In what the
Federal Trade Commission is
calling its first case involving Internet privacy, the agency announced
today that it has agreed to settle charges with Net community GeoCities.
As previously reported by CNET
News.com, the FTC had charged that GeoCities "misrepresented the purposes
for which it was collecting personal identifying information from children
and adults," according to an FTC statement.
Thomas Evans,
president and chief executive of GeoCities, declined to
comment directly about the consent order, noting that
the newly public firm is in a quiet
period.
But in a press release issued today, GeoCities both denied the allegations and
commended the FTC for reaching the June 11 agreement. The
company also stated that "compliance with the terms of the consent order
will not have any material adverse effect on the company's business,
results of operations, or financial condition.
"The company has denied the allegations contained in the FTC's complaint
and believes that it has acted fairly with its customers," the release
continues. "However, it has come to agreement with the FTC in order to resolve
the matter in an expeditious manner."
But Jodie Bernstein, director of the FTC's Bureau of Consumer Protection,
was unambiguous about the FTC's position. "GeoCities misled its customers,
both children and adults, by not telling the truth about how it was using
their personal information," she said in a statement.
The terms of the settlement now are subject to a 60-day public comment
period. Following a review of the comments, the agency will reach a final
ruling.
The FTC's move is part of the agency's ongoing enforcement of the Internet
and comes at a time when online privacy practices have come under intense scrutiny
from the public, government agencies, and private companies. Consumers are especially wary of their privacy being compromised online.
Companies have argued often that for the Net to thrive commercially, they need to make consumers feel comfortable that their information will be protected.
But they have added that they prefer self-regulation to government mandates they fear would stymie e-commerce.
However, the FTC recently reversed its support for industry self-regulation, instead calling for legislation to protect consumers' online privacy.
"This case is a message to all Internet marketers that statements about their information collection practices must be accurate and complete," Bernstein stated. "The FTC will continue to monitor these Internet sites
and bring enforcement actions when it's appropriate. GeoCities should be commended for stepping forward and agreeing to undertake important privacy protections for consumers. I hope that other Web sites will follow GeoCities' lead in implementing these protections."
Specifically, the FTC is charging that GeoCities used its registration process to create a database that included "email and postal addresses, member interest areas, and demographics including income, education, gender, marital status, and occupation."
The information "created target markets for advertisers and resulted in disclosure of personal identifying information of children and adults to third-party marketers," according to the FTC.
The complaint alleges that GeoCities told its members in the sign-up form that their information would only be used to "provide members the specific advertising offers and products or services they requested and that the 'optional' information [education level, income, marital status, occupation, and interests] would not be released to anyone without the member's permission."
But the FTC charged that "this information was disclosed to third parties, who used it to target members for solicitations beyond those agreed to by the member."
As part of the agreement GeoCities agreed to post a "clear and prominent privacy notice telling consumers what information is being collected and for what purpose, to whom it will be disclosed, and how consumers can access and remove the information," according to the FTC.
Under the agreement, GeoCites also will have to get parental consent before collecting information from children 12 and under.
In the GeoCities release, Evans emphasized that privacy is of paramount importance to his company and called GeoCities a leader in children's privacy protection.
"Our homesteaders and visitors are very important to us and are the primary reason GeoCities has developed and implemented privacy safeguards," he stated. "The rapid pace of the Internet brings new privacy issues to the fore on almost a daily basis, and I am proud of our leadership in the area of protecting children's privacy and safety on the Internet."