What’s the News?
The Federal and Trade Commission recently released a report outlining the benefits and risks involved in using big data. The report, Big Data: A Tool for Inclusion or Exclusion? Understanding the Issues cautions companies against the use of big data in a way that could lead to discrimination, and explains how companies should analyze and use big data in compliance with various consumer protection laws. In particular, FTC Chairwoman Edith Ramirez expressed concerns related to the use of big data in connection with “harmful exclusion or discrimination.” To that end, the FTC Report provides some guidance on how companies can use big data to benefit themselves and society, while minimizing legal and ethical risks.
What is “Big Data”?
Before going into the FTC Report, we first want to be clear about what we are referring to when we say “big data.” The term “big data” broadly refers to the ubiquitous collection of large and complex data sets and the analysis of these data sets to draw connections and to make inferences and predictions. For example, data brokers (companies that collect consumers’ personal information and resell or share that information with others) collect consumer data from numerous sources such as commercial, government, and publicly available sources, largely without consumers’ knowledge. Data brokers use various data elements collected to build profiles about consumers and to infer consumer interests. An FTC study found that one data broker’s database has information on 1.4 billion consumer transactions and over 700 billion aggregated data elements. The vast quantity and variety of data that can now be gathered and analyzed effectively can produce benefits to society, but can also harm consumers.
The FTC Report
The FTC Report recognizes the many societal benefits that big data can provide. The collection of massive amounts of data can be extremely informative and can provide great insight to large populations. The FTC recognizes this and highlights several examples where big data has been used to help underserved populations, such as increasing educational attainment, providing specialized health care for underserved communities, and creating better access to employment.
The FTC Report, however, also highlights several risks and concerns involved with the use of big data, which may lead to excluding certain populations from the benefits big data has to offer. Some of these concerns involve the quality of big data and the presence of uncorrected biases in underlying consumer data, which can lead to inaccurate predictions that in turn can lead to erroneously denying consumers offers or benefits. Particular uses of big data may lead to creating or reinforcing existing disparities, exposing sensitive information such as sexual orientation or ethnic origin, and giving companies new ways to justify the exclusion of certain populations from particular opportunities, such as job applications. For example, a credit card company rated consumers as having a higher credit risk based on data collected about consumer spending on services such as therapy, tire-repair services, or marriage counseling, based on its experiences with other consumers and their repayment histories. Some companies even use big data to seek out vulnerable populations, such as senior citizens with Alzheimer’s or other maladies, and send scams or misleading offers to these target populations while remaining invisible to everyone else. These uses can be extremely damaging.
Guidance for Companies
In light of the potential risks involved in using big data, the FTC Report outlines several recommendations and considerations on how companies can use big data to minimize legal and ethical risks. This includes having an understanding of the laws that apply to big data practices, and being aware of research in the field of big data aimed at identifying potential biases and inaccuracies. In particular, companies should consider the following:
- Legal Compliance: There are numerous laws that may be implicated by the use of big data. Examples include the Fair Credit Reporting Act (FCRA), Equal Opportunity Laws, and the Federal Trade Commission Act. While the FCRA traditionally applies to agencies that compile and sell consumer reports such as credit bureaus and employment screening companies, companies that compile big data for others who will use it for eligibility decisions or companies that receive big data products for eligibility determinations can be subject to the FCRA and should ensure compliance with the relevant FCRA provisions. Similarly, when using big data analytics, companies should also consider federal Equal Opportunity Laws to ensure that their use of big data analytics complies with any prohibitions against discrimination. For example, if a company uses big data analytics to make credit decisions that have disparate impacts on particular ethnic groups, such practices may be considered a violation of the Equal Credit Opportunity Act (ECOA). Finally, companies maintaining big data on consumers should take measures to ensure that the use of big data does not violate the FTC Act. Such violations can include breaching promises to refrain from sharing data with third parties, failing to reasonably secure consumer data, and knowingly selling data to third parties who will use the data for fraudulent purposes.
- Policy Considerations: Companies should also consider the questions and issues raised by research on big data to minimize errors and biases when using big data analytics. These include (1) considering whether data sets are missing information from particular populations and, if so, taking steps to address the issue; (2) reviewing data sets and algorithms to ensure that hidden biases do not create adverse or unintended effects on certain populations; (3) having human oversight where big data tools are used to make important decisions, and (4) considering whether fairness and ethical considerations weigh against using big data and whether big data can be used in ways to advance opportunities for underrepresented populations.
In its report, the FTC mentioned that it will continue to monitor areas where big data practices could violate existing laws, including the FTC Act, the FCRA, and ECOA, and that it will bring enforcement actions where appropriate. Therefore, when engaging in the use and collection of big data, it is important to be aware of the legal and ethical concerns set forth in the FTC Report.