The Rush To Keep MumEvan I. Schwartz
This August, American Express Co. will at last reveal the whole truth. Under a settlement with the New York State attorney general, the services giant will disclose, in a mass mailing to its 25 million cardholders, that for years it has been sorting their transaction records by spending patterns, and then renting name-and-address lists to everyone from stores to insurers.
Chalk up another one for the privacy brigade. Under pressure from consumer-advocacy groups, American Express is just one of many U.S. companies cleaning up their acts when it comes to protecting the privacy of consumers and employees (table, page 38). "I don't know too many companies that are just standing pat," says Columbia University privacy expert Alan F. Westin.
Forcing this change is a dawning consumer awareness of marketing and technology. Software advances make it a cinch for companies to paint alarmingly detailed profiles of millions of their customers--everything from salaries and home values to the ages and weights of family members. The result: A 1991 survey by Louis Harris & Associates Inc. found 56% of Americans think it's important to be able to "opt out" of mailing lists. And since mid-1990, some 2 million have contacted the Direct Marketing Assn. (DMA) in New York to do just that. By contrast, from 1971 to 1990, just 160,000 did so.
The backlash is causing anxiety among retailers, charities, and others who take in $200 billion annually via direct-mail campaigns. Marketers are worried that some consumers are going overboard, calling for stiff laws requiring approval from everyone on a mailing list. Such "opt in" bills are pending in California and in Europe. Says a DMA spokesman: "That would destroy direct marketing as we know it."
NEW WEAPONS. While some companies are scrambling to adjust, others are using privacy as a weapon. American Telephone & Telegraph Co. is airing TV ads attacking MCI Communications Corp.'s Friends & Family program, which offers 20% off frequent calls. In the ads, a woman is outraged when a telemarketer asks for the phone numbers of people close to her. "Many consumers feel that is an invasion," says an AT&T spokeswoman. MCI is trying to allay fears. Last fall, it tightened access to the Friends & Family data base. Before the added security measures, callers could dial an 800 number and just punch in a zip code to get anyone's calling list and the relationships of those on it.
Privacy issues promise to get hotter in the future with such items as scanners that track your car as it moves through toll booths. "New technologies require new policies," says Columbia's Westin. To stay ahead of the backlash, companies are finding they have to move fast.
PROTECTING PRIVACY EQUIFAX Has quit selling credit and lifestyle information to most direct marketers FIDELITY Has installed passwords for clients to access their mutual funds data R.R. DONNELLEY/METROMAIL Has tightened its policy governing who can buy the mortgage and birth announcement data it collects and sells MCI Has limited public access to its Friends & Family data base NORTHERN TELECOM AND CENTEL Ended secret electronic monitoring of workers DATA: BW