works as a piece of background information, so I will try to do that quickly.

The industry completely shares your concern to protect privacy. It is in our interest as well as the public's interest that that be done, because the whole system wouldn't work very well if the public lost confidence in it.

A little background quickly on how mailing lists work. A mailing list is simply a list of names and addresses which can be derived from sources as comprehensive as telephone directories or as selective as a subscription list to a small circulation magazine on contemporary art.

A retailer can maintain a list of his customers; a charity of its contributors, or a Congressman of his constituents. And each may, of course, attempt to categorize or segment them by, for example, product or service, frequency and type, or by party affiliation. The maintenance and storage is usually done by computer.

And in all cases, whatever the degree of refinement of the list, the objective is simply to ensure that recipients of mail sent out are likely to have an interest in what the mailer has to say. For example, when my company makes a mailing on behalf of the Literary Guild, we can only afford to mail to lists of that saving remnant of the population who actually read books, or at least are highly active readers in general who might become active book readers.

So what is the nature of the marketplace for these lists? It is common practice for a list owner, for example, a retailer with customers, a charity with donors, or a magazine with subscribers, to permit the one-time use of its list by another, frequently by an advertiser. For example, the Literary Guild might use the subscription lists of Harpers or the Atlantic Monthly for a promotion mailing because we know that readers of those magazines are above average book readers.

However, it is important to realize that a mailing list transaction prohibits the list user, by legally enforceable contractual obligation, from copying or making a record of the names and addresses on the list.

The purpose and the function of a mailing list is solely to furnish names and addresses to be used in the process of mailing promotional material of the user to the listed addresses. So typically the magnetic tape or mailing label list itself is delivered temporarily to an independent lettershop engaged by the advertiser or to the advertiser itself for the single mailing involved.

In the marketing world the list user never employs a list to ascertain any private information about any of the list members. He simply utilizes the list to get his mailing to the mailbox of potential customers who remain in effect anonymous so far as the list user is concerned.

So from all of this you can see that the process itself tends not to endanger personal privacy in any meaningful way-a conclusion which was reached by the Presidential Privacy Protection Study Commission in 1977.

However, let us look at the additional steps the direct marketing industry takes to ensure that privacy is protected. It is interesting

to note that they do these things in their own self-interest as well as in the public interest.

First, a mailer obviously has a strong economic incentive not to mail to people who find his mailings annoying and who throw them away unopened. To help reduce unwanted and hence unpofitable mailings, the DMA maintains the Mail Preference Service, which is widely promoted to the public.

MPS provides an individual with a means both to have his name removed from mailing lists or to have his name added to lists in which he may have a particular interest, for example, sports, camping equipment, books, or whatever.

Since the inception of this service in 1971, about 495,000 people have asked to have their names added to lists, while about 333,000 have asked to have their names removed. The add-on service was first offered in 1974, so that hasn't been running as long as the removal service.

Next, individual mailers notify their customers that they periodically rent their lists to others having something to offer in which they think their customers would be interested. But we give them the opportunity to have their names omitted from such lists if that is their desire. Thus, people can both get off of lists they are already on and avoid getting on lists in the first place, if that is what they wish.

Finally, the DMA has promulgated "Suggested Guidelines for Personal Information Protection," a copy of which is attached to this testimony, to provide individuals and organizations involved in direct mail and direct marketing with principles of conduct that are generally accepted and which will help ensure consumer privacy.

We believe they are routinely followed in the day-to-day operations of most of the business community.

The key to the whole process is the fact that direct marketers limit the collection and transfer of information to direct marketing purposes only. This has been the longstanding and natural practice of the business community inasmuch as it is only in these uses that the direct marketer has an interest.

By limiting the use of data to such commercially routine matters, consumer protection and privacy is not endangered.

Neither DMA nor the business community condones the use of mailing lists which are not compatible with the purpose for which the information is collected. Indeed, we believe this precept should be followed by all-government as well as the private sector.

The DMA guidelines specifically state that mailing lists should be rented for marketing purposes only, and we question the wisdom of Government agencies seeking to use them for other purposes. This would tend to undermine public confidence in a socially and economically important process, and possibly improperly invade personal privacy as well.

