"We were contacted in early February and asked to a meeting in Washington with members of the FTC staff to discuss health and medical privacy policies and practices in the industry," said a representative for iVillage, a site dedicated to women.
"We are happy to cooperate with them in providing them with any information that we can," the representative added.
The FTC would not confirm or deny news of the investigation. Yet a representative for the agency said the FTC is "concerned with privacy on the Web in all industries--and health care is no exception."
The representative added that an inquiry or review is different than an investigation, defining an inquiry as simply a series of informal talks with a company. FTC official Richard Cleland is heading the inquiry.
While privacy on the Internet is a key issue in the development of the medium, analysts warned there is no greater privacy concern than that of keeping personal health information confidential.
"Health-related privacy is likely to become an even bigger hotspot as the backend of healthcare migrates onto the Web," said Claudine Singer, a healthcare analyst at research firm Jupiter Communications, refering to the likelihood of medical and healthcare records being stored and accessed from the Internet by hospitals and insurers. "Right now the info that sites collect is more scary in concept than in reality but that paradigm will soon shift."
This information in the wrong hands could lead to people being denied jobs, life and medical insurance, and mortgages, Singer added.
The inquiry comes as privacy on the Internet has become a much larger concern. Earlier this month, the FTC began an investigation of Internet advertising firm DoubleClick, which has been accused of collecting information on consumers? surfing and shopping habits online and selling that information to third-party advertisers.
Just yesterday, the state of Michigan took steps toward filing a consumer protection lawsuit against the ad firm for its alleged practices.
Several leading e-commerce sites, such as eBay, eToys and Amazon.com, also have been the subjects of inquiries, partially from consumer complaints over privacy issues.
The FTC's probe was prompted by a critical report by the California HealthCare Foundation. The group asserted that many Web companies share personal health information collected from visitors without their knowledge or permission.
A probe by the FTC is likely to put a damper on the nascent online health industry because of the potential for a backlash from consumers, analysts said.
The online consumer healthcare market is expected to grow to $1.7 billion by 2003, according to research firm Jupiter Communications. Jupiter estimates that the total online and offline market for consumer health goods is expected to be $205.2 billion by 2003.
"Clearly there is going to be cloud over the stocks (of Internet health companies) as far as investors are concerned," said Caren Taylor, an Internet healthcare analyst at investment firm e-Offerings. "When consumers put information into these sites, they are assuming it is kept private and confidential."
The issue of privacy also highlights the difficulty healthcare sites that rely on content only are likely to face, analysts said.
"Healthcare sites on the Internet whose bread-and-butter is advertising are in a quandary," said Singer. "They have to tow the line between respecting their visitors' privacy and at the same time exploiting it to drive the highest ad revenue they can."
Taylor noted that DrKoop.com, the health information Web site cofounded by former U.S. Surgeon General C. Everett Koop, recently reviewed its relationship with DoubleClick and decided to run some of its own advertising operations to have better control over the information collected at its site. Taylor covers DrKoop.com with a "buy" rating.
"I think others, like WebMD, will have to do something similar," said Taylor. "They all have to be very careful."