Online Consumer Profiling vs. Privacy Laws: A Data Privacy Report

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BIT244IT and Business Fraud
(2019)
Student Name:
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Online Consumer Profiling
Vs.
Privacy Laws

Executive Summary
Data privacy and user information’s security is not just to keep the hackers away. It also includes
ensuring the consumers that their belief in consumer products and services of a particular brand
is reasonable. The research and analysis in this report show that the consumers who have proper
awareness about the privacy issues and risks in the privacy of data, and that a lot of business
executives are overestimating the security and legitimacy of the way they handle their
customer’s data and information. Similarly, they are underestimating the fact that meeting an
individual’s requirements and needs of data privacy have great benefits to the business and its
reputation. Furthermore, a significant amount of companies is failing daily to gain the belief and
trust of their costumes on the topic of security and data privacy. There is a huge scope and field
of advancement for the companies if they can implement effective practices and privacy policies
on consumer data to differentiate themselves from other corporations as companies. Maintaining
data privacy is not just a risk management activity but it also helps in the advancement and
improvement of particular business activity.

Table of Contents
1. Topic Description........................................................................................................................5
1.1 Online Consumer Profiling....................................................................................................5
1.1.1 Profiling & Data Capturing............................................................................................5
1.2 Privacy Policies for Consumer Profiling...............................................................................6
1.2.1 Companies Ignorance and Lack of Awareness while collecting Consumer’s
Information..............................................................................................................................7
1.2.2 Need for the Policies.......................................................................................................7
2. Problems or Crime.......................................................................................................................7
2.1 Problems associated with profiling and privacy policies......................................................8
2.1.1 Profile Accuracy Problems.............................................................................................8
2.1.2 Problems caused by DMAs............................................................................................8
2.1.3 Supermarket Membership and Surveillance related Threats..........................................8
2.1.4 Misuse of Profile-Sharing, ANIs and Warrant Cards.....................................................9
2.2 Crimes Related to Consumer Profiling..................................................................................9
2.2.1 Data Hacks and Dumps..................................................................................................9
2.2.2 Data Theft and Harassment Crimes................................................................................9
2.2.3 Unethical Sharing of Consumer Data between Companies..........................................10
3. Prevention and Detection...........................................................................................................10
3.1 How to Find a Balance in the Profiling System?.................................................................10
3.1.1 Drawing a Line between Consumer Profiling and Consumer Privacy.........................11
3.1.2 Various Practices based on Consumer Privacy............................................................11
3.1.3 Rules & Regulations for Consumer Privacy.................................................................12
4. Response and Consequences.....................................................................................................13

4.1 Challenging fields and the proper Response actions...........................................................13
4.2 Consumer do care about Data Privacy and Safety...............................................................14
4.3 Increased Concern of Costumers about the practices the Companies perform on Consumer’
Information. Data & Profiles.....................................................................................................14
5. Conclusion.................................................................................................................................14
References......................................................................................................................................16

1. Topic Description
1.1 Online Consumer Profiling
The main purpose behind profiling the customers is to categorize the customers in a specific way
which will group them in an efficient way to fulfill the marketing purpose of an organization and
to design productive advertisement plans. Ability to target a particular segment in the market will
help in increasing the success rate of product sales for any company. Costumer profiles help in
creating these market segments and in identifying the trends in their purchasing patterns. It is
very beneficial to develop a profile for an ideal customer for the product to be sold. The profiles
can help in understanding the patterns and these patterns might prove beneficial for the
advertisement of the product as well (Devault, 2019).
1.1.1 Profiling & Data Capturing
The process of profiling involves capturing and classifying the behaviors of the customers. The
information about the users can be gathered from offline as well as online interactions and
purchases, supermarket databases, from survey results, and many public records of the
customers. The profiling and related activities have given a huge buff to the “CRM”,
“Personalization” and Marketing industries.

