01 September 2013


Two pieces by Frank Pasquale -

'Privacy, Antitrust, and Power' in (2013) 20(4) George Mason Law Review 1009 comments
When a dominant Internet service collects information about its users, the situation is so far from the usual arm’s-length market transaction that neoclassical economic analysis is misleading. “Lack of surveillance” is not a product that individuals have varying preferences for and purchase accordingly. Rather, surveillance is an inevitable concomitant of life online. We need to tame the power that surveillance entails, rather than continuing to pursue illusory, surveillance-free alternatives on the platform level.
To the extent a company creates profiles of individuals and collects data on them, a third party ought to be collecting reports from the company on how it is using that information, to whom it is selling the data, and how it maintains the security of the data. Surveillance of these dominant firms’ practices could also allay fears of venture capitalists and innovators (who are loath to enter online markets knowing that a dominant firm could effectively cut off their air supply on a whim).
Monitoring should do to leading Internet companies what they do to their users each day: systematically study, categorize, and characterize their behavior. Routinely making information available about data collection will help develop the infrastructure and analytics necessary to bring antitrust enforcement into the twenty-first century by promoting rapid understanding of the corporate actions underlying complaints.
Rather than relying on antitrust law to promote the development of rivals to dominant Internet firms, we should rely on monitoring of data practices to help authorities regulate dominant firms. Only then can the FTC, DOJ, and other antitrust enforcers assure that companies that occupy such commanding heights in the Internet ecosystem do not treat firms operating in adjacent fields in an anti-competitive manner.
Pasquale's 'The Credit Scoring Conundrum' (University of Maryland Legal Studies Research Paper No. 2013-45) notes that
A bad credit score may cost a borrower tens of thousands of dollars, but it is not clear how it is calculated. The formula is a trade secret, immune from scrutiny. Lenders are moving beyond scoring to “credit analytics,” which tracks a consumer’s every transaction. Buy generic products instead of branded ones, and you may find your credit card’s interest rate rising and its limit falling.
This essay critiques automation in the consumer-facing side of the finance industry. Reputation systems are creating new (and largely invisible) disadvantaged groups, disfavored due to error or unfairness. You may be one of those affected, labeled in a database as “unreliable,” “high medical cost,” “declining income,” or some other derogatory term. Since it is nearly impossible to find out exactly how one has been categorized by data brokers and other information collectors, those disadvantaged by secret, automated processes can’t even organize for better treatment. This essay documents their plight, and how current law fails to help. I propose new principles to guide the Consumer Financial Protection Bureau, the Federal Trade Commission, and other regulators as they address the growth of unaccountable financial data sources.