

Verizon Fined $7.4M for Misusing Customer Data - david_shaw
http://online.wsj.com/news/article_email/verizon-to-pay-7-4-million-fine-for-using-customer-data-for-marketing-1409761548-lMyQjAxMTA0MDAwMzEwNDMyWj

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click170
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.

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eli
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.

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delecti
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.

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eli
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.

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

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eli
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.

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gerner
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.

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eli
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.

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

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

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BryantD
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.

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

