Addressing the Failure of Anonymization

It is common practice for companies to “anonymize” the consumer data that they collect. In fact, U.S. data protection laws and Federal Trade Commission guidelines encourage the practice of anonymization by exempting anonymized data from the privacy and data security requirements they impose. Anonymization involves removing personally identifiable information (“PII”) from a dataset so that, in theory, the data cannot be traced back to its data subjects. In practice, however, anonymization fails to irrevocably protect consumer privacy due to the potential for deanonymization—the linking of anonymized data to auxiliary information to re-identify data subjects. Because U.S. data protection laws provide safe harbors for anonymized data, re-identified data subjects receive no statutory privacy protections at all—a fact that is particularly troublesome given consumers’ dependence on technology and today’s climate of ubiquitous data collection. By adopting an all-or-nothing approach to anonymization, the United States has created no means of incentivizing the practice of anonymization while still providing data subjects statutory protections. This Note argues that the United States should look to the risk-based approach taken by the European Union under the General Data Protection Regulation. Their data protection laws utilize multiple tiers of anonymization, which vary in their potential for deanonymization. Under this approach, pseudonymized data—i.e., certain data that has had PII removed but can still be linked to auxiliary information to re-identify data subjects—falls within the scope of the governing law, but receives relaxed requirements designed to incentivize pseudonymization and thereby reduce the risk of data subject identification. This approach both strikes a balance between data privacy and data utility, and affords data subjects the benefit of anonymity in addition to statutory protections ranging from choice to transparency.