• by Wendy Davis  @wendyndavis, December 18, 2012

Turning its attention to data brokers, the Federal Trade Commission on Tuesday directed nine companies to answer a host of questions about how they collect and use information about consumers.

The FTC says it intends to draw on the answers to craft recommendations for how data brokers can improve their practices. Nine companies so far have received demands for information: Acxiom, Corelogic, Datalogix, eBureau, ID Analytics, Intelius, Peekyou, Rapleaf, and Recorded Future.

The FTC is seeking details about exactly how the companies compile data, including whether they mine the Web for information. Specifically, the FTC is asking data brokers to specify whether they collect data via "cookies, a user's direct textual input, a user's behavior on the company's Web site, a user's behavior on other Web sites, social media, a user's mobile use and activity, or other online or offline sources."

The FTC also wants to know whether the companies "anonymize" the data and whether they evaluate its accuracy. Other areas of inquiry include why data brokers' customers want information, and whether consumers can access data about themselves.

Some on Capitol Hill cheered news of the probe. Sen. Jay Rockefeller (D-W.Va.), who is also investigating data brokers, said in a statement that consumers "deserve to know who is collecting information about them, what that information is, and how it is being used."

Reps. Ed Markey (D-Mass.) and Joe Barton (R-Texas) also praised the FTC for launching the investigation.

"Many data brokerage companies are engaging in business practices without consumer knowledge or consent," Markey said in a statement. "It's critical to bring data brokers out from the shadows and shed light on this omnipresent industry."

For its part, the Direct Marketing Association said it expects the FTC's inquiry "will highlight the responsible use of consumer information by data-driven marketers -- and the significant benefits derived by consumers from those practices."

The FTC's move comes at a time of increased scrutiny of the data broker industry. This summer, a group of eight House members criticized data brokers for creating "digital dossiers" on consumers, who have no way of knowing what is contained in those files.

The DMA said at the time that restrictions on data brokers could harm "the countless entities that rely on such data sources to improve their marketing and grow their businesses."

In March, the FTC called for Congress to enact new laws requiring data brokers to give consumers access to information about them. The FTC also urged data brokers to create a centralized site where they can explain to consumers how their data is collected and used.

The Interactive Advertising Bureau opposed that recommendation, arguing that the term "data broker" is vague. The FTC's March report defines data brokers as companies that collect information about consumers in order to resell the data for identity verification, fraud prevention, marketing and other purposes. But the IAB says that characterization is so broad that it could include a host of online publishers, advertisers, ad networks and analytics companies.