FTC Chairman Jon Leibowitz, left, called data brokers "invisible… (Mark Wilson / Getty Images )
SAN FRANCISCO — Data brokers who collect vast amounts of information on Americans will be the ones turning over information this time.
The Federal Trade Commission has launched an investigation into nine data brokerage companies, ordering them to tell the agency how they harvest and use data on consumers.
The FTC is looking to shed light on a multibillion-dollar industry that has largely operated in the shadows. The agency said Tuesday that it planned to scrutinize the privacy practices of nine data brokers: Acxiom, CoreLogic, Datalogix, EBureau, ID Analytics, Intelius, Peekyou, Rapleaf and Recorded Future.
The FTC wants to know what the brokers do with the information they collect from consumers. It also wants to know if the data brokers let consumers review and correct their personal information or opt out from having their personal information sold to a third party.
Data brokers are not required by law to disclose to consumers the information they collect on people's finances, race and ethnicity, shopping habits, social media updates, health concerns and more. By some estimates, these brokers stockpile several thousand details on the majority of adults in the U.S.
The industry says the information is used solely to target marketing pitches that benefit consumers who get offers for products and services in which they are interested.
The Direct Marketing Assn. rolled out a public relations campaign in October to educate consumers about data-driven marketing. It said that government intrusion could stifle innovation and hamper economic growth, and pointed to the boom in online holiday shopping this year as proof that consumers welcome targeted offers. And it says its member companies abide by stringent guidelines that the data are used only for marketing purposes.
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"We look at this inquiry as an opportunity for the government and regulators to learn what the value of this data is," said Jerry Cerasale, the association's senior vice president of government affairs.
Government scrutiny has intensified as the data brokerage industry has grown more powerful and online privacy concerns have moved to the forefront of a public policy debate in the U.S. and Europe. Americans live more of their lives online, leaving ample digital footprints for data brokers to follow.
At a congressional hearing last week, FTC Chairman Jon Leibowitz called data brokers "invisible data catchers" that can benefit consumers but that need to be more transparent about their practices.
The FTC has tried to persuade data brokers to create a centralized website to tell consumers how they handle their information and let them correct any inaccuracies, but the industry says such a system would be too expensive and burdensome and could potentially put consumers' personal information at risk.
The agency has also urged Congress to pass a law that would require data brokers to let people examine the detailed dossiers gleaned from their activities on the Web and mobile devices, similar to federal laws that give consumers free access to their credit reports once a year.
The FTC has also taken action against some data brokers. In June, Pasadena company Spokeo agreed to pay $800,000 to settle charges it illegally sold personal information for employment screening.
Ieuan Jolly, a privacy and data security lawyer with Loeb & Loeb, said the data brokers being investigated are "key players in the advertising industry."
"They are the companies pulling the strings and directing to whom ads are targeted. On the one hand this provides a tremendous benefit for e-commerce, because data analytics on customers' online behavior provides consumers with relevant products and services meeting their needs," he said in an email. "On the other hand, few consumers know the identity of these invisible puppet masters that are collecting masses of data about them."
Watchdogs fear that the unregulated collection of sensitive — and sometimes inaccurate — information could affect someone's ability to land a job or find a place to live or determine what prices they pay for goods and services. They say most people have no idea how much information is amassed on their personal lives. Nor do they know to whom that information is sold or what's done with it.
"A digital gold mine of infinite details is harvested about each of us — what we buy, who our friends are, how much we earn, our ethnicity, health concerns, location, etc. For the most part, these records are off limits to consumers, who can't really discover what they say about us — including the likely errors they may contain," said Jeffrey Chester, executive director of the Center for Digital Democracy. "Today's action by the FTC will unmask this largely stealth consumer surveillance industry."
There are currently two congressional inquiries into the data brokerage industry. In October, Sen. John D. Rockefeller IV (D-W.Va.) opened an investigation into nine data brokers. He said he was alarmed by the amount of personal, medical and financial information that could be collected, analyzed and sold. In July, Rep. Edward J. Markey (D-Mass.) and Rep. Joe L. Barton (R-Texas) began a House inquiry into the industry.
"I applaud the FTC's decision to join me in taking a hard look at the data broker industry," Rockefeller said in a statement. "American consumers deserve to know who is collecting information about them."