In a new report, the Federal Trade Commission warned businesses about the use of "big data," cautioning that taking advantage of big data analytics could result in outcomes that are exclusionary or discriminatory.
"Big data's role is growing in nearly every area of business, affecting millions of consumers in concrete ways," FTC Chairwoman Edith Ramirez said in a statement. "The potential benefits to consumers are significant, but businesses must ensure that their big data use does not lead to harmful exclusion or discrimination."
"Big Data: A Tool for Inclusion or Exclusion? Understanding the Issues" examined how data is used by businesses after being collected and analyzed. The agency considered research, public comments, and information from a 2014 workshop on big data, as well as a recent seminar on alternative scoring products.
While the report highlighted innovative uses of big data in providing benefits to consumers (such as access to credit for underserved populations and increased educational attainment), it also addressed possible risks that could result from biases or inaccuracies about certain groups. For example, the data could be used to target vulnerable consumers for fraud or expose sensitive information. The agency noted that various federal laws may also come into play, including the Fair Credit Reporting Act, the Federal Trade Commission Act, and the Equal Credit Opportunity Act.
To help businesses address such concerns, the FTC offered four policy questions for consideration that were designed "to help companies determine how best to maximize the benefit of their use of big data while limiting possible harms."
The FTC suggested companies ask themselves: (i) How representative is your data set? (ii) Does your data model account for biases? (iii) How accurate are your predictions based on big data? and (iv) Does your reliance on big data raise ethical or fairness concerns?
Answers to the questions will help businesses guide their use of big data, the report said. For example, data sets with missing information about particular populations may tend to disadvantage a member of that population and hidden biases may lead to a disparate impact on certain individuals, the agency explained.
Commissioner Maureen K. Ohlhausen issued a separate statement about the report. Although she stated the report "enriches the conversation about big data," she emphasized the need to "test hypothetical harms with economic reasoning and empirical evidence."
"To understand the benefits and risks of tools like big data analytics, we must also consider the powerful forces of economics and free-market competition," she wrote. "If we give undue credence to hypothetical harms, we risk distracting ourselves from genuine harms and discouraging the development of the very tools that promise new benefits to low income, disadvantaged, and vulnerable individuals."
To read the report, click here.
To read Commissioner Ohlhausen's statement, click here.
Why it matters: Although the actual number of companies using big data analytics remains unclear, the FTC is certain about its interest in the issue and the potential for an enforcement action if a business is found to have violated one of the laws discussed in the new report.