The Federal Trade Commission’s Recent Comments on Big Data

June 16, 2015Alerts

There are numerous open questions about how Big Data will be regulated. What types of decisions can be made, in what context, and what disclosures need to be given are all still (in many ways) undecided. The Federal Trade Commission (“FTC”) is likely to play a leading role in answering those questions and regulating Big Data. That’s why companies of all types and sizes should pay close attention to comments by FTC Chairwoman Edith Ramirez at a recent international conference on big data and privacy.

In her remarks, Chairwoman Ramirez provided helpful guidance regarding the use of consumer data. She specifically emphasized that businesses must: (1) be transparent about how consumer data is used; (2) provide consumers with meaningful choice to opt-out of data collection efforts; and (3) protect the collected data. Chairwoman Ramirez added, “[t]he importance of implementing reasonable security data cannot be overstated.”

These principles of transparency, consent, and security have been well established in both FTC guidance and enforcement actions regarding privacy and data security matters in a variety of contexts. Her comments, however, reconfirm the FTC’s plan to continue its active efforts in this area, as she specifically noted with approval the 53 enforcement action settlements the FTC obtained from companies failing to adequately protect consumer data.

But Chairwoman Ramirez’s comments could signal a broader shift in the FTC’s focus towards regulating Big Data’s uses. Chairwoman Ramirez flagged the threat posed by potentially discriminating decisions being made based on Big Data analytics. For example, she said that while employment data shows that people with longer commutes leave jobs more frequently, basing hiring decisions on commuting distance may disadvantage minority populations who frequently have longer commutes relative to the rest of the population.

The potential regulatory scrutiny on the types of decisions being made, either by algorithm or based on Big Data analytics, should be watched by companies in all areas. The promise of Big Data is that amalgamating large amounts of data can answer questions people never knew to ask based on previously unknown correlations. The FTC, however, thinks that not all decisions capable of being made by Big Data should be made or even be lawful. This position has widespread implications for all industries looking to benefit from the promises of Big Data, including the emerging Internet of Things. The FTC has many enforcement tools at its disposal, like the Fair Credit Reporting Act, but has so far focused more on the privacy and security aspects of Big Data. But that does not mean Big Data decisions will be free from regulation in the years to come. In fact, the real questions are just when and how the FTC will start heavily scrutinizing Big Data practices.