Property rights to consumer information

JUDY FOSTER DAVIS

Property Rights to Consumer Information A Proposed Policy Framework for Direct Marketing JUDY FOSTER DAVIS is an associate professor of marketing at Eastern Michigan University. She has a PhD and an MA from Michigan State University. Her research interests include small business marketing and promotion, policy issues related to consumer information databases, and marketing over the internet. The author would like to thank law professor Joel Welber (Eastern Michigan University) and legal assistant Terry McCoy for research assistance provided in writing this paper.

JUDY FOSTER DAVIS

ABSTRACT Literature on property rights suggests that consumers may have valid claims against database owners who use and sell personal information for direct marketing purposes. The marketplace, legal, and societal implications of consumer ownership of personal information are explored. A policy framework is proposed that seeks to improve the relationship between marketers and consumers via improved consumer contact and information handling practices.

q 1997 John Wiley & Sons, Inc. and Direct Marketing Educational Foundation, Inc. CCC 0892-0591/03032-12

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INTRODUCTION A number of proposals have emerged that advocate changes in the way that database-oriented direct marketing is practiced so that consumer contact and consumer information-handling strategies can improve (26,46,49,50). Although the approaches differ, the desired outcomes articulated in these proposals are similar with respect to how consumer information should be handled. In essence, the proposals advocate that direct marketers: 1. utilize more efficient contact strategies so that appropriate consumers are targeted; 2. engage in de-duplication efforts, so that wasted multiple contacts are minimized; 3. allow consumers greater input into how information about themselves is collected, used, and disseminated in the marketplace so that privacy concerns are reduced; and 4. engage in more stringent self-regulatory practices in an effort to ward off more restrictive government regulation. The marketing database has been recognized as a primary tool that can help direct marketers improve the accuracy, relevance, and efficiency of their contact strategies. Yet, as Schultz observes, many marketers underutilize their own databases and continue directing mass mailings and telephone solicitations to consumers (61). Many consumers view these practices as annoying and offensive and, worst, as invasions of privacy. Schultz argues that if direct marketing contact strategies were improved, and if such contacts enhanced the lives of the recipients, then privacy would not be the hot-button issue it is today (61). This observation is consistent with Milne and Gordon’s assertion that an implied social contract utilizing tradeoffs drives the relationship between direct marketers and consumers (45). Specifically, consumers must perceive that the economic or social benefits derived from the relationship with the marketer outweigh the personal privacy costs. Instead, public privacy concerns have escalated in recent years, suggesting that consumer perceptions of the benefits derived from relationships with marketers are out of line with the personal costs incurred (28,29,37,40). Further, concern has heightened as marketers use more and more very highly personalized data. For example, several new credit card

companies planned to recruit cardholders using appeals based upon individuals’ sexual orientation and racial identity, using club membership and other information to target homosexuals and African-Americans (31). Privacy concerns have resulted in a number of marketing-related policy proposals aimed at reducing privacy threats and increasing benefits to consumers. These proposals include expanding the federal Privacy Act to include industry as well as government (5); encouraging greater marketer compliance with consumer opt-off registrations maintained by the Direct Marketing Association’s mail and telephone preference services (21); requiring consumer permission to use their personal information or disseminate it to third parties (22); and compensating consumers for use of their personal information (72). Milne and Gordon suggest using consumer attitudes toward privacy as a basis for segmenting direct mail solicitations (46). Past legal actions directed at users of consumer contact lists on the basis of privacy violation claims have been largely unsuccessful (36,38,62), yet there is evidence suggesting that courts may view consumer privacy as a right worth protecting. In a recent case, a San Diego man was awarded over $1,000 in a lawsuit against Tandy Corporation when its retail establishment ignored his verbal request not to be placed on a mailing list and disregarded a statement he wrote on the back of his payment check indicating that the retailer not place him on any mailing list or send him any promotional mailings (35). A judge agreed that Tandy had breached the agreement written on the back of the plaintiff’s check and supported this decision saying, ‘‘the attempt to protect one’s privacy can hardly be viewed as unreasonable.’’ In 1995, an alternative to the traditional idea of consumer privacy rights was widely publicized. The issue was raised as to whether consumers have property rights associated with their names and personal information in the marketplace (36). In Virginia Circuit Court, a plaintiff sued a national magazine, claiming that the publisher broke state law by selling his name to a publication without his knowledge or consent. The suit asserted that the plaintiff’s name was misappropriated by the seller for commercial purposes and therefore entitled the plaintiff to compensation for use of his name under a Virginia property statute (20,71). In June of 1996, the court ruled

