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Congress investigates companies' use of data to impact consumers

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Photo: Energy and Commerce Committee YouTube Channel

WASHINGTON (Sinclair Broadcast Group) – Legislators held a hearing Wednesday to investigate how algorithms affect the type of data acquired by companies and, in turn, how that information impacts consumers in their use of the internet.

The House Energy and Commerce Committee’ subcommittee on Digital Commerce and Consumer Protection convened the meeting to gain a greater understanding of “how companies’ decisions about data and content impact consumers.” Black Friday weekend through Cyber Monday saw an increase of 16.8 percent in online sales from last year, according to Adobe Insights.

Subcommittee Chairman Robert Latta, R- Ohio, said it was the Equifax data breach that raised greater concerns about how consumer data is handled. Those concerns are compounded by Uber’s hack last month which left 57 million users/ personal data exposed.

“Rather than alert authorities and make the breach known to their users and drivers, Uber kept the hack secret for over a year,” Latta said. “Disregard of law and disregard of consumers' and drivers' trust all require close scrutiny.”

He then called on lawmakers to ensure that their constituents understand the risks of a digital environment.

“It is our obligation to ask the tough questions and make sure consumers understand how their information is being used in our digitally driven economy,” Latta said. “That is why we explore today how personal information about consumers is collected online and importantly how companies use that information to make decisions about content consumers see.”

The Subcommittee Ranking Member Jan Schakowsky, D- Illinois, highlighted that some of what users see, content companies pay to put in front of those people.

“Algorithms determine what appears in web ads, search results, and your customized news feed,” Schakowsky said. “Some of the content you are presented may be based on personal information such as your gender race and location. It may also depend on how much companies have paid to get content in front of you.”

One witness, Professor of Law at the University of Maryland Francis King Carey School of Law Frank Pasquale, said that privacy erosion has led to the classification of users.

“Having eroded privacy for decades, shady, poorly regulated data miners, brokers and resellers have now taken creepy classification to a whole new level. They have created lists of victims of sexual assault, and lists of people with sexually transmitted diseases,” Pasquale said. “Lists of people who have Alzheimer’s, dementia and AIDS. Lists of the impotent and the depressed. There are lists of “impulse buyers.” Lists of suckers: gullible consumers who have shown that they are susceptible to “vulnerability-based marketing.” Even without such inflammatory data, firms can take advantage of unprecedented levels of other data about consumers.”

But Schakowsky reminded the committee that the information gathered by algorithms can be exploited or even used in a discriminatory manner.

“On a sinister level, organizations and even nation states can exploit algorithms to spread disinformation as we saw with the Russian interference in the 2016 elections,” Schakowsky said. “This may have some benefit -- consumers see ads they are actually interested in -- but the line between tailored advertising and facilitating discrimination can get murky.”

Chairman of the Energy and Commerce Committee Rep. Gregg Walden, R- Ore., emphasized the importance for consumers to know their rights.

“Americans should have vibrant competitive markets both offline and online. Where consumers know their rights and options and have the freedom to choose what is best for their circumstances,” Walden said.

Witness and Sloan Distinguished Professor of Management Science and Marketing at the MIT Sloan School of Management Dr. Catherine Tucker said her research has shown that even though users claim they want stronger security and protection, they are acting differently.

“We do see this inconsistency between the way consumers say they talk about their privacy and actually act out there in the online world,” Tucker said.

Her observation implies that many users opted to hand over their personal information to get the access they wanted to an internet platform.

Lawmakers questioned if greater transparency would remedy this issue. Witness Leo and Eileen Herzel Professor of Law at the University of Chicago Law School Dr. Omri Ben-Shahar said that disclosures for transparency don’t work.

“But disclosure rules have miserably failed to achieve their goals. Massive amounts of evidence show that people don’t read the disclosure and don’t use them to make more informed choices. In reality, disclosures are regularly ignored, they are an empty ritual,” Ben-Shahar stated. “Consumers’ apathy is entirely rational: there is simply not enough time to review all the disclosures that the law requires companies to bestow upon them.”