It is noteworthy that the U.S. Supreme Court has held that the first amendment protects not only a speaker's right to communicate, but also a listener's right to hear. Thus, when balancing the various delicate rights of individuals, the judiciary has fully protected all forms of commercial speech, including those uniquely employed by direct marketers.

Individual privacy is important to legitimate business people. With that in mind, the business community has done what we think is an effective job in seeing to it that consumer privacy is maintained.

I would be glad to pursue any of these things in more detail however you would like.

[The statement of Mr. Hoffman, and the guidelines, follow:] STATEMENT PRESENTED BY ALEXANDER C. HOFFMAN On Behalf of the Direct MarKETING ASSOCIATION, INC., BEFORE THE HOUSE JUDICIARY SUBCOMMITTEE ON COURTS, CIVIL LIBERTIES AND THE ADMINISTRATION OF JUSTICE, WASHINGTON, DC, APRIL 5, 1984

My name is Alex Hoffman. I am Group Vice President of Doubleday & Company, Inc., a diversified New York publishing house which does general publishing, both hardcover and paperback, elementary and secondary textbook publishing, operates a chain of bookstores and runs a number of large and small book clubs.

I am here today as Chairman of the Board of Directors of the Direct Marketing Association, Inc., known as DMA, a trade association incorporated under the NotFor-Profit Corporation Law of the State of New York. On behalf of DMA, I extend my deep appreciation to Chairman Kastenmeier and the House Judiciary Subcommittee on Courts, Civil Liberties and the Administration of Justice for the opportunity to share our thoughts with you today on the question of privacy protection.

ways.

I want to say at the outset that the direct marketing industry shares your concern that personal privacy continue to be protected in this era of the computer and other manifestations of high technology. My chief aim this morning is to help clarify the distinction between unauthorized release of properly private individual information and the legitimate, essentially anonymous use of marketing characteristics in compiled mailing lists—a process that serves the public well in many diverse ĎMA has nearly 2,400 member firms in 47 states and 26 foreign countries which represent every functional level of industry-manufacturing, wholesale and retail. These companies market goods and services through direct response methods, including direct mail advertising and mailing lists. As a measure of direct marketing's economic importance and consumer acceptance, consumer sales volume from catalogs alone was estimated to be $44.4 billion in 1983, a figure that has doubled in only 7 years. We estimate that total sales volume of all direct marketing and related service industries approaches $150 billion.

It is important to bear in mind the many and varied economic and social benefits of direct marketing. It is beyond the scope of this testimony to go into all of them, but suffice it to say here that direct marketing is an effective and efficient way to communicate information about available goods and services to targeted audiences, to provide maximum convenience to the elderly as well as to the increasing number of families with both heads of household working, and to aid fund raisers and charitable activities as well as to assist political candidates, parties and causes. Although mail is only one of the many media used to carry a direct marketer's message to his intended audience, it is convenient to use that medium as an example to demonstrate the methods which have been developed by the business community to protect consumer privacy.

First, a little background on the use of mailing lists in direct marketing. What is a list, where does it come from, and how is it used? A mailing list is simply a list of names and addresses which can be derived from sources as comprehensive as telephone directories or as selective as the subscription list of a small circulation magazine on contemporary art. A retailer may maintain a list of his customers, a charity of its contributors or a congressman of his constituents.

Each may, of course, attempt to categorize or segment them by, for example, product or service, frequency and type, or by party affiliation. Maintenance and storage is usually done by computer.

But in all cases, whatever the degree of refinement of the list, the objective is simply to insure that recipients of the mail sent out are likely to have an interest in what the mail has to say. For example, when my company makes a mailing on behalf of the Literary Guild, we can only afford to mail to lists of that saving remnant of the population who actually read books, or at least are highly active readers in general who might become active book readers.

What is the nature of the marketplace for lists? It is common practice for a list owner (e.g., a retailer with customers, a charity with donors or a magazine with sub

scribers) to permit the one-time use of its list by another, frequently by an advertiser. For example, the Literary Guild might use the subscription list of Harpers or the Atlantic Monthly for a promotion mailing because readers of those magazines are above average book readers.