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in favor of the magazine publisher, reasoning that the use of one name in a mailing list is too incidental to be actionable under the statute and does not constitute a use for advertising purposes or for purposes of trade. The plaintiff has appealed the decision to the Virginia Supreme Court. A decision, should the court decide to hear the case, is anticipated by late 1997. A ruling on the case may be precedent-setting for the direct marketing industry as database intelligence and list trading proliferate. Property rights issues add new dimensions to direct marketing policy and practice as society attempts to find solutions to privacy and other problems set forth by the Information Age. This paper examines arguments supporting consumer property rights to personal information, explores the implications for direct marketers should a property rights view become instituted, and makes a policy recommendation which seeks to improve direct marketer consumer contact strategies.

Personal Information as Property The idea of property rights associated with personal information dates back at least 100 years. The rationale, ‘‘A man’s name is his own property, and he has the same right to its use and enjoyment as he has to that of any other species of property,’’ was introduced in the U.S. in 1891 in Brown Chemical Company v. Meyer in a dispute over the use of a personal name for business (14). Constitutional scholars Westin (73) and Miller (43) argued in the late 1960s that property rights should be attached to personal information so that individuals could better control its dissemination and safeguard their personal privacy. Radin argued that an individual’s ‘‘personhood’’ (i.e., the state of being a person) consists of an intrinsic relationship between the physical body, external properties, and the concept of self— which includes names and similar manifestations of the self (56). Radin supported this assertion saying, ‘‘the personhood perspective generates a hierarchy of entitlements: the more closely connected with personhood, the stronger the entitlement’’ (56:986). Following this rationale, if personal information is recognized as personal property, then the individuals associated with that information are due various considerations—such as control over how that information is used. Belk’s work on the concept of the extended self suggests that consumers view personal identifiers, such as names, as personal possessions and that loss of control over such may result in feelings of loss or victimization (9). Foxman and Kilcoyne argue, on ethical grounds, that marketers should recognize consumer ownership rights to personal information in that consumers perceive these rights to exist and resent their violation (26).

ARGUMENTS SUPPORTING CONSUMER PROPERTY RIGHTS TO PERSONAL INFORMATION Property Definitions and Rationale for Property Laws Legally defined, property is something that may be owned or possessed and has value (6,10). Early constitutional and common law concerning property tended to concern physical entities, but in modern times, the idea of property has been expanded to include intangibles (10:1216). Property rights were established in order to protect owners from theft or misappropriation of movable or immovable property (2:71). Ownership of property implies the right to use and enjoy it, including the right to sell and transmit it. Possession of property can be actual or constructive—i.e., the ability to exercise dominion or control over the property; in addition, control of property need not be exclusive but may be shared with others (3:269). Property rights may be absolute—exclusive to one—or limited, where control falls short of absolute. States may establish regulations as to the acquisition, enjoyment, and disposition of tangible or intangible property, such as to ensure ‘‘general safety, the public welfare, and peace, good order and morals of the community’’ (3:272).

APPROPRIATION OF PERSONAL INFORMATION AS A BASIS FOR PROPERTY CLAIMS. A major contributor to

personal privacy issues is Prosser, whose theories have been widely incorporated into court decisions and federal laws (41). He asserted that privacy encompasses four separate legal torts: 1) intrusion (physical violation of a person’s seclusion or solitude); 2) disclosure (public disclosure of embarrassing private fact); 3) false light (inaccurate public portrayals); and 4) appropriation (use of a person’s name or likeness without permission) (54). There is belief that Prosser’s appropriation dimension of privacy rests upon a property right associated with one’s name or likeness (67). Prosser’s appropriation

