GeoCities Settles With FTC Over Privacy Violations
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In the first case of its kind handled by The Federal Trade Commission, community Web site GeoCities--the firm whose initial public offering was well received on Wall Street this week--has agreed to a settlement over Internet privacy charges.
The FTC charged GeoCities with misrepresenting why it collected personal information from adults and children. When users registered at the site, the FTC said GeoCities gathered information such as e-mail and postal addresses, member interest areas, and demographic data including income, education, gender, marital status and occupation, to create a database.
The information was used in targeting markets for advertisers, and third-party marketers were able to obtain the adult and children's personal information, according to the FTC.
"GeoCities misled its customers, both children and adults, by not telling the truth about how it was using their personal information," said Jodie Bernstein, Director of the FTC's Bureau of Consumer Protection, in a statement. "This case is a message to all Internet marketers that statements about their information collection practices must be accurate and complete."
Before children could partake in these areas, the FTC said they were required to fill out forms that asked for personal identifying information. GeoCities claimed it maintained the club and contests when in fact they were run by third-party community leaders who then collected and maintained the information.
Under today's settlement, GeoCities, which claims 2 million members, has agreed to post a clear and prominent Privacy Notice on its site that gives users an explanation as to the kind of information collected, what its purpose is, to whom it is being sent, and how users can obtain and remove the information. GeoCities will also post a clear and prominent Privacy Notice that informs consumers about the kind of information being collected.
GeoCities must now also obtain parental consent before collecting personal identifying information from children 12 and under. In addition, the settlement requires GeoCities to notify parents of children 12 and younger when information is collected, and explain how to delete the information or how to agree to its retention and use. GeoCities also will be required to contact third parties to whom it disclosed information and ask that those parties also erase the information.
The FTC said GeoCities will be required to provide an FTC Web site link for five years, enabling users to read the government's educational information about consumer privacy.
"The FTC will continue to monitor these Internet sites and bring enforcement actions when it's appropriate," added Bernstein. "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."
GeoCities, which was quick to respond with a statement of its own today, said compliance with terms of the Consent Order will not have an adverse effect on its business, results of operations, or financial condition.
"Our Homesteaders and visitors are very important to us and are the primary reason GeoCities has developed and implemented privacy safeguards," said Thomas R. Evans, GeoCities Chief Executive Officer and President. "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."
"As a company, we are continually monitoring and becoming better informed about privacy issues," Evans said. "In addition, we have created a multi-faceted program to ensure the involvement of parents when children under the age of 13 join GeoCities. This program has been in place since May 1998 and was developed by GeoCities in consultation with the FTC."
Wall Street appeared to react negatively to the news--high-flying GeoCities' stock was down 6 3/4 to 38 3/4 in late afternoon trading.