A Special Deal Just For You: The Value of Big Data Continues to Elude Consumers

For a while now, one of the main causes of concern for privacy advocates has been "Big Data," that is, the collection, aggregation and analysis of data, on a, well, BIG scale. This post takes the opportunity to review some specific issues and recent developments in this area.

The exploitation of Big Data for commercial purposes may have negative consequences on individuals’ lives, yet consumers are not yet fully aware of the impact it may have on their privacy and their economic interests. Even more galling, consumers have no way to claim any portion of the profits generated by their data when sold to advertising companies for top dollars.

Big Data Enables Economic Discrimination

One of the most common uses of aggregated consumer data is in online advertising, where the advertisements that users see are based upon their online history. Automated algorithms assess whether a consumer is likely or not to be interested in a particular type of ad, and the opportunity to deliver an ad to that consumer is auctioned off on a split-second basis using an electronic trading system. Companies often present this use of Big Data as being advantageous to consumers, as they only see advertisements which are truly relevant to their interests, and thus are less exposed to spam. 

However, as Professor Rebecca Goldin from George Mason University pointed out in 2009, “[u]nfortunately these algorithms can also be used to exploit us.” For instance, computers can also predict which maximum price or rate a particular consumer is willing to pay for a product or service, thus benefiting banks or insurance companies to the detriment of consumers.

Big Data may also be used for price discrimination. The New York Times reported last August that a supermarket is using customers’ data collected through its loyalty card program to customize coupons offered online to various customers, and is considering using the data to offer different prices for the same product to different customers in the near future.

This is possible because coupons are often times no longer clipped, but printed or sent directly to smart phones from the retailer’s website. Online coupons can be tailored based upon a wealth of personal information about the consumer, including the search terms used to land on the page offering the coupon. As a result, the deal offered in a coupon may vary depending on whether a consumer searched for “cheap discount socks” or “100% cashmere socks.”

In the United Kingdom, the Office of Fair Trading launched on November 15 a call for information to learn more about how the use of consumers’ data is affecting online markets, and if such use has any effect on pricing. Let’s hope for a similar inquiry in the U.S. soon.

Our Data is Like Gold, But Apparently it is Not Our Gold

According to a report published by the World Economic Forum in May 2012, “personal data represents an emerging asset class, potentially every bit as valuable as other assets such as traded goods, gold or oil” (p.7).

But if our personal data has great value once thrown into the Big Data pool, we, quite unfortunately, do not benefit directly from this bounty, and the U.S. law does not offer a venue for plaintiffs to claim ownership or control over the use of their data for advertising purposes. In the 1995 case of Dwyer v. American Express, one of the first cases on the use of aggregated consumer data for advertising purposes, plaintiffs claimed that such use of their data by a credit card company was an invasion of privacy (in particular, an intrusion upon their seclusion). The court found, however, that there was no claim because the plaintiffs had voluntarily given their information to the credit card company.

A few years later, in 2001, the Southern District Court of New York held in In re Doubleclick Inc. Privacy Litigation that website visitors did not suffer a recognizable "economic loss" from the collection of their data. The court rejected plaintiffs' arguments that they suffered economic damages for the purpose of stating a claim under the Computer Fraud and Abuse Act, based on either the value of their attention to Doubleclick's advertisements or the value of the demographic information compiled by the company through the use of browser cookies. The Court wrote that "although demographic information is valued highly ... the value of its collection has never been considered an economic loss to the subject.”

In yet another case, In Re JetBlue Airways Corp. Privacy Litigation (2005), an airline company had shared the personal data of the plaintiffs with a data mining company. Plaintiffs claimed, inter alia, a breach of contract because the airline’s privacy policy stated it would not share personal data with third parties. The plaintiffs claimed the damages incurred because of that breach were the deprivation of the economic value of their data. The Eastern District Court of New York was not convinced, noting that there was “absolutely no support for the proposition that the personal value of an individual JetBlue passenger had any value for which that passenger could have expected to be compensated” and that “[t]here is… no support for the proposition that an individual passenger’s personal information has or had any compensable value in the economy at large.”