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concept has successfully supported numerous ‘‘right of publicity’’ claims by plaintiffs whose names or likenesses have been used for promotional purposes without their permission (17,66,74). There has been some debate over whether Prosser’s appropriation concept should be interpreted to mean that the use of a person’s name for any commercial purpose be considered a privacy rights violation. Responding to this dispute, Prosser wrote, ‘‘It is the plaintiff’s name as a symbol of his identity that is involved here, and not as a mere name’’ (55:851). Thus, Prosser has been interpreted as stopping just short of declaring a property interest in individual names (39). Nowak and Phelps recently applied Prosser’s theories to an analysis of direct marketing practices and privacy and suggest that a logical basis exists for expanding Prosser’s concept of appropriation to direct marketing practices, especially those involving the trading of personal information to third parties (49). In support of this position, they argue that just as individuals retain some control over reproductions of their physical likenesses and the ways they can be used by others, those individuals should be able to ‘‘exercise control over database representations or specific personal facts provided by the individual in the course of a business transaction’’ (49:51). This reasoning suggests that the appropriation concept could serve as a basis for claims against direct marketers, especially those who sell, rent, or share lists of consumer information with other parties without the consumer’s knowledge or consent. Many states have laws modeled after Prosser’s appropriation concept, and the state of Virginia has a statute, rooted in Prosser’s theory, that has been interpreted by some as creating a property right in individual names and likenesses associated with commercial practices (36). The statute reads:

preme Court of Virginia in Lavery v. Automation Consultants, Inc., on the basis of the statute (39). The court reasoned: Prosser’s description of an appropriation case as one where a species of trade name or trademark is recognized helps persuade us that the Virginia statute protects property rights. The reality of a case such as we have here is, in the court’s opinion, simply this: plaintiff’s names and likenesses belong to them. As such, they are property. They are things of value. Defendant has made them so, for it has taken them for its own commercial benefit. (39:340–41)

VALUE ASSOCIATED WITH PERSONAL INFORMATION. The Lavery ruling sets the precedent for the

aforementioned Virginia case where an individual used a major magazine for selling his name to another party (36). A major argument in the case, and consistent with the definition of property, is that names have value. Trade and scholarly literature suggests that consumers may have legitimate property interests associated with the use of their names for commercial purposes in that economic or monetary value is associated with that information. Industry reports suggest that consumer information be perceived as key to financial success (32,57) and that databases be viewed as business assets. Reiter (58:274) claims, ‘‘in the Cybernetic Era information has become a commodity that is just as valuable as iron and coal were to the Industrial Revolution.’’ Advertising Age recently advised marketers to ‘‘treat information as an important company asset and invest in its development’’ (4). As the extensive use of consumer information has become part of the fabric of the modern marketplace, the issue of who ‘‘owns’’ consumer information is raised (13). Several perspectives on ownership have been offered. If personal information can be defined as property, the original owner (the subject of the information) could control its use and dissemination, an idea consistent with those of Westin and of Miller (43,58,73). Another view suggests the enterprise (the collector of the information), which has gathered such information through the expenditure of time, effort, and money for the purpose of its business, should control its use and dissemination (58). A recent study suggests that marketers who have created databases INFORMATION OWNERSHIP ISSUES.

Any person whose name, portrait or picture is used without having first obtained the written consent of such person . . . for advertising purposes or for the purpose of trade, such persons may maintain a suit in equity against the person, firm, or corporation so using such person’s name, portrait or picture to prevent and restrain the use thereof; and may also sue and recover damages for any injuries sustained by reason of such use. (71)

A plaintiff’s claim that his name was misappropriated for commercial purposes was supported by the Su-

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feel that the information contained belongs to them and therefore feel justified in using, selling, or renting the information to others without the subjects’ consent (63). Conversely, Westin suggests that marketers merely possess the information and thus should be regarded as trustees of the consumer data (72).

trol over personal information rests with government and legislative bodies, rather than with consumers. For example, attempting to reduce the disclosure of consumer credit information, the FTC in 1994 issued a cease and desist order to TransUnion Corporation, a large credit reporting agency, asking it to refrain from selling or distributing consumer credit reports in the form of marketing lists unless it had reason to believe that the list recipient intended to offer credit to the persons on the list (59). Despite the development of information protection policies, it appears that consumer information today is largely controlled by commercial and government entities (1,7).

