Ramirez Says FTC Big Data Report Meant To Help Companies Be 'Mindful' of Risks
LAS VEGAS -- Chairwoman Edith Ramirez said the FTC's new report on the possible discriminatory effects of big data (see 1601060042) is meant to help companies identify potential problems, not overstate harms, as critics including Commissioner Maureen Ohlhausen have said. "What we’re trying to do is to highlight risks," she told us Wednesday at CES. "And we’re offering suggestions for companies to take these issues into consideration, to look at the data that they’re using, the analytical tools they’re using to minimize these potential downsides. So I think it’s important to be mindful."
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The report provided recommendations to companies about using big data analytics and its possible discriminatory impact on low-income and disadvantaged Americans. Ramirez, who was attending an FTC panel with her three fellow commissioners but not participating in it, said she couldn't comment on criticism from the Center for Digital Democracy -- which said the FTC failed to urge Congress to update the Fair Credit Reporting Act (FCRA) and acknowledge it doesn't have the regulatory power to protect consumers -- because she hasn't seen the CDD's remarks. But she said the FCRA is an important tool. "What we’re trying to do is to explain the current legal landscape to companies as well as highlight to their attention the potential fairness and ethical issues that come into play when companies use big data and big data analytics," she said. "And it also means that these tools are going to be used as a way to expand opportunities particularly for people who have been either underserved or financially distressed."
Ramirez said the agency will continue to look at the issue and will act if it finds any company that crosses the line, violates or circumvents the law. She said the FTC will use its policy tools, including the report, and make recommendations so companies avoid getting into trouble. She said the agency also will stay current on and out in front of emerging technologies such as cross-device tracking, connected cars and drones. "As data increasingly becomes the currency of today’s economy, I think you also need to look at not only the potential benefits but ensure that the risks are addressed and that’s our aim with this report."
During the panel with her two Democratic colleagues, Ohlhausen, a Republican who voted for the report but issued a separate statement, said the report did a "really good job" of highlighting the benefits for consumers and providing guidance about legal concerns for companies. She said her separate statement wasn't a dissent, but to point out that some of the concerns raised about big data not reaching consumers should also be looked at through a competitive market focus with companies trying to take advantage of a business opportunity. She cited the book Moneyball about how the Oakland Athletics baseball team used data analytics to improve its game and compete better: "I wanted to be sure that as we looked at big data, we looked at it also in this context of the market incentive."
Commissioner Terrell McSweeny highlighted the need for companies to discuss their responsibilities in using data analytics. "If you’re a company, some of the key questions you ought to be asking [are] not just the legal questions but some of the ethical questions that might arise," she said. She called this the "next frontier" of thinking about the value of data and the "ethical consequences of the way it's being used and what do we do when we find out that maybe it's having a disparate impact, for example."
While a bank might use data to beneficially target the "financially vulnerable" through an entry-level credit card or loan, "that very same data can be used to victimize consumers," perhaps by scammers or payday lenders, said Commissioner Julie Brill, expanding on McSweeny's point. "So it’s a very tricky issue and a lot of it comes down to how is the data being used," she said. "And it’s not just an issue for data analytics for us, it’s not just an issue for credit reporting agencies."
Citing a 2014 Harvard Business Review piece by Michael Schrage, Brill said as companies start analyzing their own data, they will look at their "good" and "bad" customers and move them to the front of their customer service line or to the end. And the piece said this "will undoubtedly result in some disparate impact," she explained. "There will be racial groupings, there will be ethnic groupings, there will be gender groupings, there will be age groupings that will be troublesome. And so companies themselves ... really need to be thinking about this."