We have been highly critical of information services company ChoicePoint (NYSE: CPS) for years, ever since they admitted selling private consumer data in early 2005. Identity theft was starting to ramp up as an American consumer's worst nightmare, data was sometimes being lost or stolen, but this was the first time in recent memory that a company collecting the data admitted that it sold more than 140,000 consumer records to individuals posing as businesses.
The timeline grew as gruesome as one might expect. Only one week later, ChoicePoint admitted that they knew about their data breach as early as October 2004, but were working with law enforcement. We were critical and remain critical of the decision to suppress news from consumers about a deliberate breach of consumer information.
Congress justifiably got involved, but little came out of the federal government's queries, something we see repeated too often. This time, however, the Federal Trade Commission stepped in and chased down ChoicePoint's processes. A year later, the company announced it would pay a $15 million fine, including $5 million for consumers, to settle the FTC's complaint that ChoicePoint did not have adequate safeguards in place.
The only time we believed the company was being harshly treated was when a coalition made up of nearly every state bellied up to the trough and beat another $500,000 out of ChoicePoint. We said then and believe now that this was just a money and headline grab gambit and did little to help consumers.
Now an even bigger information company, Reed Elsevier (NYSE: RUK) which owns information company Lexis-Nexis among others, has stepped in with $4 billion or so to buy ChoicePoint. The premium being paid for the information housed in Georgia-based ChoicePoint is staggering. Less than one month ago, the market value of the company (as determined by its stock price) was about $2.3 billion. While stocks have been battered and there are value buys out there, this is akin to Microsoft trying to take on Yahoo!
We can (and do) argue both sides of consolidation at Consumer Help Web. Concentrating data in a few companies allows for more stringent regulation, tighter controls and a wider spotlight. At the same time, the mess our nation's three major bureaus have created finally caused the government to legislate that consumers receive free access to each company's report every year to examine the report for errors. That is a lot of power to put in the hands of a for-profit entity.
We see the same issue with Google now. We adore Google for its groundbreaking contributions to Internet searching. At the same time, multiple consumers in multiple consumers have expressed to us their concerns that the search company is gathering a picture of consumers that is too detailed. Indeed, search queries and other information are associated with Google accounts and create a history of what was searched for by a person. That's not a marketer's fantasy, but a consumer's nightmare. Every unimaginable intensely private search query is dutifully logged by massive computer centers and tied to an individual.
That is why we are not fans of Google's proposed Health offering, why we think Microsoft's Health offering has failed to gain traction and why we are very concerned about the merger of two giants like Reed Elsevier and ChoicePoint, even if the latter has been learned a painful lesson.
Labels: ChoicePoint, data breach, Google, Microsoft, privacy, Reed Elsevier
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