CONSUMER PROTECTION AND PERSONAL INFORMATION DISCLOSURE Several federal statutes developed in recent years appear to expand consumer rights over personal privacy protection and information disclosure with respect to data held by commercial entities. For example, the Fair Credit Reporting Act (FCRA) allows consumers to see and correct errors in records held by consumer credit reporting agencies (24). The FCRA limits the disclosure of consumer credit information to those who intend to use the information for employment purposes or to make offers of credit or insurance and to those with a legitimate business need; credit records may also be released by court order or by written consent of the consumer (24,53). Other statutes which control personal information held by businesses are the Video Privacy Protection Act of 1988 and the Cable Television Consumer Protection and Competition Act of 1992, which limit disclosure of customer records (15,69). Specifically directed at telemarketing practices, the Federal Communication Commission’s Telephone Consumer Protection Act of 1991 and the Federal Trade Commission’s Telemarketing Sales Rule, which went into effect in January 1996, each contain provisions that reduce residential intrusion and require marketers to maintain company-specific ‘‘do not call’’ lists of consumers who request not to be called again (64,65). Despite the policies regulating the handling of consumer information, there is belief that these policies provide inadequate consumer privacy protection and that the laws lag behind current practice and technology (1,27,49). For example, the FCRA’s provision that anyone with ‘‘a legitimate business need’’ may have access to consumer credit information can be interpreted to mean that marketers essentially have free access to consumers’ personal information. Another criticism is that disclosure con-

PROPERTY RIGHTS: IMPLICATIONS FOR MARKETERS AND CONSUMERS The current interest in property rights for consumer information may be fueled by a belief that it would shift more control of personal information away from institutions to consumers, therefore allowing individuals to pursue such objectives as increased privacy or compensation. Thus, the Virginia plaintiff making the property rights claim probably stirs positive emotions among many consumers: Yes! The consumer strikes back! But a deeper analysis raises key questions. What could happen to direct marketing practice if property rights were attached to consumer information? Would a property rights orientation be constitutional? What are the broader social and economic implications of property rights for consumers? Consumer Control of Personal Information Absolute property rights attached to consumer’s personal information could spell dramatic changes for direct marketing practice. Property theory suggests that the use of information about individuals, beyond that necessary to conduct the original primary transaction, could be prohibited at the consumer’s discretion. Marketers could be required to obtain individual permission before using personal information for targeting purposes, an idea advanced by consumer advocates and the governing body of the European Community (8,21). Examples of consent include when consumers sign up to be on a company’s mailing list or call companies to request information; consumers may also respond affirmatively

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to marketer queries such as, ‘‘Would you like to receive information on XYZ products or services?’’ Companies may have to obtain permission for disclosing personal information to third parties, an idea consistent with several privacy proposals which would affect data trading practices (21,73). Further, marketers could have to compensate consumers when their information is traded or if their personal information is misused.

ing relationship while minimizing the potential abuse of their personal information (19,50). There is argument that compensation is not a proper model in the context of direct marketing since the value of the name is null if the prospect declines the solicitation; in effect, the direct marketer pays when the prospect fails to respond even it does not compensate the prospect directly. This is a valid argument from the perspective of purchasers of contact lists who make offers to those whose names appear on the lists. However, for list traders (those who sell or rent lists) the value is in the names themselves since list traders derive an income regardless of whether prospects respond to direct marketing offers and are compensated even when their lists include inappropriate prospects. This perspective of value formed the basis for the compensation claim in the Virginia case (20,36). Some legal observers argue that once value is placed on a name there is a property interest attached to it, whether the name is used for advertising purposes or as part of a mailing list (36). Another dimension of compensation is whether consumers should be compensated if their personal information is misused by marketers. The Telephone Consumer Protection Act (TCPA), for example, creates a private cause of action for individuals who receive more than one call from the same telemarketer in a 12-month period, if that individual has requested to be removed from the company’s calling list (65). The TCPA allows for monetary damages or fines of up to $500 per violation. States may issue injunctions against entities engaging in patterns or practices which violate the TCPA and may award triple damages for knowing or willful violations of TCPA provisions (65:). Marketers may defend themselves from charges of violating the TCPA if they have implemented reasonable practices and procedures to effectively prevent impermissible telephone solicitations. This protection is designed to protect marketers who inadvertently fail to accommodate a consumer’s opt-off request (16:62).

