexis Evans

Alexis Evans is an Assistant Editor at Law Street and a Buckeye State native. She has a Bachelor’s Degree in Journalism and a minor in Business from Ohio University. Contact Alexis at aevans@LawStreetMedia.com.

The post Truth in Advertising Org Threatens to Report Kardashian/Jenner Family to FTC appeared first on Law Street.

Just because an app is labeled as “free,” doesn’t mean it won’t end up costing you.

No one knows this fact better than parents who discovered Amazon was billing them for unauthorized in-app purchases racked up by their children. As a result a federal judge has determined that Amazon will be held liable for the charges since it did not sufficiently warn its customers about the possible charges associated with free apps.

The lawsuit was first brought against Apple by the Federal Trade Commission(FTC) in July 2014, after the agency reached settlements with both Apple and Google concerning the same issue.

In an FTC press release Chairwoman Edith Ramirez said,

We are pleased the federal judge found Amazon liable for unfairly billing consumers for unauthorized in-app purchases by children.We look forward to making a case for full refunds to consumers as a result of Amazon’s actions.

Oftentimes app developers incorporate revenue generating features aka “in-app purchasing” into their free apps in order to upgrade or customize users’ gaming experiences. These can be seen in the form of additional gaming coins, extra levels, or lives.

The problem arises when parents download apps onto their kids’ devices using their username and password, which inadvertently grants their children access to saved billing information.

In the case of Amazon, entering one’s password into a device opens up a window for approximately 15 minutes to an hour, in which children can spend at will without having to re-enter information.

Following the FTC’s case against Apple, the App Store was forced to change its labeling of apps from “Free” to “Get,” in order not to confuse customers on whether or not the app could still contain in-app purchases.

The FTC also won $32.5 million in the settlement with Apple, and another $19 million from Google to be refunded back to customers. In the case against Amazon, both parties still have to present more information to the court before an official settlement amount can be determined.

Alexis Evans

Alexis Evans is an Assistant Editor at Law Street and a Buckeye State native. She has a Bachelor’s Degree in Journalism and a minor in Business from Ohio University. Contact Alexis at aevans@LawStreetMedia.com.

The post Amazon Found Liable for In-App Purchases Made By Kids appeared first on Law Street.

Energy drink company Vemma is in a lot of trouble after the Federal Trade Commission (FTC) recently announced that it was temporarily shutting down the company. The FTC has stated that Vemma was running an illegal pyramid scheme that targeted young adults and students.

#FTC shuts down #vemma nutritional drink’s alleged pyramid scheme http://t.co/iPrGiIbVtP pic.twitter.com/7qhrUpCwAg

— UPI.com (@UPI) August 28, 2015

Vemma recruited “affiliates,” most of them impressionable college students, who then were required to purchase starter kits to sell the nutrition drinks to others. Products that Vemma produced included Verve, and Bod-e. The starter kits were $500 each, and then Vemma affiliates had to purchase an additional $150 in products and marketing tools each month. Vemma told the affiliates that they could make up to $50,000 a week working for the company. Despite those claims, the vast majority of participants ended up losing money, or earning very little.

But most importantly, the affiliates also helped to recruit more affiliates who were then subject to the same outrageous fees. According to the FTC, Vemma made its money by bringing on affiliates–hence the pyramid scheme accusations. Vemma made over $200 million in revenue in 2014 through these methods. Jessica Rich, Director of the FTC’s Bureau of Consumer Protection stated:

Rather than focusing on selling products, Vemma uses false promises of high income potential to convince consumers to pay money to join their organization. We are also alleging that Vemma is an illegal pyramid scheme.

Vemma is also being accused of misleading marketing–the promotional materials it used to try to attract the affiliates promised that if you worked for the company you’d be “driving a BMW within 90 days” and featured pictures of young people in luxury vehicles, yachts, and jets.

Vemma isn’t the first nutrition drink company to come under a watchful eye. Herbalife was also accused of running a pyramid scheme in 2013, by a hedge fund called Pershing Square. Ironically, there’s a connecting between Herbalife and Vemma as Anthony Powell jumped ship from the former to the latter that same year. The FTC is now investigating Herbalife as well.

