This is not a hit piece on Epsilon/Abacus. It is a wake-up call for you the rest of you.
At the end of January, I saw a small article in the Wall Street Journal that mentioned that the US Department of Justice was fining Epsilon/Abacus $150 million for selling data to companies that were using that data and direct marketing techniques to target elderly consumers in criminal fraud schemes.
This was not a one-shot deal. It occurred over nine years ending in July 2017. You can read the full complaint here, at the Department of Justice website: Marketing Company Agrees To Pay $150 Million Fine For Facilitating Elder Fraud Schemes.
I’ve been waiting to see what kind of attention this news received in the “trade press”. But of course, there is no more catalog trade press, in the US at least. Years ago, this would be page one news in a dozen different industry publications which no longer exist. How convenient that this got swept under the rug. Nothing to see here folks.
If you have been a long-time reader of this blog, you know I’m not a fan of the catalog co-ops. But that stopped being news years ago, when almost all of you realized that the co-ops were not growing as more and more activity flowed to marketplaces like Amazon and Walmart. I last wrote about the co-ops in detail in 2018 (Acquisition – You’ve Beaten This To Death), and as I said in that posting, the topic by then had been beaten to death.
So why bring it up again?
As much as the co-ops might not be growing because so much transactional activity bypasses the co-ops (Amazon), they are still viable and used by many catalogs. Even though I have been warning you over the years to find additional sources of new customers, many of you continue to rely on them. They are easy to use, relatively low-cost, and even though the results are not as strong as they used to be, response rates are still predictable.
What’s changed is the current political climate in America.
Many of you are dealing with GDPR privacy regulations in EU nations. California has its Consumer Privacy Act. Rules for targeting customers are changing at Facebook and Google in an effort to protect consumer privacy.
Then, along comes a company that most consumers have never heard of, that collects their personal transactional data – which you supplied and which you thought was only used to help identify additional customers/prospects that want to buy your products – and that company admits to selling your customer’s data to criminals. Still think there’s nothing to see here?
Here is the part of the Justice Department announcement I find most alarming: “Epsilon admitted that, from July 2008 through July 2017, employees in its Direct to Consumer (DTC) Unit knowingly sold modelled lists of consumers to clients engaged in fraud. In particular, Epsilon acknowledged that the DTC Unit sold consumer lists to a number of mass-mailing fraud schemes that sent false “sweepstakes” and “astrology” solicitations to consumers. Those solicitations stated that each consumer recipient had won a large prize or individualized psychic service that they could obtain by paying a fee. In reality, the solicitations — as known to DTC Unit employees — were mass-produced mailings and victims who paid a fee received nothing of value. As reflected in the consumer lists sold by the DTC Unit to perpetrators of the fraud schemes, the schemes disproportionately affected the elderly and other vulnerable individuals. DTC Unit employees continued to sell consumer data to clients engaged in fraud despite knowing that those and similar clients had been arrested, charged with crimes, convicted, and otherwise subject to law enforcement actions for false and misleading practices. Epsilon admitted that the DTC Unit sold more than 30 million consumers’ data to fraudulent schemes.
The co-ops owned the golden egg. They had a great business model. You gave them your data – your customer transactions – for FREE. You lost control of that data but you trusted that it would not be abused. Further, when you wanted to use the data for your own mailings, you had to PAY. And you went into this relationship willingly. But because it worked, you closed your eyes and prayed that all would be well.
I’m not offering any political commentary – my political views are of no matter here. But in a country that got its collective undies in a bunch this past week over Dr. Suess, how long do you think it will be before some legislator somewhere turns their attention to all those data companies in Denver and says “We have to stop this. We have to protect our citizens.”
It’s too late for the co-ops to put a positive spin on “employees continued to sell consumer data to clients engaged in fraud despite knowing that those clients had been arrested and convicted for false and misleading practices.” They made it so easy for consumers to hate this industry, the legislators won’t be far behind.
Let’s not be naïve. There are probably boatloads of privacy lobbyists already approaching members of Congress and state legislators with legislation to further limit your ability to obtain names for prospecting. Once the pandemic starts to wane in importance, they’ll need another new crisis to solve.
Please don’t think I’m overreacting. In 1992, a local New Hampshire state representative wanted to severally restrict what data could be collected on residents in the state. The DMA contacted me (I was working at Brookstone at the time) to testify in the state capital, with the DMA’s lobbyist, against the restrictions. Purely by chance, my aunt was also a state representative at that time. Through a combination of working with her, the DMA lobbyist (who was great!), and my state senator, we persuaded the state rep who had proposed the initial legislation to withdraw it. In my opinion, his intentions were pure. He simply thought that too much of his constituent’s data was being collected and circulated. And this was 30 years ago! We won’t be so successful the next time.
Further, let’s be fair and recognize that only one of the co-ops perpetrated this breach of faith and trust between you and your customers and throughout the industry. It’s not for us to judge what Epsilon/Abacus did, the Department of Justice did that at a corporate level, and there is a higher authority that will judge what was done at a personal level by the individuals involved. However, I tip my hat to Phil Wiland who has made it a priority from day one to protect your data.
Take this as a wake-up call. It is a reminder that you need to always be developing other options for acquiring customers. And as a point of full disclosure, I continue to advise my clients to use the co-ops, including Abacus. But I also advise them that they must diversify.
I close with this thought: I once had a representative from Abacus ask to meet with me at a conference. He was tired of reading my criticisms of the co-ops in this space. I’m sure he felt that he could use his sales persuasion to win me over as a fan of the co-ops. His argument boiled down to one point: “What will you do if the co-ops go away”. Sadly, we may soon find out.
It was the golden egg….
by Bill LaPierre, Datamann USA
Since publishing this article we have secured the following comment from Epsilon addressing the DOJ settlement:
“With this resolution, Epsilon is putting this matter behind it and continuing its focus on its business. Epsilon has cooperated and actively consulted with the DOJ throughout this investigation, which related to activities that last occurred in 2017 and employees that were separated from the company long before Publicis acquired the company. Alliance Data Systems, the former owner of Epsilon, has agreed to indemnify Publicis for all costs related to the DOJ investigation and resolution, including the monetary payment.
“As part of Publicis Groupe, Epsilon adheres to the highest standards of compliance and employee conduct. Before acquiring Epsilon, Publicis ensured that Epsilon had taken corrective action, including putting in place an industry-leading compliance program in the Data Practice.
“For more than 50 years, Epsilon has been a leader in providing marketing, digital, and consulting services. With Epsilon as an important part of Publicis, it is uniquely positioned to help clients personalize consumer journeys and create immediate business impact.”