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Privacy

In the Matter of GeoCities, Federal Trade Commission File No. 9823015, August 13, 1998

Summary

Shortly after issuing its initial report on web site privacy practices to Congress and proposing legislation regulating how information is collected from children on-line, the FTC served a draft complaint against GeoCities, alleging that, by misrepresenting how personal identifying information was collected from consumers and how it was used, GeoCities had committed unfair or deceptive trade practices. The FTC then reached a settlement of this initial enforcement action concerning Internet privacy protection, with GeoCities not admitting the violations alleged. The FTC's final Decision and Order was issued on February 5, 1999.

Analysis

GeoCities is a "virtual community" which hosts members’ home pages in interest-based "communities." It was alleged to have sold or otherwise transferred members’ personal identifying information to third parties, despite reassurances that it would not do so. Specifically with regard to children who enter the "Enchanted Forest" neighborhood, it was alleged that GeoCities permittedd third parties to collect and utilize the children's personal identifying information. The consent order entered into by the parties went well beyond "cease and desist." It requires that privacy notices be prominently posted around the GeoCities site, and that links be maintained to consumer privacy education pages on the FTC site. It also requires establishment of an "information practices training program," and other precautionary measures to prevent unauthorized disclosure of personal identifying information. The order is effective for twenty years.

The procedure followed by the FTC in GeoCities is one which it frequently employs: serving a draft complaint, negotiating a settlement agreement which is based on the target company not having to admit any of the allegations of the complaint, and entering an agreed order after public comment and final approval by the Commission of the FTC. To facilitate public comment, the FTC prepares a summary of the complaint and the relief proposed - the settlement terms which the target company is accepting. One reason this action was significant is that state consumer protection statutes frequently track the FTC’s proscription of "unfair and deceptive" trade practices, see, e.g., the Massachusetts consumer protection statute, M.G.L.c. 93A. Typically, such statutes provide for private causes of action as well as actions by a state’s attorney general. A company which mishandled personal identifying information of a web site visitor could be subject to suit in the courts of any of a number of states.

Copyright SRBC 1998 up