Tuesday, October 12, 2004

Article: Privacy litigation and customer relations

DMNews (Direct Marketing News) has an interesting article, commenting on the Albertson's pharmacy ligitation begun by the Privacy Rights Clearinghouse (see Lawsuit: Privacy advocacy group sues drug store chain over alleged privacy concerns). The article, written by Alan Chapell, has some good insights on the importance of privacy in customer relations:

Albertson’s Case Shows Hazards of Privacy Waters:


Scenario 1: Completely innocent. Let’s assume for the sake of argument that every allegation Privacy Rights Clearinghouse made is false, and that Albertson’s will be vindicated. Unfortunately, by the time the truth comes out, Albertson’s will have spent a boatload of money in legal fees.

Moreover, guilty or not, its brand image will have taken a large hit. Allegations are usually printed on the front page, while retractions are often buried in the classifieds next to the tag sale ads. And in an environment where all pharmacies are created more or less equal, any negative press is likely to send some of its customers across the street.

Scenario 2: Enron part deux. Now let’s take the worst-case scenario. Let’s say it’s proven that Albertson’s took confidential customer prescription information, placed it into a database and then sold that data to pharmaceutical companies.

Then let’s say that the drug companies use that data to send mailings and place telephone calls to consumers reminding them to renew their prescriptions. And let’s say that these practices are found in court to be in violation of the law. The fallout of fines, legal bills, bad press and customer loss could be nothing short of devastating to the company.

Scenario 3: Middle of the road. Now let’s assume that the facts are somewhere in the middle. Maybe Albertson’s did send prescription reminders, and perhaps those reminders were financed by drug companies. Is that the same thing as selling consumer prescription data to the drug companies?

My point is that there’s a very subtle distinction between selling customer data to a third party and having that third party finance marketing campaigns to your customer lists. I’m not sure how Albertson’s alleged prescription plan differs from a traditional list rental situation. And even if Albertson’s is on the right side of the law, it will be in the unenviable position of defending its legal position at the expense of customer good will.

Consumers are not necessarily interested in subtle legal arguments if they feel that they’ve been misled or otherwise mistreated..."

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