Page 323 - DMGT308_CUSTOMER_RELATIONSHIP_MANAGEMENT

Customer Relationship Management

Notes A could attempt to stop personal data from getting released to a third party by preferring to do
business only with firms that agree to destroy such data. But companies would charge customers
higher prices to compensate for the lost information resale. Furthermore, once many companies
start refusing to sell information, each will have less information that before and hence a greater
business risk, which would be reflected in the price. In effect, firms would charge for withholding
the information through their product or service prices.
At the same time, any effort by A to pay a high price to B for non-revelation will likely raise the
value of the information to B, C, etc. – What is A trying to hide, anyway? And, wouldn’t A have
to pay a similar bribe to C, too, if the information reaches it? Thus, the more important the
information is to more parties, the less affordable is a market transaction to purchase privacy.
Only where information is of little use to others, or only to a very few, are privacy transactions
likely.
An example is a video store. Such a business could advertise that its policy is to guarantee
privacy. It would gain customers, and since the information is not usually very important to
many other parties, it would lose little (the interest in political figures and celebrities is an
exception). In contrast, it is hard to imagine a credit card company willing to be compensated for
non-disclosure to other credit-extending firms. The value of preventing credit-fraud is so great
to so many firms that any payment to undermine the reporting system would have to be quite
high. Yet video-store disclosure is prohibited by law, while credit-reporting is legal. The reason
is probably that the loss of information-value was low for video-viewing and nobody therefore
mounted a fight against such legislation, while politicians running for election were particularly
sensitive about the issue.
Even if A could pay B to withhold the information, it may not be possible in practical terms. One
of the characteristics of information is that its exclusivity is almost impossible to acquire once
multiple parties have access to it.
Any negotiating approach will only work for transactions between individuals and businesses.
If the information is obtained by government, less market-based incentive exists to prevent
transfer of the data. This is one reason why government agencies are becoming so active in
selling information to others. They have little to lose. Where else could one go to get a driver’s
license?
Currently, there is a right to collect, distribute and utilize personal data. What then if the rights
were reversed and one would have to get a person’s permission before retaining, transferring or
utilizing personal data about him? If the information is of value to a bank and other credit
institutions, they would acquire it by compensating the customer. Given the collective value of
the information, such transaction would be likely. Hence, the information would be circulating.
Consumer would be richer that before, but the information would be, in effect, still in the public
domain.

In conclusion, for personal data banks containing information about individuals, market
transactions are either unlikely where the information is of use to many others or it will be
acquired by them. In either case the personal information, if valuable, becomes public
information. For the future, one possibility that may help alleviate this problem is the emergence
of encryptions.
12.2.5 Encryption

For markets in personal information to exist, it is necessary to protect that information from
appropriation by others.

With digital technology, methods of protecting information with encryption have become
powerful and convenient. Encryption goes back for thousands of years. It emerged primarily for

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