FTC Big Data regulation tells companies how to use big data legally and responsibly

FTC Big Data regulation tells companies how to use big data legally and responsibly, in FTC’s report, Big Data: A Tool for Inclusion or Exclusion? Understanding the Issues

Big Data affects nearly every area of business

Why FTC? Because FTC regulates advertising, and FTC predicts that big data will be used in more and more businesses, affecting more and more consumers.

FTC is concerned, among other things, with big data’s use in healthcare, including for providing benefits to under-served healthcare populations.

According to FTC’s report on big data, risks of misuse of big data include biases or inaccuracies about certain groups, including:

  • more individuals mistakenly denied opportunities based on the actions of others
  • exposing sensitive information
  • creating or reinforcing existing disparities
  • assisting in the targeting of vulnerable consumers for fraud
  • creating higher prices for goods and services in lower-income communities and
  • weakening the effectiveness of consumer choice.

FTC often expresses concern with things such as consumer privacy, prevention of consumer fraud, and consumer choice. Big data is no exception.

How big data helps consumers

Cheering on the side of big data, FTC observes that big data can:

  • guide the development of new products and services
  • predict customer preferences
  • help companies tailor services to consumers
  • guide individualized marketing

I’m not sure why the last is a good, except to businesses.  I’m reminded of the scene in Minority Report where all the billboards call out to Tom Cruise – a babble of messages, the same bombardment we have today except add the audio to the visual.

At any rate, FTC divides the life cycle of big data into four phrases–

  • Collection of big data
  • Compilation and consolidation of big data
  • Data analytics
  • Use

FTC focuses on use, and cites a number of laws such as the Fair Credit Reporting Act, Equal Opportunity Laws, and the Federal Trade Commission Act (FTCA).  FTC says it will monitor use of big data to be sure it promotes a positive impact on consumers and does not violate existing laws.

Why Big Data

FTC dryly notices: “The era of big data has arrived.”

Yes, “consumers engage digitally.”

With so much of healthcare law serving as witness to a bygone age–the days when doctors wore white coats or traveled on horseback or called chiropractors “cultists” or breathed a different air–it’s good that FTC is living in the modern world.  For the sake of being able to predict the legal rules, and efficiency in getting valuable healthcare products and services to market, we need a regulatory framework that is understandable and contemporary.

FTC refers to big data as driven by Volume, Velocity, and Variety of data – vast quantities of information, low costs of collection and storage, and exponentially increasing predictive power.

FTC concerns about deceptive acts or practices

FTC points out a number of past cases in which it acted against unfair and deceptive practices involving use of data:

  • FTC alleged that a credit card marketing company deceptively failed to disclose that it reduced consumers’ credit lines based on a behavioral scoring model that predicted how they would use their cash advances.
  • FTC acted against a company that sold personal information of financially distressed loan applicants.
  • FTC alleged that a company sold the personal information of consumers to identity thieves posing as legitimate subscribers despite obvious red flags.

Although FTC does not provide a lot of examples of potential abuses, FTC does provide a section called Questions for legal Compliance.  These include:

  • If you use big data analytics in way that might adversely affect prospect of obtaining credit, housing or employment, check whether you are treating people different based on a prohibited basis, such as race or national origin.
  • Of course, FTC emphasizes data security.

FTC’s report also has suggestions for those doing big data research, notably on ways to reduce potential errors and bias.

Conclusion

FTC is stepping into the brave new world with thoughtful articulation of basic principles, frameworks, and general warnings.

This is not the first time the federal government has had the foresight to tackle new technologies as they emerge.  See our prior posts on:

It’s hard to say exactly how FTC enforcement will play out in the arena of big data in healthcare, given the wide swathe of concerns it has outlined and the few examples around false and misleading advertising.

What’s clear is that the FTC places a moral onus on businesses using big data, and reserves the right to swoop in if FTC perceives consumer harm and sees a violation of one of the areas of law it has outlined. Also clear is that FTC expects businesses to think about privacy, security, and consumer choice while designing the product.  FTC’s Chairwomen recently commented in a Washington post interview:

Part of our mission is to protect consumers in both the digital world as well as in the brick-and-mortar world….. We’re mainly a law enforcement agency, and, so, in much of our enforcement work, the problem that we often see is that companies don’t really think about these issues at the outset of their design process…

Her advice to companies:

If you don’t need to collect the information, don’t collect it. You’re better off not having information that you don’t really need. You’re minimizing your risk. That’s number one.

Number two: Be transparent about what you’re doing and provide choices for consumers. When you do provide choices, make sure that you respect those choices when consumers do select. Some may opt not to have their information collected.

Finally, I can’t emphasize the importance of data security enough.

Companies may not be able to avoid collecting data – that “big data has arrived” means they will collect as much as possible.  That leaves transparency, security, and of course, being sure that messaging is not false, misleading, or intrusive.

In a phrase that could have come out of my college philosophy class, FTC’s report on big data concludes:

Given that big data analytics can have big consequences, it is imperative that we work together–government, academics, consumer advcocates, and industry–to help ensure that we maximize big data’s capacity for good while identifying and minimizing the risks it presents.

That does compute.  Working together, we can figure out how the insights from big data will change our world — and how to balance legal compliance with the opportunities presented to rock our health and wellness.  And during this process. healthcare companies using big data should seek legal counsel to ease on down the healthcare compliance road.

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Michael H Cohen Healthcare & FDA Lawyers

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