However, it is important to realize that a mailing list transaction prohibits the list user, by legally enforceable contractual obligation, from copying or making a record of the names and addresses on the list. The purpose and function of a mailing list is solely to furnish names and addresses to be used in the process of mailing promotional material of the user to the listed addresses. It is not to convey any information for any cognitive purposes and never purposely discloses anything beyond the name and address of each person on the list and, by implication, that he or she falls within the generic category of persons that comprise the list. Transposition of names and addresses from a list to the mailing pieces is done mechanically, electronically and automatically. A list user gains no information or knowledge as to the contents of the list by having the list, which is its physical form consists of magnetic tapes or sheets of labels, transmitted to him or received by him.

Thus, in many mailing list transactions (indeed, perhaps in by far the majority of them), the magnetic tape or mailing label list itself is delivered temporarily to an independent lettershop engaged by the advertiser, or to the advertiser itself, for the single mailing involved. In the marketing world, the list year user never employs a list to ascertain any private information about any of the list's members. He simply utilizes the list to get his mailing to the mailbox of potential customers who remain, in effect, anonymous so far as the list user is concerned.

In these respects, a mailing list is a unique vehicle. It provides means for both mass communication and for individual attention; but the individual attention is provided to the listed person in the form of receiving something he is likely to be interested in, not by disclosing anything about him as an individual. To succeed, direct marketers must deliver their messages to the right prospects. A mailing list is the impersonal aid used to reach that goal.

From all of this you can see that the process itself tends not to endanger personal privacy in any meaningful way-a conclusion which was reached by the Presidential Privacy Protection Study Commission in 1977. However, let us look at the additional steps the direct marketing industry takes to insure that privacy is protected. It is interesting to note that they do these things in their own self interest as well as in the public interest.

First, a mailer obviously has a strong economic incentive not to mail to people who find his mailings annoying and who throw them away unopened. To help reduce unwanted and hence unprofitable mailings, the DMA maintains the Mail Preference Service (MPS), which is widely promoted to the public. MPS provides an individual with a means both to have his name removed from mailing lists or to have his name added to lists in which he may have a particular interest (i.e. sports, camping equipment, books, etc.). Since the inception of the service is 1971, about 495,000 people have asked to have their names added to lists, while about 333,000 have asked to have their names removed. The add-on service was offered in 1974. Next, individual mailers notify their customers that they periodically rent their lists to others having something to offer in which they think their customers would be interested, and give them the opportunity to have their names omitted from such lists if that is their desire. Thus, people can both get off of lists they are already on and avoid getting on lists in the first place.

Finally, DMA has promulgated Suggested Guidelines for Personal Information Protection, a copy of which is attached to this testimony, to provide individuals and organizations involved in direct mail and direct marketing with principles of conduct that are generally accepted and which will help ensure consumer privacy. We believe they are routinely followed in the day-to-day operations of the business community.

It should be noted that no mailing list is conceivable that would be constructed on the basis of unfavorable information regarding the names upon it. Lists that constitute reports regarding the credit status of individuals are, of course, not mailing lists, and, in any event, they are already governed by the Fair Credit Reporting Act. The only consequence of being on a mailing list is that one receives something that he presumably has an interest in. At that point he is free to read it or throw it away as he chooses.

Key to the whole process is the fact that direct marketers limit the collection and transfer of information to direct marketing purposes only. This has been the longstanding and natural practice of the business community inasmuch as it is only in such uses that the direct marketer has an interest. By limiting the use of data to

such commercially routine matters, consumer protection and privacy is not endangered.

Neither DMA nor the business community condones uses of mailing lists which are not compatible with the purpose for which information is collected. Indeed, we believe this precept should be followed by all-government as well as the private sector. The DMA Guidelines specifically state that mailing lists should be rented for marketing purposes only, and we question the wisdom of government agencies seeking to use them for other purposes. This would tend to undermine public confidence in a socially and economically important process, and possibly improperly invade personal privacy as well.

It is noteworthy that the United States Supreme Court has held that the First Amendment protects not only a speaker's right to communicate, but also a listener's right to hear. Thus, when balancing the various delicate rights of individuals, the judiciary has fully protected all forms of commercial speech, including those uniquely employed by direct marketers.

Individual privacy is important to legitimate business people. With that in mind, the business community had done what we think is an effective job in seeing to it that consumer privacy is maintained. Should any questions concerning these matters arise, now or in the future, DMA will be pleased to offer its assistance.

40-209 O

85

11

www