Vemma shows the mighty fall far, as it was once heralded as a company on the rise. The Phoenix Business Journal–Vemma is based out of Arizona–named it the Number one fastest growing private company on the Arizona Corporate Excellence. However, at this point it seems like that growth was begotten through illegal means.

For now, the FTC suit is still ongoing, but it doesn’t look like Vemma will be springing back anytime soon.

Anneliese Mahoney

Anneliese Mahoney is Managing Editor at Law Street and a Connecticut transplant to Washington D.C. She has a Bachelor’s degree in International Affairs from the George Washington University, and a passion for law, politics, and social issues. Contact Anneliese at amahoney@LawStreetMedia.com.

The post FTC Accuses Vemma of Running a Pyramid Scheme appeared first on Law Street.

Does privacy even exist in the digital world these days? Many argue no, as more and more companies use elaborate software to track their customers’ precise locations, spending habits, facial features, and shopping preferences. Uber is just the latest company to come under fire for going “big brother” on its customers.

Uber recently announced a plan to track customers through the app, even if the user shuts it off, deletes it, and even turns off the GPS function. Last Monday, a formal complaint was filed against Uber by the nonprofit research group Electronic Privacy Information Center (EPIC) at the Federal Trade Commission (FTC) in Washington, DC. This was done in an effort to get the agency to prohibit the taxi-service company from instituting these new changes.

Uber will soon be able to track your location even if you exit the app and have GPS turned off http://t.co/RZUN2EaMej pic.twitter.com/StttNhjVqr

— Business Insider (@businessinsider) June 23, 2015

These new updates are expected to take effect around July 15th, a decision that Uber announced on May 28th, although not without some serious uproar.

If you are an Uber user, your every move will soon be able to be tracked; this revelation has left many customers on edge. What’s most appalling about this update is that it will let the company trace not only the whereabouts of its customers, but also everywhere that they’ve ever traveled while they’ve had the app on their phones. This is a major issue that people have with this update since the company will retain all the past location data of its consumers, with no indication when this information will be deleted, if ever.

Despite the backlash over this new policy, Uber stated that there is no support for these allegations made by EPIC. It claims that these changes in data collection are being done solely to help Uber optimize its services so that it can improve customer satisfaction. The company believes that it is completely necessary to track its customers’ every move in order to provide optimal services with shorter wait times. Uber does not see any problems with this new update, nor any truth in the many complaints against it. It also claims that its customers’ privacy is of its utmost concern.

Uber has a reputation for breaching the privacy of its customers, as this is not the first time that the app has been criticized by the public. It has encountered numerous lawsuits lately, such as when it was accused of tracking a customer without first receiving consent, cheating customers, and failing to meet local regulations in the United States.

Despite there being some extreme opposition to this change in the privacy policy of the app, there are some people who see the benefits of it. Some state that since this update has the potential to drastically change a customer’s experience so it is worth the hassle. This update would likely help Uber to figure out where most of its customers are so it can concentrate drivers in the most popular areas.

Uber remains one of the growing giants of the tech industry, it has been valued at $40 billion even though it was created only six years ago, and it continues to grow at absurd rates. For a company that is still so new, it is imperative for it to maintain its following and to keep the public’s interest. It currently provides millions of trips a day for users across the globe, and so the last thing Uber wants to do is upset its loyal customers.

Infringing on people’s privacy can be quite daunting, especially for those who have secrets to hide. Americans today are very conscious of their security, and so the thought of a company having access to your exact location at all times can seem frightening. Uber claims that it will give all customers the option of whether or not to report their location data back to the company, however, this choice will not be possible to disable on all phones.

Not only will this new update track customers’ locations, but it will also access users’ contact lists upon approval. Uber is doing this so that it can send promotions to riders’ friends and family, and to also implement its improved “split fare” feature. Communicating with a person’s contacts in such a manner might even be breaking a federal law, which states that a company can’t call or text people without first getting written permission.