To some, the value dimension of personal information implies that some type of compensation is due for such information. Compensation is a controversial topic and is a salient issue for some consumers. Westin proposed that consumers be compensated, perhaps via coupons, discounts, rebates, etc., for use of their personal information (73). The DMA proposed that similar forms of compensation be used as a tradeoff to consumers for perceived invasions of privacy. Milne and Gordon’s 1994 privacy study identified a cluster of consumers, labeled ‘‘potential lobbyists,’’ who attitudinally tended toward an activist role with respect to direct marketing policy (46). Representing about a third of the sample, these consumers wanted to reduce the volume of mail solicitations received and wanted to be compensated somehow for the use of their personal information. It is likely that for many consumers, property interests have less to do with profiting from marketers than with other issues. Another consumer cluster identified by Milne and Gordon, representing about half of the sample, desired no compensation but wanted direct mail to be better targeted, that is, more relevant to them (46). In the Virginia case, the plaintiff stated that he was mainly in interested in making a point rather than money and requested only $100 in compensatory damages (36). Similarly, in a recent study by MasterCard International and Yankelovich Partners, only about one-third of the respondents agreed that monetary incentives, including cash back on purchases, product discounts, and elimination of credit card fees, were acceptable tradeoffs for the marketers to have the right to use their personal information for business purposes (40). Thus, compensation for information is not the driving issue for most consumers today. Rather, consumers are more likely interested in acquiring some control of and enhancing the benefits associated with the marketCOMPENSATION ISSUES.

Property Rights and Constitutional Issues A property orientation raises questions as to the constitutionality of property rights for consumers. Mott and Mott assert that historically, the concepts of personal privacy and property were interrelated under the Fourth Amendment with respect to protection from unwarranted government search and seizure

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of private property (48). In the late 1800s in Boyd v. the United States the Supreme Court asserted that personality and the privacies of life were equated with the individual’s inviolate property rights concerning the seizure of personal documents (12). Yet technological innovations such as wiretap devices and electronic data systems changed the physical nature of property and made Court decisions more complicated. By the 1960s, as illustrated in Katz v. U.S., the Court had largely abandoned a property standard of privacy in favor of a ‘‘reasonableness’’ interpretation of the Fourth Amendment (34). In Katz, the Court refused to admit into evidence conversations received via a ‘‘listening device,’’ arguing that Katz maintained a reasonable expectation of privacy when the conversations were held. Mott and Mott argue that the emphasis on reasonableness reduced the link between privacy and property, creating confusion in lower court decisions (48). However, the reasonableness standard provides courts with greater latitude in applying contemporary standards to questions of privacy and property. The 1976 United States v. Miller case sets a precedent which suggests that consumer control over personal information held by commercial entities is limited (68). In a dispute involving disclosure of a depositor’s bank records to government authorities, the Supreme Court determined that the documents in question were not the individual’s confidential ‘‘private papers’’ but were ‘‘business records of the bank’’ (68:440). The Court explained that business records had great utility in pursuing criminal, tax, and regulatory investigations, and appeared to want to avoid establishing restrictions on personal information that may hinder the pursuit of justice. Miller can be interpreted to mean that courts are reluctant to assign information disclosure control rights to individual subjects of that information. Consumer claims to personal information also raise First Amendment concerns, especially if permission is required before direct marketers can communicate with consumers. The Supreme Court’s decision in the 1976 Virginia Pharmacy case suggested that commercial speech be protected on the basis of its information value to consumers and reinforced the rights of sellers to communicate with consumers (70). However, beginning with the Central Hudson case in 1980, the Court retreated from affording the same level of protection to commercial speech than it does to political (noncommercial)