A class of California plaintiffs claimed in Cohen v. Facebook (2011) that the social media site had breached California’s right of publicity law by using their name and profile pictures to promote one of its own products, “Friend Finder,” a program allowing users to find out which other Facebook users he may already know, and send them invitation to join their networks. However, plaintiffs failed to convince the court that this resulted of an injury for them. District Judge Seeborg wrote that plaintiffs had not shown how disclosing to their Facebook friends that they had used “Friend Finder” had caused them any cognizable harm, “regardless of the extent to which that disclosure could also be seen as an implied endorsement by them of the services,” and dismissed the case.

More recently, another class of Facebook users in California adopted a different approach. They did not argue that their browsing history had economic value for advertisers wishing to target ads to them, or that their demographic data had value for general marketing purposes, but instead argued that it was their endorsement of products through Facebook’s “Sponsored Stories” program which had economic value. They filed a class action suit, Fraley v. Facebook, Inc., claiming that Facebook used their name, photograph, likeness and identity in an advertisement without their consent and breached California’s publicity rights statute by making them “unpaid and unknowing spokespersons for various products.”

“Sponsored Stories” was introduced by Facebook in January 2011. In that program, when a Facebook user clicks on the “like” button, his name and profile picture can be used in an advertisement (a “Story”) for the product or service he "liked." Such an ad, bearing a statement in the form of “User likes Product/Service,” is then posted on the pages of the user’s friends. The plaintiffs argued that this was an unauthorized commercial use of their names or likenesses, which is forbidden under California's right of publicity law.

Judge Koh denied dismissal of the case under the right to publicity statute in December 2011, even though Facebook had claimed that the case should be dismissed for failure to show injury. In Dwyer v. American Express, plaintiffs had also claimed appropriation of their likeness, but the court dismissed them for failure to prove an appropriation without consent. In Fraley, there was no consent, as Sponsored Stories has been enabled for all users by default, with no option to opt out. Judge Koh distinguished both the In re Doubleclick and In re JetBlue cases from Fraley as they did not involve the statutory right to publicity.

The parties then reached a proposed settlement: plaintiffs would not receive any cash, and Facebook would instead make a cy pres payment of $10 million to privacy organizations. However, Judge Seeborg, who was assigned the Fraley case after Judge Koh recused herself, denied last August the plaintiffs' motion for preliminary approval of the settlement.

Among his concerns was how the economic value of the injunctive provisions of the settlement had been calculated by the plaintiffs. They did so by estimating the dollar value for Facebook of the ability to use its members’ names and likeness over the next two years. Judge Seeborg wrote that “[t]he dollars Facebook derived from using its members’ names and likenesses … cannot serve as measure of the economic value realized by [class action] members through obtaining the ability to 'opt out' from allowing Facebook to do so in the future.”

In others words, the value of our privacy, and the right to be left alone by opting out, cannot be measured against the dollar value of our data for the collecting companies. Our data is still not ours to sell on the open market.

UPDATE: December 5, 2012

On December 3, Judge Seeborg issued an order in the Fraley v. Facebook case, giving his preliminary approval of an amended settlement, pursuant to which individual users affected by the Sponsored Stories program could receive up to $10 each. Judge Seeborg did not discuss the details of the settlement in the December order, but found it to be “the product of serious, informed, non-collusive negotiations and fall[ing] within the range of possible approval as fair, reasonable and adequate.” A Fairness Hearing is scheduled for June 28, 2013, where the Court will determine if the final settlement should be approved.

Marie-Andrée Weiss is a solo attorney admitted in New York, and her admission is pending in France. Her practice focuses on intellectual property, privacy, and social media law. She frequently writes on these topics and on European Union law.

(Image courtesy of Flickr user cabbit pursuant to Creative Commons CC BY-NC-SA 2.0 license.)

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