It seems that Uber tried to keep the implications of this new update under the radar, although EPIC is not about to let it slide for violating its customers’ fundamental rights to privacy. The group is outraged at this new policy change, as it stated that it finds it to be a threat to people’s overall safety and privacy rights, it could create a substantial risk of harm for customers, and that it would “constitute an unfair and deceptive trade practice.”

Don’t people have the right to feel secure within their own devices? In an age where virtually anything can be found or performed online, people want to feel like their privacy is always being protected. There is currently no word as to whether the FTC will investigate the claims made by EPIC, although it might have to as this story continues to develop and gain publicity.

Toni Keddell

Toni Keddell is a member of the University of Maryland Class of 2017 and a Law Street Media Fellow for the Summer of 2015. Contact Toni at staff@LawStreetMedia.com.

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Every few years, a scandal breaks where it is discovered that a charity isn’t donating as much as it claims of the funds that it raises. But a new story coming out of Tennessee puts pretty much any other misbehaving charity to shame. A civil complaint filed by the Federal Trade Commission (FTC) revealed that four related charities, all run by members of the same extended family, donated only three percent of the $187 million they raised from 2008-2012. The rest of the money went to items for the family.

The charities are called the Cancer Fund of America, the Breast Cancer Society, the Children’s Cancer Fund of America, and Cancer Support Services. The Cancer Fund of America and Cancer Support Services both appear to be run by the same man, James Reynolds Sr. His son, James Reynolds Jr., runs the Breast Cancer Society, and his ex-wife Rose Perkins heads up the Children’s Cancer Fund of America. In addition to the clear familial connections at the top of each charity, multiple other family members worked for the organizations and were rewarded handsomely.

There have been allegations levied against these charities for a while–CNN went after the Breast Cancer Society, Children’s Cancer Fund, and Cancer Fund of America in 2013, telling potential donors to stay away and calling them fraudulent. But these recent FTC findings will spark serious change. Two of the charities–the Breast Cancer Society and the Children’s Cancer Fund of America–appear to have agreed to disband, but legal action is still moving forward against the other two charities, as well as against James Reynolds Sr.

So, if the money wasn’t going to help cancer patients, where was it going? That’s the truly upsetting part, as it seems that it was going directly into the pockets of the Reynolds family. According to the FTC’s complaint:

[D]onated funds were used to pay for vehicles, personal consumer goods, college tuition, gym memberships, Jet Ski outings, dating website subscriptions, luxury cruises, and tickets to concerts and professional sporting events.

In even more upsetting revelations, the charities didn’t follow through on promises they made to cancer victims, such as volunteering to drive them to appointments, or sending ibuprofen instead of more helpful promised pain medications. So not only were the heads of these organizations taking money from the people who really needed it, they weren’t following through on promises to cancer patients. That’s about as low as you can get.

There are plenty of charities that do truly good work and try to spend as little money as possible. It’s also not too hard to find them, because free tools like “Charity Navigator” exist that evaluate how charities spend their money. It would be nice to assume that every organization that purports to be raising money for good is actually doing so, but it’s a truly sad reality that not every group is honest. The four “charities” run by the Reynolds family certainly proved that, and hopefully they’ll pay the price for their truly reprehensible dishonesty.

Anneliese Mahoney

Anneliese Mahoney is Managing Editor at Law Street and a Connecticut transplant to Washington D.C. She has a Bachelor’s degree in International Affairs from the George Washington University, and a passion for law, politics, and social issues. Contact Anneliese at amahoney@LawStreetMedia.com.

The post Your Donation to This Cancer “Charity” Funded Online Dating Subscriptions appeared first on Law Street.

On Wednesday the European Union’s antitrust chief hit Google with a double whammy. The EU formally accusing the multinational company of abusing its web dominance to the detriment of its competitors, as well as announcing it would begin officially investigating whether Google’s Android smartphone software forces phone makers to favor the company’s own services and applications.

In a press release issued by the EU, Google was accused of diverting web traffic in the European Economic Area from its rivals to favor its own products and services, particularly when it came to shopping websites. The statement warns that this kind of business practice hinders its competitors‘ “ability to compete, to the detriment of consumers, as well as stifling innovation.”

