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Washington Retail Insight

FTC Recommendations on Consumer Privacy Could Restrict Customer Service

By J. Craig Shearman
Washington Retail Insight
March 29, 2012

NRF is concerned that recommendations on consumer privacy made by the
Federal Trade Commission this week could restrict retailers’ ability to serve their customers if not carefully drafted in any new laws or regulations that result.

The FTC on Monday released a report titled “Protecting Consumer Privacy in an Era of Rapid Change” that called on Congress to enact legislation on issues including baseline privacy, data security, data breach notification and regulation of data brokers. Among other provisions, the report said businesses should voluntarily adopt a Do Not Track mechanism allowing consumers to opt out of having their online behavior monitored and shared, but said Congress should pass a law to mandate it if companies fail to do so.

One of the recommendations was that retailers and other businesses should agree to discard information about customers once the data has fulfilled its purpose for a specific transaction, and not to use it for future marketing.

But NRF Senior Vice President and General Counsel Mallory Duncan told the Wall Street Journal in an interview that the proposed requirement could limit retailers’ ability to get to know their customers and serve their needs.

“It’s like asking the greengrocer to open up his mind and forget that you like lettuce,” Duncan said. “You run the risk of seriously undermining consumer satisfaction if you limit that information.”

Duncan said retailers’ goal in using information about customers is conceptually similar to small-town merchants of 100 years ago who knew their customers’ clothing sizes, tastes, and buying habits and used that knowledge to stock and recommend the right merchandise or make desired offers.

The FTC report is aimed largely at data brokers, the companies that collect, analyze and sell data about consumers to third parties as their core business. But NRF is concerned that the proposed restrictions – if written too broadly – could interfere with retailers’ ability to collect and use information about their own customers.

NRF believes that “first party” information – data retailers use to serve their own customers – should not be restricted. And Duncan said policymakers must make a distinction between sensitive personal information such as financial data and innocuous information. “Most of what merchants collect is not sensitive – it’s your sock size,” he said.

© 2012 National Retail Federation

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