"GeoCities, Planning IPO, Reaches FTC Settlement on Kids'Data"
Bloomberg News, June 12, 1998, 11:21 a.m. PT
Washington, June 12 (Bloomberg) -- GeoCities, a fast-growing
company that hosts special-interest Internet groups, agreed to
settle federal charges the company improperly collected and used
personal information about children visiting its World Wide Web
sites.
The agreement with the Federal Trade Commission would mark
the first time the agency has used its power to police ''unfair
and deceptive'' trade practices in a case about the use of
information gathered from children on the Web.
GeoCities disclosed the settlement in a filing today with
the Securities and Exchange Commission, in which it announced
plans for an initial public offering of stock. The company signed
a preliminary settlement with the FTC staff yesterday, the filing
said. The agreement still must be approved by the commission.
''This tells us two things: One, the FTC is watching, and
two, one of the largest sites on the Web is responding,'' said
Deirdre Mulligan, staff counsel at the Center for Democracy and
Technology, a civil liberties policy group. ''I'm very pleased
that the FTC is moving to use their existing power to police the
Internet and protect children.''
Under the proposed settlement, GeoCities would agree to
adopt policies for the use of personal information that address
the FTC's concerns. The company would not be fined, and would not
admit wrongdoing.
The FTC has been pushing tougher legal rules for Internet
operators regarding the collection of personal information about
children who use their sites, and the use of that information for
marketing or other purposes. Earlier this month, the FTC asked
Congress to pass a law requiring parental consent before children
under 13 can enter World Wide Web sites that solicit addresses,
phone numbers, or other personal information.
Last year, the FTC investigated another Web site operator,
KidsCom Co. The agency decided not to bring charges after
Wisconsin-based KidsCom voluntarily changed its practices. The
FTC used that case, however, to formally set down guidelines for
information-gathering from children. At that time, the agency
said Internet operators may violate laws against deceptive
practices if they ask for personal information without parental
consent and disclosures about how the material will be used.
In a draft complaint against Santa Monica, California-based
GeoCities, the FTC charges that the company engaged in ''unfair
and deceptive practices'' by disclosing information to third
parties without telling children or their parents, the company's
SEC filing said. The FTC first requested information from
GeoCities last September, the filing said.
Company officials couldn't be reached for comment. Outside
spokesman Bennett Kleinberg declined comment. An FTC spokeswoman
wouldn't comment on the settlement.
Under the proposed agreement, GeoCities would have to seek
parental permission before using information from children under
the age of 13, would be required to more clearly explain how that
data would be used, and must give consumers the ability to delete
personal information from GeoCities' database.
Steps to Protect Kids
''GeoCities has been and remains committed to protecting the
privacy rights of all consumers and, in particular, children on
the Internet,'' the company said in the SEC filing.
The shadow of the FTC settlement isn't likely to hurt the
company or its IPO, said Jim Preissler, an analyst who follows
Internet commerce for PaineWebber Inc.
GeoCities has taken several steps to protect children, such
as telling companies that received information about children to
stop using it and removing ''inappropriate advertising and
promotions from'' its EnchantedForest family oriented
''neighborhood,'' the filing said.
The company runs Internet ''communities,'' or groups of
personal Web sites where users with similar interests can visit
related Internet pages. The company has allowed more than 1.9
million ''homesteaders'' to set up free Web sites in those
communities, and collects money from advertisers that target the
sites' visitors.
Last week, the FTC issued a report to Congress criticizing
the high-tech industry's efforts at self-regulation as a means of
protecting privacy online. In particular, the three-year study
found only 54 percent of some 212 children's Internet sites
disclose that they're collecting information and less than 10
percent give parents control over this practice.
''The Commission's survey of Web sites tells us that
industry efforts to encourage voluntary adoption of these
principles have not met with great success,'' FTC Chairman Robert
Pitofsky said last week, calling on Congress for parental-consent
legislation. |