Anti-trust laws are meant as an economic safeguard to promote fair competition which benefits all consumers, while also preventing any one business from getting too big and becoming a monopoly. If the EU finds Google in violation of the anti-trust laws, the internet search giant will be forced to completely change the way it does business overseas and could also face a fine up to $6 billion.

According to the New York Times, the European Commision will also be launching an alternate investigation into Google’s “monopolistic” mobile business practices. The EU is trying to see if phone makers who want to use Google’s Android operating software–including Google owned applications like Youtube–are in fact contractually obligated to give those applications prominent features on their mobile devices.

Margrethe Vestager, the European Union competition commissioner, was quoted in the New York Times saying:

Smartphones, tablets and similar devices play an increasing role in many people’s daily lives, and I want to make sure the markets in this area can flourish without anticompetitive constraints imposed by any company.

Google responded to the investigation in a blog post Wednesday writing:

While Google may be the most-used search engine, people can now find and access information in numerous different ways — and allegations of harm, for consumers and competitors, have proved to be wide off the mark.

In 2013, the United States’ Federal Trade Commission investigated Google for similar complaints but closed its investigation, deciding not to take any action against the company even though the investigation found similar issues of search bias.

This time around the EU will have to prove that Google deliberately buries better search results, expanding beyond just e-commerce, in favor of its own company sourced content, although defining what qualifies as “better” could be tough. Subjectively speaking, Google’s actions may not actually be anti-competitive, but rather a better optimization for what consumers actually want.

Google now has 10 weeks to officially respond to the EU’s complaint, where they could settle the matter. If not, a lengthy court battle is an almost guarantee.

Alexis Evans

Alexis Evans is an Assistant Editor at Law Street and a Buckeye State native. She has a Bachelor’s Degree in Journalism and a minor in Business from Ohio University. Contact Alexis at aevans@LawStreetMedia.com.

The post EU Goes After Google with Anti-Trust Charges appeared first on Law Street.

“You may not know them, but data brokers know you,” Federal Trade Commission (FTC) chairwoman Edith Ramirez said at the release of an FTC report about the data broker industry. Data brokers know where you live, what you buy, what medical conditions you have, your background, interests, and even the names of your kids. It sounds like something out of a sci-fi movie, so it is no wonder most Americans have no idea the thriving market for their personal information even exists. Here’s everything you need to know about how data brokers collect your information, what it is used for, and what protection you have.

What are data brokers?

Data brokers are companies that compile and resell or share the personal data of consumers. The FTC released a report on May 27, 2014 examining nine companies in the industry: Acxiom, CoreLogic, Datalogix, eBureau, ID Analytics, Intelius, PeekYou, Rapleaf and Recorded Future. These companies derive a whopping $426 million in annual revenue from their products.

The information set held by these companies is massive. Acxiom estimates it holds roughly 1,500 pieces of data per consumer. Another broker dwarfs Acxiom with 3,000 data points for nearly every U.S. consumer. One broker is said to maintain about 700 billion aggregated data elements and adds more than 3 billion pieces of data each month. Another database has information on 1.4 billion consumer transactions alone, such as credit card purchases. Watch an in-depth look at data brokers by 60 Minutes below.

Where do data brokers find their information?

Contentions with the data broker industry arise from the fact that information gleaned does not come directly from consumers. Data brokers garner a lot of information from publicly available sites. A site relaying U.S. Census data can provide information regarding local demographics and real estate value. These firms get additional information from voter records, tax records, court records, mortgages and property information, driving records, and numerous other avenues. Companies can scour social media sites, such as LinkedIn, for any publicly-available information. Data brokers also gain a lot of information from card loyalty programs, credit cards, and advertising agencies that may follow a user’s online activities. If you recently bought a subscription to Forbes Magazine or purchased a new dress from a catalog sent to your home, these data brokers will know. By compiling all this information, brokers begin to paint a profile of you, including your age, race, income, social security number, religion, political affiliation, criminal history, movie preferences, gun-ownership, gym membership, and hobbies.

What is this data used for?