Figure 1: The Marketing Cycle for Consumer Profiling
There are a lot of jobs assigned by almost all the organizations that are specifically focused on
collecting data from multiple resources. The collected data is then analyzed to develop extensive
profiles on particular individuals to develop a product. The dossiers developed by the data
collection practices are also made available to the government for implementing laws and
policies. The data collected on individuals is highly concrete and specific in nature. The
individual’s information collected by the organizations is Security Numbers, Preferences,
Personal Habits and Hobbies, Criminal records, Health & Disease information, religion-based
practices, gender and marital status, and a lot more information a user can think of.
There are a lot of legal obligations in retrieving an individual’s personal information but these
individuals are forced or compelled to disclose their personal data under the influence of
government laws and regulations. The next topic will shed some light on these policies which
influence the profiling of a consumer by any organization.
1.2 Privacy Policies for Consumer Profiling
One of the most talked about issue in the business industry is “privacy”. Companies might not be
interested in collecting the consumer’s data and profiling the consumers base on that data. But
the implementation of this information provides highly efficient business plans and designs to

the companies. Besides the benefits of such data mining processes, there are also a lot of issues
and privacy concerns triggered by them (Center, 2019).
Some of the data collected by the service portals of the companies include the personal data that
is voluntarily fed by the consumers along with some other information used by the consumers on
the communication and interaction platforms. Besides this information, the companies also
collect the consumer’s data from their web browsing and purchasing patterns. Many third part
organizations which use a platform to advertise their products also gain the rights to access the
consumers’ data available on that platform. User is often not aware of this scenario as they think
the information that they are providing on a platform will only be used by the concerned
platform provider. Therefore, there are a lot of policies and regulations implemented on the data
collection activities of the business industry to monitor the data collection and protect
consumer’s privacy (Center, 2019).
1.2.1 Companies Ignorance and Lack of Awareness while collecting Consumer’s
Information
Many companies and business firms often rely on their web applications and software tools to
collect data about their customers. They have also implemented several algorithms and data
mining tools to gather consumers’ information from other authorized sources. But the data
collected by these tools and software are not so transparent to be easily categorized by the
company officials at collection time. Thus, the business clients might be unaware of the range
and stretch of data collected by their sites. The lawyers and attorneys should consider this fact
and advise the clients accordingly.
1.2.2 Need for the Policies
There is an increasing need to apply better privacy laws to avoid spammers and advertisers who
try to profile, track and target the consumers. First, the tracking and profiling were done only
through online means but now the technology for user profiling and tracking has evolved
massively. The RFID and other data collection technologies are used to track the consumer
details offline as well. The rapid evolution of these technologies has perplexed the advocates,
government officials and privacy commissioners whereas it is quite obvious that the consumers
are highly ignorant towards these profiling and privacy issues. The privacy policies that help and
aid the consumer rights in the market are thus, very important to be implemented by the national

governments. These policies are meant to ensure that consumer rights are not violated by
business companies.
2. Problems or Crime
Profiling and data mining using the consumer’s personal information and preferences have a lot
of beneficial implementations in the health industry, human resource, and service industry, and
mostly to the business & marketing industries. The knowledge about a consumer’s personal
activities, conditions and preferences can help in providing great services and help to that
customer. These services are specially designed for the specific division of consumer’s and the
consumers are most likely to accept and appraise these services.
Pairing with these advantages there are several issues and risks that are introduced to the
customers and consumers on a daily basis.
2.1 Problems associated with profiling and privacy policies
There are a lot of problems associated with consumer profiling activities and with the
implementation of the privacy policies for profiling and tracking activities. Some of the major
problems and issues are discussed in this part of the research report.
2.1.1 Profile Accuracy Problems
A lot of companies and organizations use the profiles and information collected by the marketing
companies. But a lot of times, people use false data while filling their personal information on
many sites and applications. For example, a user lies their salary status, contact information, and
medical conditions. Now suppose a public service organization uses this false data to provide
financial or medical help to that customer and the user had provided with false information on
the websites. Such cases may result in serious troubles or risks to that user. There was a case
when a consumer requested a dossier on himself and the document that he received had more
incorrect information as compared to the correct ones (King and Forder, 2016).
2.1.2 Problems caused by DMAs
The DMA stands for “Direct-Marketing-Association”, is one of the pioneers who started
building dossiers based on customer data. The association has kept itself away from the
obligations of the privacy policies supporting consumer rights. The DMA was successful in

