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Businesses stand to benefit if they grant consumers more control over how their personal data is used, a policy think-tank has said.

Demos said that consumers are suffering a "crisis of confidence" in relation to information sharing, and that businesses stand to enjoy a "significant advantage" over others if they have "open, transparent and clear information-sharing relationships with customers".

Businesses should allow consumers to make an "informed choice" about the way those firms can use personal information, Demos said. It added that consumers should also be given "meaningful options" when making privacy choices. The think-tank also said that consumers are more likely to share personal information with businesses if they believe they are going to benefit by doing so.

"Regulators and businesses need to find a flexible, dynamic framework, which recognises the diversity of views on the issue, and consider how people can customise and negotiate their relationship with organisations, so that it is and feels mutually beneficial," Demos said in a new report [80-page 490KB PDF] on the 'data dialogue'. "We believe that three key principles can help establish this approach to data sharing: offering informed choice, having meaningful options and elucidating the mutual benefit of doing so."

Demos said that businesses need to educate consumers about how their personal data would be utilised in the event of them sharing that information.

"Informed decisions are based on knowledge about how data and information are collected, who it might be shared with, and under what conditions, so this information must be provided in a clear and simple way," it said. "This includes making distinctions between information that is personal – for example, anything that might identify them personally – and generic behavioural data, which can be aggregated and anonymised. This demands honesty about the ways in which data are collected – such as how the technology works – and how they are used."

It is not always appropriate for companies simply to offer consumers a choice between opting-in or opting-out of information sharing in its totality, Demos said.

"Concerns relating to the sharing of personal data are not about the principle of sharing data per se, but about losing control over who accesses it and what it is used for," the report said.

"Information policies must be designed around the principle of consumer control – creating a spectrum of meaningful options about how much, when, and to whom consumers share information. This needs to be realistic: some products depend on information sharing, such as mobile network access services."

"A spectrum of options must go beyond 'opt-in' or 'opt-out', which do not reflect the shifting scale and variety of views about information sharing held by the public. Simple dichotomies could result in too little or too much information being shared, which is bad for consumers and businesses," it said.

Demos said that consumers may not be sharing as much personal information as they may be willing to because they do not fully understand how they can benefit from the process. As a result companies should make it clearer to consumers what they can gain from trading their personal information, it advised.

"It is important to make 'value exchange' transactions between consumers and companies more explicit," it said.

"At the moment people are entering into an exchange but are not always sure what they are trading. It is vital to make the currency of the exchange more explicit to all parties, so that trust is established. Any information policy must be based on fully elucidating the benefits of sharing information for individuals and companies. Companies and organisations that take information sharing concerns seriously will be rewarded by consumers."

"Consumers make decisions about what to share based on trust: they will share information with companies and brands they have confidence in. To gain that trust, businesses must recognise and respond to the concerns that the UK public has about information sharing. Then they will benefit from greater consumer loyalty – and reap an economic reward, too, as consumers share more," Demos said.

The think-tank said that continued consumer mistrust in how businesses handle personal information could lead people to share less of their data, and that this "would have detrimental results for individuals, companies and the economy."

Copyright © 2012, Out-Law.com

Out-Law.com is part of international law firm Pinsent Masons.

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