4 ms·

Verizon Fined $7.4M for Misusing Customer Data

34 points by david_shaw 12y ago

bicknergseng 12y ago
Oh boy... 32 minutes of revenue. That'll teach em.
- iLoch 12y ago
  Actually, time would probably be a much better way of fining companies of that size. Example: "Verizon Fined 1 Week's worth of revenue"
  - ezekielrage 12y ago
    Yeah, good luck getting that passed through congress.
- eli 12y ago
  How much do you think is appropriate? What Verizon did is clearly wrong and I'm glad the FCC is on top of it... but this ain't exactly the crime of the century.
  - gerner 12y ago
    True, but it seems like this is not much a disincentive compared to the revenue potential in that data. Having worked at a number of companies that have acquired data (legally) from a fraction of this many people, one should easily be able to turn those around for a comparable amount of money. I'm not saying there's $100M of revenue here (for 2 million folks). But It seems like the penalty must be much worse than the upside to make the risk adjusted expected value work out in favor of following laws and regulations. I might agree with you if I thought the bad press Verizon is getting was actually quite costly. But I don't.
    - deleted 12y ago
      [deleted]
    - eli 12y ago
      FWIW, I'm pretty sure Verizon lost quite a bit of money on this. Especially since most people don't bother to opt-out even when given proper notice so the illegal act netted them far less than 2 million people.
  - mikeash 12y ago
    Another comment says that it's about $4 per affected customer. Fines for this sort of thing are typically hundreds or thousands of dollars per incident.
    - eli 12y ago
      Not sure what you mean. This is the largest FCC fine for misuse of marketing data ever.
  - bicknergseng 12y ago
    I'm no legal expert, but I'm pretty sure this is the same legal system that dolled out $1,920,000 to a non-wealthy individual for sharing some Gloria Estefan songs. Justice?
click170 12y ago
Why are fines not tied to a percent of revenue for a given time period? These flat-fee fines look big to the little folks but typically are pocket change for these big companies, it should actually hurt (see punishment) when they do something wrong.
- chimeracoder 12y ago
  It's not like there isn't precedent for percent-revenue-over-time penalties in the law (albeit perhaps not by the FCC). For example, Google was ordered to pay 1.36% of AdWords revenue to Vringo[0] (though this was later overturned). [0] http://arstechnica.com/tech-policy/2014/01/court-orders-google-to-pay-1-36-of-adwords-revenue-for-infringing-patents/ http://arstechnica.com/tech-policy/2014/01/court-orders-goog...
- eli 12y ago
  But it's not a flat fee. According to the FCC, it's actually the largest fine ever for misuse of data for marketing purposes.
  - delecti 12y ago
    This works out to ~$4 per affected customer. The issue is that they advertised other Verizon services to customers without giving them an option to opt-out. They effectively paid $4 per sales lead, and for leads to customers they already did business with, that's a pretty phenomenal deal considering the breadth of services they could then try to sell. Figure 1/10 of those customers got a $10 monthly service and kept it for a year. That's $24m in revenue on a conservative estimate.
    - eli 12y ago
      I agree in principle with the idea that the fine should always be more than the potential profit, but I think it would be really hard to implement such a rule. Anyway, I don't agree with your math. Surely many/most of the affected customers would not have bothered opting out even if they had been given proper notice. Opting out is kind of a hassle. And a 10% sales conversion is ridiculously generous by like three orders magnitude. I'd be surprised if 10% of people even open their messages.
kyledrake 12y ago
Can I fine the NSA for mis-using customer data?
- spacecadet 12y ago
  yeah seriously- the government will demand user data and then fine the company for misusing it... corrupt.
pkaye 12y ago
If you scale this to an average person making $50K a year, it would like a $5 fine.
BryantD 12y ago
The initial fine is not always the biggest cost to the company. I am not a lawyer and have not read the consent decree in this case, but typically the cost of compliance to the consent decree is significantly larger than the initial fine.

34 points by david_shaw 12y ago

bicknergseng 12y ago

Oh boy... 32 minutes of revenue. That'll teach em.

iLoch 12y ago
Actually, time would probably be a much better way of fining companies of that size. Example: "Verizon Fined 1 Week's worth of revenue"
- ezekielrage 12y ago
  Yeah, good luck getting that passed through congress.
eli 12y ago
How much do you think is appropriate? What Verizon did is clearly wrong and I'm glad the FCC is on top of it... but this ain't exactly the crime of the century.
- gerner 12y ago
  True, but it seems like this is not much a disincentive compared to the revenue potential in that data. Having worked at a number of companies that have acquired data (legally) from a fraction of this many people, one should easily be able to turn those around for a comparable amount of money. I'm not saying there's $100M of revenue here (for 2 million folks). But It seems like the penalty must be much worse than the upside to make the risk adjusted expected value work out in favor of following laws and regulations. I might agree with you if I thought the bad press Verizon is getting was actually quite costly. But I don't.
  - deleted 12y ago
    [deleted]
  - eli 12y ago
    FWIW, I'm pretty sure Verizon lost quite a bit of money on this. Especially since most people don't bother to opt-out even when given proper notice so the illegal act netted them far less than 2 million people.
- mikeash 12y ago
  Another comment says that it's about $4 per affected customer. Fines for this sort of thing are typically hundreds or thousands of dollars per incident.
  - eli 12y ago
    Not sure what you mean. This is the largest FCC fine for misuse of marketing data ever.
- bicknergseng 12y ago
  I'm no legal expert, but I'm pretty sure this is the same legal system that dolled out $1,920,000 to a non-wealthy individual for sharing some Gloria Estefan songs. Justice?

click170 12y ago

Why are fines not tied to a percent of revenue for a given time period? These flat-fee fines look big to the little folks but typically are pocket change for these big companies, it should actually hurt (see punishment) when they do something wrong.

chimeracoder 12y ago
It's not like there isn't precedent for percent-revenue-over-time penalties in the law (albeit perhaps not by the FCC). For example, Google was ordered to pay 1.36% of AdWords revenue to Vringo[0] (though this was later overturned). [0] http://arstechnica.com/tech-policy/2014/01/court-orders-google-to-pay-1-36-of-adwords-revenue-for-infringing-patents/ http://arstechnica.com/tech-policy/2014/01/court-orders-goog...
eli 12y ago
But it's not a flat fee. According to the FCC, it's actually the largest fine ever for misuse of data for marketing purposes.
- delecti 12y ago
  This works out to ~$4 per affected customer. The issue is that they advertised other Verizon services to customers without giving them an option to opt-out. They effectively paid $4 per sales lead, and for leads to customers they already did business with, that's a pretty phenomenal deal considering the breadth of services they could then try to sell. Figure 1/10 of those customers got a $10 monthly service and kept it for a year. That's $24m in revenue on a conservative estimate.
  - eli 12y ago
    I agree in principle with the idea that the fine should always be more than the potential profit, but I think it would be really hard to implement such a rule. Anyway, I don't agree with your math. Surely many/most of the affected customers would not have bothered opting out even if they had been given proper notice. Opting out is kind of a hassle. And a 10% sales conversion is ridiculously generous by like three orders magnitude. I'd be surprised if 10% of people even open their messages.

kyledrake 12y ago

Can I fine the NSA for mis-using customer data?

spacecadet 12y ago
yeah seriously- the government will demand user data and then fine the company for misusing it... corrupt.

pkaye 12y ago

If you scale this to an average person making $50K a year, it would like a $5 fine.

BryantD 12y ago

The initial fine is not always the biggest cost to the company. I am not a lawyer and have not read the consent decree in this case, but typically the cost of compliance to the consent decree is significantly larger than the initial fine.