Individual data points are compiled to form a profile of potential consumers who can then be targeted for specific products. The information allows companies to more accurately target consumers for advertising campaigns and gain information about consumer preferences. The FTC report shows that data brokers usually package data into two forms:

1. Data elements: Age, family, and interests.
2. Data segments: Compilation of interests used to to create a list of people with similar characteristics. Here are some examples of these list segments: “African-American Professional;” “Allergy Sufferer;” “Bible Lifestyle;” “Biker/Hell’s Angels;” “Plus-Size Apparel;” “Twitter User with 250+ friends.” Other categories include people with high cholesterol or those interested in novelty Elvis items.

Data brokers then use this information to create various products in three different categories:

1. Marketing: This includes mail, email, telemarketing, mobile, and TV campaigns. To target consumers, marketers use a process called “onboarding.” Onboarding allows marketers to load offline information, such as magazine subscriptions or store loyalty cards, into cookies that digital advertisers use to target consumers. Cookies are stored in a computer’s browser and allow advertisers to promote their products on numerous Internet services.
2. Risk Mitigation: This includes identity verification. These products use analytics to help banks comply with “know your customer” identity verification requirements under the USA Patriot Act. Products also include fraud detection to track patterns of attempted fraud. For instance, these products can track how long an email address has been used or whether a delivery address matches a listed consumer.
3. People Search: This includes products generally intended for use by individuals. Products can search for someone’s criminal record, ancestry, phone number, telephone history, or social media information. Most come in the form of fee-based search products.

Does the data make our lives easier?

Many people would agree that products that help to verify one’s identity are a good thing. Companies that can link consumer purchases to personal information like an address, phone number, and email drastically reduce chances of fraud. Some also see personalized advertising as a good thing. Say you are a senior citizen. Rather than scrolling through the Internet and seeing ads for baby strollers or discounted student loans, you might see ads for healthcare services. Targeted advertising means you receive information and discounts for things you actually use instead of products with no relevance to your life. Ideally the more information data brokers have about you, the more they can target your individual tastes. While each individual piece of data has little benefit, the aggregation of this data by data brokers is immensely beneficial to companies doing market research to improve and tailor their products.

How are data brokers changing political campaigns?

The use of personal data is not limited to what you buy. In the 2012 elections, campaigns contracted with political data brokers to match voting records with cookies on computers. Voter registration lists have long been used to target voters. Combined with more information, these lists now take a powerful form in the digital arena. Political microtargeting allows campaigns to utilize information from data brokers to deliver a specific message to a target demographic. Data can help campaigns decide which voters are most likely to respond to a specific ad or which groups need to be targeted with a specific message. Candidates can target registered Democrat or Republican voters with online ads and can even target based on how much the individual has donated to campaigns before.

President Obama’s 2012 re-election campaign was among the first to use big data to its advantage. The 2012 team assembled an analytics department five times the size of that in its 2008 campaign. Some insights into the use of data in Obama’s 2012 campaign:

• As TIME describes, the team discovered that East Coast women between 40 and 50 were not donating as much as hoped. This demographic was the most likely to hand over cash for the chance to dine with a gravitational celebrity. The campaign’s solution? A fundraising drive with the prize being a dinner with Sarah Jessica Parker.
• The campaign used data to predict how much money they would get from each fundraising email. They also used demographics to determine which groups would be most responsive to an email signed by either Barack Obama, Michelle Obama, or Joe Biden.
• The campaign bought data from brokers regarding the television-viewing habits of Ohioans. The campaign was able to combine lists of voters with lists of cable subscribers and then coordinate the information of watching habits. Using this information, they targeted campaign ads to specific demographics at the exact time these niche voters were watching TV. This led to the campaign buying airtime in shows like Sons of Anarchy and the Walking Dead rather than traditional news programming. Watch for more on the use of big data during Obama’s reelection campaign below.

Little information is disclosed on just how much data campaigns can access. Inevitably the collection and effective use of data will play a huge role in the 2016 presidential election, but not all consumers are happy with that. The regulation of the use of data for political purposes raises questions of free speech and privacy. Others claim microtargeting actually offers more privacy, since the data does not include names or physical mailing addresses. It may be hard, however, for consumers to opt out of political advertising. Even lists like the National Do Not Call registry have exceptions for political campaign calls. According to a study by the University of Pennsylvania, 86 percent of Americans said they did not want political advertising tailored to their interests.