speech (18). In several cases since Virginia Pharmacy, the court has seen fit to limit truthful commercial speech and has found such regulation within the scope of the First Amendment (11,18,52). In a 1995 case challenging the constitutionality of the TCPA a federal court, citing Central Hudson, stated, ‘‘The government may impose reasonable restrictions on the time, place or manner of protected speech, provided that the restrictions are justified without reference to the content of the restricted speech, that they are narrowly tailored to serve a significant governmental interest, and that they leave open ample alternative channels for communication of the information.’’ (47). Citing evidence which showed that automated telemarketing practices posed an unwarranted intrusion upon residential privacy, the court ruled that the ban on such practices was content-neutral and narrowly tailored to advance the government’s interest in protecting residential privacy, and left open ample alternative communication channels (47). Similarly, calling time regulations and ‘‘do not call’’ provisions of the TCPA and the Telemarketing Sales Rule are consistent with acceptable time, place, or manner restrictions and advance the government’s interest in protecting consumer privacy. While policies allowing consumers to opt off of direct marketing contact lists may withstand constitutional scrutiny, courts may find that the express consent dimension of consumer property rights, requiring consumer permission to use or to disclose personal information to others, is unconstitutional under the First Amendment. If such a requirement significantly reduces the number of contactable prospects, then it could be argued that sellers’ rights to communicate with potential buyers are diminished and that such regulation is more restrictive than necessary to advance the government’s interests in protecting personal privacy. Social and Economic Implications Not withstanding constitutional issues, a consumercontrolled information marketplace could offer advantages as well as disadvantages from a social and economic perspective. A property orientation has the opportunity to impact upon direct marketing practices at three different levels. At one level, property rights could elevate consumer intrusion privacy if request-driven ‘‘do not contact’’ rights, consistent with existing ‘‘do not call’’ telemarketing rules, are

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established. Intrusion control could expand consumer protection to include freedom from unwanted mail and electronic mail, as well as telephone solicitations. Such an environment would also effectively signal to direct marketers that those who request not to be contacted are not viable prospects. At a second level, property rights could improve consumer targeting and solicitation response rates if consumer consent for contact were required, since theoretically, the people who grant permission would be better qualified and more interested (36,73). A social disadvantage to the express consent scenario is that appropriate prospects could cut themselves off from valuable marketing information by failing to provide consent. In other words, many consumers who are indifferent toward direct marketing solicitations may deprive themselves of information from marketers by doing nothing, which is equivalent to saying ‘‘no’’ under an express consent rule. At a third level, property rights could impact significantly on data-trading practices. With respect to data trading, consumers and marketers are at odds: consumer advocacy groups champion the permission or opt-in view, which would require consumer consent to disclose personal information to third parties, while marketing trade groups prefer optout mechanisms—i.e., that personal information be disclosed to others unless the individual explicitly objects (8). Consumer consent could substantially reduce the level of data trading, as an overwhelming majority of consumers object to current data trading practices: specifically, personal information disclosed to other parties without the consumer’s knowledge or consent and data collected for one purpose but used for another produce high levels of public concern, anxiety, and anger (28,29,37,40,49). Thus, many consumers would vent these concerns by failing to provide permission to disclose their information to third parties. Again, many indifferent consumers would do nothing, which is equivalent to not granting permission. Marketers are fearful that such restrictions on list trading would seriously diminish direct marketing opportunities, as many are dependent upon list availability. Placing restrictions on the availability of consumer information and having consumers control access to data has the greatest potential for increasing consumer privacy. Yet requiring consumer permission to use and trade personal data has the po-

tential to make list management and trading practices significantly more costly and cumbersome. For some business categories which experience low levels of consumer-motivated interest and are dependent upon aggressive outbound solicitation tactics, this requirement may effectively kill off their direct solicitation activities, reducing revenues and employment in the process. Trade reports show that direct marketing activities make a significant impact on the national economy, producing 1 in every 13 jobs in the U.S. and producing 12% of consumer sales—nearly $600 billion in 1995 (23).