doing so by implementing a self-opt-out option for people who want to control the number of
advertisement solicitations they get daily. But the person who wants to opt-out from the schemes
has to pay some amount to the DMA. After going through such problems, the user is again
removed from the list after five years.
2.1.3 Supermarket Membership and Surveillance related Threats
User willingly applies for a membership/loyalty card at the supermarkets. The supermarkets use
those cards and conditions that a user agreed to while buying that card, to store information and
purchasing patterns of that user. These supermarkets are not obliged by the privacy laws and can
freely share consumer information with others. The purchasing patterns and habits can be shared
with many health insurance companies and to the law enforcement teams, who can use the data
in a user’s disadvantage. For example, a person sued a supermarket, because he slipped and got
injured there. But the supermarket used his alcohol-purchase history to prove that he was drunk
at that time. Literally, there is more disadvantage in having a loyalty card than advantages.
2.1.4 Misuse of Profile-Sharing, ANIs and Warrant Cards
Government organizations are restricted by many policies to profile a person without any
specific reason. So, they purchase the user profiles from private firms, that are not limited by any
laws, to have information on the consumers.
Telecom companies use “Automatic Number Identification” to get a caller’s personal
information like name, address, contact information, etc. when he calls a toll-free number.
Similar to the loyalty cards, many vendors that sell electronic appliances, ask customers to fill
their personal information as a part of the warranty service. It is definitely not necessary to
provide your personal information to get the benefits of a product’s warranty.
2.2 Crimes Related to Consumer Profiling
The globalization and massive growth of Marketing and CRM industries have resulted in the
accumulation of the huge amount of data based on consumer profiles and personal information.
This data is shared between multiple organizations on a daily basis. The data is stored and shared
over the cloud internet or sometimes through physical storage devices. This storage and sharing
process pose a great threat of data theft and tampering. This part of the report will address some

of the major crimes associated with consumer profiling (Parsons, Maclaran and Chatzidakis,
2017).
2.2.1 Data Hacks and Dumps
There were a lot of issues reported in the past where hackers gained access to the databases of
many companies and deleted all the data related to customer profiles, marketing plans, financial
and transaction history. This caused huge chaos in the marketing industry and affect a lot of
business. Hacking someone’s system is a criminal and punishable offense.
2.2.2 Data Theft and Harassment Crimes
The cyber attacks to steal the data from the cloud and websites can be used to leak someone’s
personal information which can put the person in a highly vulnerable situation. The hacker can
also use the data to harass a person which is a serious crime. For example, a few years ago, a
hacker attacked Apple’s cloud storage and stole personal information (including graphics
contents) of many famous celebrities and leaked it online. This affected the lives of a lot of
people and the lives of people close to them.
2.2.3 Unethical Sharing of Consumer Data between Companies
Most of the large business organizations have facilities and tools to extract consumer’s data and
profile them but a lot of other organizations do have adequate resources and technologies to mine
and store the consumer data. So, companies share data with each other to fulfill their needs. But
sometimes, giving authority to other companies to access their consumer’s data may result in the
misuse of data by the other company. For example, on the most talked about the scandal is the
“Facebook data privacy scandal”. Identifiable data and personal information of a lot of people
(approximately 87 million) were collected by the “Cambridge Analytica” which is a consultancy
and communication firm (Sanders and Patterson, 2019).
These were some of the major problems and crimes that were encountered by the business
industry in the past few years. In order to detect and prevent the risks and threats associated with
consumer profiling, many privacy policies and laws are implemented by the government and the
business industry.

3. Prevention and Detection
Any industry that is based on the continuous flow of customers and their repetition, costumers
want to trust the business they are dealing with. It would be very unproductive to make these
customers angry by sharing their personal information with other companies. It would be a
negative revenue if the costumers find out that their confidential information is being sold in the
market. Although it is a good practice to gain knowledge about the preferences of the customers
to develop a product according to their needs, special care should be given while dealing with
other’s personal data (King and Forder, 2016).
3.1 How to Find a Balance in the Profiling System?
The profiling is used to tailor a product according to an individual’s preferences but it also
introduces a lot of privacy issues for these individuals. Till now, no individual has been arrested
for being careless with the consumer information & data. The customers and the government are
definitely going to hold the corporations responsible for any problems related to their privacy.
How can the companies cope up with such situations?
3.1.1 Drawing a Line between Consumer Profiling and Consumer Privacy
The marketing and business industries and corporate companies should take consumer privacy
seriously and take preventive measures if they don’t want themselves to be held accountable for
any future problems. In order to do so, they should consider the following options:
 It is better to use the consumer data and profiles internally by a company rather than
selling or sharing that knowledge with other corporations or companies.
 There should not be any anonymity when companies deal with consumer privacy.
Because sometimes, specific information about an individual is sufficient to guess his
identity correctly.
 Costumers should have an option to choose whether they want the companies to store
their personal information, says transactional information, or not.
 Individuals should be able to control their information shared with the businesses.
 Appropriate and highly secure encryption mechanisms can be used to store and retrieve
consumer information and in profiling activities. This would aid in the betterment of
consumer privacy. Like in the case of Facebook, the messages between the users should