What are the problems with data brokers?

There is a certain “creepiness” factor to data collection without consumer consent. Target tried to market products to new parents by identifying them even before the baby was born. Data showed that pregnant women purchased products like cocoa butter and calcium tablets. Target began sending targeted mail to these women. But instead of finding it helpful, the women found the fact that Target knew they were pregnant to be unnerving.

Others worry about the effects of outdated data. Consumers have little access to immediately change what information that brokers have on them, such as an address change or marriage. This means people could potentially be prevented from making a purchase solely based on outdated information. Outdated information becomes more offensive when the deceased remain on data broker lists and continue to receive offers in the mail. Some women revealed stories of experiencing a miscarriage yet continuing to receive insensitive mailings from Gerber and American Baby Magazine.

Companies that have such specific information about segments of consumers may take advantage from the data. An example from the FTC looks at the case of a consumer labeled to be a biker enthusiast. This person might get more coupons for motorcycles and gear, but they could also see higher insurance rates if companies use this information to conclude this individual engages in risky behavior. Watch a Congressional hearing on the industry’s issues below.

An Acxiom presentation to the Consumer Marketing Organization in 2013 indicates further issues with potential discrimination. Acxiom placed customers into “customer value segments.” Data showed that while the top 30 percent of customers add 500 percent of value, the bottom 20 percent actually cost 400 percent of value. The bottom 20 percent call customer service numerous times and cost the company in returns. The company would be better off ignoring these customers altogether, and data brokers can help companies to identify these costly customers. These high-cost customers could then face higher prices or poor service without even being aware they are discriminated against.

Do people have any protection?

The problem most people have with the collection of data is that they have no say in it. They are not aware when information is being collected, nor are they in control of what it is used for or if it is correct. The resale and illegal use of the data is prohibited. Data brokers also suppress protected lists such as phone numbers on the Do Not Call Registry.

Some data brokers do try to protect consumers. Some voluntarily remove information regarding children and teens from their data. Others provide ways to edit and review what data the broker has on you. Acxiom uses aboutthedata.com for this very purpose. Epsilon allows consumers to review information, but reviewing the information costs $5 and requests can only be made by postal mail. Trying to review information collected by every broker is extremely time consuming. Watch for more on how to protect yourself below.

No laws require brokers to maintain the privacy of consumer data unless it is used for prohibited purposes. Federal law protects the confidentiality of medical records. The Fair Credit Reporting Act (FCRA) restricts the search of information when determining eligibility for employment, credit, or housing; however, most data does not fall under the scope of FCRA.

What is the FTC pushing for?

The FTC report recognizes the immense value of data brokers to both companies and consumers; however, the FTC has offered the following recommendations to improve the industry and bolster consumer protection:

• Create a central database where consumers can see what information about them was collected. The database should also allow consumers to opt out from the data collection.
• Require brokers to list their data sources.
• Increase industry visibility and consumer awareness.
• Comprehensive legislation to prevent the discriminatory use of data. For instance, some categories infer sensitive statistics. “Metro Parents” are single parents primarily high school-educated handling the stresses of urban life on a small budget. “Timeless Traditions” are immigrants who speak some English but generally prefer Spanish.
• Adopt a series of best practices, including better protection for minors, improving data security, preventing unlawful discrimination, and restricting collection to only needed data.

The Direct Marketing Association (DMA) and other groups attacked the FTC report. In an interview with the Washington Post, Stuart Ingis of the DMA said, “You’d think if there was a real problem, they’d be able to talk about something other than potential” abuses.

The data broker lobby is very powerful. Senators John D. Rockefeller (D-WV) and Edward Markey (D-MA) led the regulatory push by proposing the DATA bill on February 12, 2014, requiring data brokers to be transparent about the information they collect. But considering the fact that political campaigns benefit from data broker information when targeting voters, it is unlikely there will be new legislation on data brokers in the near future. In the meantime, expect data brokers to know much more about you than you know about them.