MAKING DIRECT MARKETER– CONSUMER CONTACTS MORE MUTUALLY BENEFICIAL: A PROPOSED POLICY FRAMEWORK Criticisms of direct marketing practices tend to focus on the intrusive nature of some direct marketing contacts, receipt of irrelevant or inappropriate solicitations, and the trading of personal data. Perceived negative perceptions of some direct marketing practices have fostered feelings of resentment and distrust among a substantial proportion of the consuming public (19,28,29), fueled extensive media coverage about consumer privacy issues (51), and prompted more restrictive regulatory proposals (5,21,42,44,72). Yet not all direct marketing practices are perceived negatively. Rogers’ recent study indicates that consumers exhibit little hostility toward direct marketers with whom they know and do business compared with unfamiliar solicitors; many consumers enjoy and look forward to some direct mailings and catalogs (60). Similarly, Nowak and Phelps’ research indicates that consumer privacy concerns are reduced when consumers willingly and knowingly supply information, are aware when information is being collected and are aware of its uses, are allowed access to database information, and can opt off of marketing lists (49). As Schultz argued, an environment that favors the marketer without offering adequate benefits to the consumer acts as a disincentive to the consumer (61). An appropriate policy approach, therefore, would place more emphasis on consumer interests in the marketplace than currently exist. In the context of direct marketing, the interests of marketers and consumers can be served via infor-

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mation policy implementation which recognizes limited property rights of consumers and marketers. Property theory indicates that property rights can be limited and shared among multiple parties and that property laws can be constructed to promote the general welfare of the public (2,3). Limited property rights implies that each party has some control, although not absolute control, over information use and disclosure in the marketplace. These proposed policies, described below, would shift some control of personal information to consumers and would make mandatory certain marketer information-handling practices. This paper proposes government regulation at the federal level as industry attempts at self-regulation pertaining to similar ideas have been regarded as largely ineffective (27,33,49). Even marketers themselves do not believe that consumer rights are adequately protected under current law and business practices (63). This regulatory proposal calls for the establishment of a federal Consumer Information Exchange Policy, perhaps administered through the Federal Trade Commission, which would encourage consumer involvement in information disclosure, improve consumer targeting, and increase consumer privacy via enhanced intrusion control. The new policies would place significantly more control of consumer information in the hands of consumers via increased opt-in/opt-off opportunities, while allowing marketers fairly broad access to qualified prospects. First, a disclosure policy would require that consumers be made aware of information transactions at the point of data collection, since one source of consumer concern is that they are unaware that the data is even collected. There could be notices in catalogs, on return mailings, at points of purchase, etc., which inform the consumer 1) that information is being collected for marketing purposes, and 2) if the information will be shared with other parties. Second, marketers would provide consumers with substantially more opportunity to engage in consensual information exchange where consumers could indicate what kind of information they wish to provide for marketing purposes and to what kinds of companies that information should be disseminated. Consumer preference in providing information to marketers (opting in) could be defined as generally or specifically applicable (consumers would specify whether they prefer to provide information to all

direct marketers, or only to marketers in specific product/service categories). These consumer information exchange specifications could be documented during common marketplace transactions: for example, on credit applications, on magazine subscription reply cards, during orders from mailorder houses, etc., in the form of check-off boxes validated with the consumer’s signature. Consumers could also indicate how they prefer to be contacted: by mail, by phone, etc. These information exchange specifications could be updated on a regular basis, once a year, for example, and added to databases. With respect to data trading activities, list compilers and brokers would be required to allow consumers to see and correct inaccuracies in their personal profiles, similar to the consumer rights established under the Fair Credit Reporting Act. Express consent to use or trade consumer information for targeting purposes would not be required. Any compensation to consumers for the use of their data would be at the marketer’s discretion and could be negotiated with consumers. Under this scheme, targeting would improve via consumer involvement in the consensual information exchange. In an effort to heighten consumer privacy from intrusion, direct marketer compliance with consumer opt-off requests would become mandatory rather than voluntary. Consumers could opt off generally by registering with the Direct Marketing Association’s Mail and/or Telephone Preference Services. As such, all direct marketers would have to consult the registry, which could be made available for a modest annual fee. (On-line access to the registry could help to minimize access costs and perhaps decrease time lags so the information is more current.) Consumers who opt off generally could add themselves to specific marketers’ lists by contacting the companies directly. As an alternative to the general opt-off mechanism, consumers could register their opt-off requests with specific companies, via postcard or other documentation. All companies would be required to maintain records of ‘‘do not contact’’ requests, similar to the ‘‘do not call’’ provisions established by the telemarketing rules. Marketers would not be required to compensate consumers for the use of their personal information, but direct marketers who willfully fail to comply with the optoff mandate could be liable for compensation to consumers who have registered their opt-off preferences, in a manner similar to that established under

