The Troubling Trend Toward Trade Secrecy in Rankings and Ratings

Article Source: in The Law and Theory of Trade Secrecy, Edward Elgar Publishing, July 2011
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This paper asks if retaining trade secrecy of rating methods such as credit scoring will harm competition and consumers.


Policy Relevance:

Regulators should be more aggressive in urging that the methods used to rank and rate web sites, doctors, and consumers’ credit scores be revealed.


Key Takeaways:
  • Powerful search engines such as Baidu in China or Google can distort the results of searches for political, cultural or economic reasons.
  • Google keeps secret the method it uses to rank the results of a search. There have been disputes about the fairness of the results of certain Google searches. Some argue that some problems with Google’s search results reveal political bias.
  • Markets and existing legal rules are not enough to hold firms that produce rankings and ratings accountable to consumers.
    • It would be hard for the FTC to know if Google is violating their agreement to keep paid search results separate from organic search results, because so much of what Google does is protected as a trade secret.
  • Some argue that if ranking methods are not kept as trade secrets, people will manipulate their position in the rankings. However, like voting, ranking methods should be transparent to justify our trust.
  • Credit scoring methods are also kept secret. Some have alleged that the system is unfair to minorities and the poor.
  • The federal government should establish a credit scoring system that clearly sets out the consequences for good or bad financial behavior.
  • Doctors have asked that insurers' systems for ranking doctors be revealed, because they might be based on financial factors and not the quality of the doctor’s care.



Frank Pasquale

About Frank Pasquale

Frank Pasquale is Professor of Law at the Brooklyn Law School. He is a noted expert on the law of artificial intelligence (AI), algorithms, and machine learning. His work focuses on how information is used across a number of areas, including health law, commerce, and technology. His wide-ranging expertise encompasses the study of the rapidity of technological advances and the unintended consequences of the interaction of privacy law, intellectual property, and antitrust laws, as well as the power of private sector intermediaries to influence healthcare and education finance policy.