Resources

Primary

FTC: Data Brokers: A Call for Transparency and Accountability

Ed Markey: Markey, Rockefeller Introduce Data Broker Bill

White House: Big Data: Seizing Opportunities, Preserving Values

Senate: A Review of the Data Broker Industry

Additional

Yahoo: FTC Wants More Transparency for Data Brokers

Data Privacy Minitor: FTC Report Seeks Congressional Review

Privacy and Security Law Blog: “Getting to Know You, Getting to Know All About You”

Washington Post: Brokers Use Billions of Data Points to Profile Americans

ProPublica: Everything We Know About What Data Brokers Know About You

Slate: What Do Data Brokers Know About Me?

CNN: Why Big Companies Buy, Sell Your Data

New York Books: How Your Data are Being Deeply Mined

Pulitzer Center: Consumer Data Privacy in Politics

Time: Inside the Secret World of the Data Crunchers Who Helped Obama Win

ProPublica: Everything We Know So Far About Obama’s Big Data Operation

AdWeek: Confessions of a Data Broker

Alexandra Stembaugh

Alexandra Stembaugh graduated from the University of Notre Dame studying Economics and English. She plans to go on to law school in the future. Her interests include economic policy, criminal justice, and political dramas. Contact Alexandra at staff@LawStreetMedia.com.

The post The Big Business of Big Data appeared first on Law Street.

Attention companies using Pinterest as part of your marketing strategy: proceed with extreme caution. The popular social network, or “copyright infringement machine” as one commentator calls it, has turned into a platform where companies must tread carefully or face legal consequences.

Recently, Cole Haan, a fashion label specializing in footwear, ran a seemingly innocuous contest on Pinterest that ended up catching the attention of the Federal Trade Commission (FTC). The brand created the “Wandering Sole” campaign and sought to use Pinterest to market it. Thus, Cole Haan asked Pinterest users to create boards with their favorite Cole Haan images from the company’s own “Wandering Sole” board, and for the users to pin their favorite places to wander. Users who participated received the chance to win a $1000 cash reward.

win a $1,000 shopping spree from @colehaan ! share where your sole's are going to wander – http://t.co/m4cK5RCcDM

— Jennifer Chong (@jchongstudio) May 26, 2013

This contest — a popular type in the social media marketing world — may not seem detrimental; however, federal law provides that a company must make clear that it has a financial relationship with the individuals endorsing it. It seems that Cole Haan accidentally used Pinterest as a vehicle for illicit advertising. A user coming across the images pinned as part of the contest had no way of knowing that the images were in the running for a prize of $1000. In order to legally run the campaign, Cole Haan would’ve had to disclose the financial incentive.

Specifically, the FTC made four conclusions regarding the Wandering Sole campaign:

1. Pinterest users’ pins featuring Cole Haan images were endorsements. (‘Endorsement’ is a legal term of art, and the FTC has its own guidelines regarding the use of endorsements).
2. Individuals using Pinterest who saw the pins and boards relating to Cole Haan’s campaign had no reasonable way of knowing that the pins were motivated by a chance to win $1,000.
3. Cole Haan did not take appropriate steps to make it clear to average Pinterest users that the pins were part of a campaign with a $1,000 cash reward.
4. Cole Haan did not instruct participants in the campaign to disclose that their activity stemmed from Cole Haan’s campaign, not their own unsolicited Pinterest activity.

Importantly, the FTC decided not to persue enforcement action despite suggesting that Cole Haan violated federal policy. Basically, the FTC wrote a letter reprimanding Cole Haan, but did not financially punish the company or pursue any legal action. This likely results from the novelty of these issues. Companies using social media sites often accidentally violate federal laws since the platforms create new user experiences that do not perfectly cohere to the world the laws originally intended to govern. This is something we are bound to see a whole lot more of until the laws catch up with technological innovation.

—

Imran Ahmed is a law student and writer living in New York City whose blog explores the legal implications of social media and the internet. Contact him via email here.

Featured image courtesy of [afunkydamsel via Flickr]

Imran Ahmed

Imran Ahmed is a writer living in New York. Contact Imran at staff@LawStreetMedia.com.

The post Are You Sure You Want to Pin That? appeared first on Law Street.