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CONCLUSIONS

the Telephone Consumer Protection Act. Marketers could defend themselves from litigious consumers by establishing reasonable procedures for consumer contact, again similar to the language in the TCPA. This policy scenario recognizes that both marketers and consumers have a vested interest in personal information and marketplace information exchange and seeks to maximize the value of the marketerconsumer relationship for both parties. Consumers would benefit by exercising greater input into how their personal information is used and elevating privacy from unwanted direct marketing intrusion. Through increased opt-in/opt-off opportunities, consumers would receive a greater proportion of direct marketing offers that are relevant to their needs and interests but would not be cut off from the flow of marketing information. Marketers would benefit by seeing an improvement in their targeting efforts and would effectively reduce the number of hostile, uninterested, and inappropriate prospects. List trading opportunities would not diminish, but the quality of lists could improve. In turn, improved targeting may increase positive response rates to direct marketing offers, improve customer satisfaction, and help to alleviate the ‘‘junk’’ perception often associated with direct marketing efforts. One limitation associated with this policy proposal is that it could increase direct marketers’ administrative costs associated with list management and opt-off compliance. However, these costs could be offset by savings associated with a reduction in the volume of inappropriate direct marketing contacts and improved response rates. Marketers’ financial liability in cases of noncompliance with the information exchange terms would serve as an incentive to comply, and may help to reduce such costs in the long run. Another limitation of the proposal is that it does not substantially curb data trading or the availability of personal data in the marketplace—circumstances that many take issue with. Yet, the contributions of personal information to society and the economy suggest that some expectations of personal privacy may be traded off for benefits derived from information exchange. Mandatory opt-off compliance would at least allow consumers more freedom from intrusion. The foregoing analysis suggests that to widely restrict the availability of personal information may be detrimental socially and economically and also may be unconstitutional.

A review of the literature on property rights and personal information suggests that consumers may have valid interests associated with the use of their names for marketing purposes. However, a broader issue is whether attaching property rights to consumer information is a suitable solution to improving direct marketing practices. Attaching absolute property rights and ‘‘ownership’’ privileges to consumers’ personal information may result in unintended and undesirable societal effects and may have ramifications which extend well beyond marketing. For example, contact lists are useful for research and polling purposes and the attachment of pure property rights to personal names could negatively impact upon data collection attempts. The proposed policy may not satisfactorily address consumer privacy concerns related to use and trading of personal data. Yet examination of the legal environment suggests that nonlegislative solutions to consumer privacy issues may have to be devised. Marketers and consumers should share consumer information in such a way that the interests of both are served, without unreasonably burdening or compromising the interests of the other. Recognizing consumer interests in their personal information in the manner proposed would improve direct marketing contact strategies and would help to reduce negative concerns associated with direct marketing practice. Marketers should take advantage of database technology to store and use information that indicates what kind of incentives and/or approaches make individuals feel more comfortable and confident in maintaining relationships with marketers. The same techniques which can be used to determine who might buy a gas grill can be used to foster a more valuable experience for the consumer (25,30). When marketers use personal information in a way that offends, disrespects, and annoys consumers, the perception of direct marketing as a whole suffers. Recognizing that consumers perceive ownership of their personal information, and sharing that information in a way that is respectful, relevant, and beneficial, is a way to build relationships with consumers and improve satisfaction. The policies proposed here illustrate a way to enhance the reputation and practice of direct marketing in such

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25. Fitzgerald, Kate (1995), ‘‘Marketers Capture Prospects Using AmEx ‘Closed Loop’,’’ Advertising Age, (October 9), 19–20.

a way that both consumer and marketer goals are enhanced. j

26. Foxman, Ellen R. and Kilcoyne, Paula (1993), ‘‘Information Technology, Marketing Practice, and Consumer Privacy: Ethical Issues,’’ Journal of Public Policy and Marketing, 12 (Spring), 106– 119.

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