FTC Says GeoCities Violated Privacy Rules

August 14, 1998

FTC Says GeoCities Violated Privacy Rules

By JOEL BRINKLEY

ASHINGTON -- In the federal government's first Internet-privacy enforcement action, the Federal Trade Commission said Thursday that a popular Web site had lied when it told more than 2 million subscribers, both adults and children, that it would not disclose personal information it collected from them.

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The FTC and the company, Geocities, announced they had reached a settlement under which the Web site would stop promising subscribers that they would not give out information collected during registration -- including age, education, occupation, income and personal interests -- without permission.
"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.
The FTC also said Geocities engaged in "deceptive practices" by gathering information about children who played games on its site and turning that over to third parties.
Without admitting wrongdoing, Geocities has posted a new privacy statement that explains how it uses the information it collects. "The company has denied the allegations contained in the FTC's complaint and believes that it has acted fairly with its customers," Geocities said in a statement. "However, it has come to agreement with the FTC in order to resolve the matter in an expeditious manner."
The Geocities site offers members their own Web pages, e-mail addresses and information on topics of interest to them. It has been in business since December 1994 and went public Tuesday. The company's initial offering was at $17 a share, and the stock closed after the first day at $37.31. Wednesday the stock rose to $45.50. Thursday it closed down 7 points, or about 15 percent.
In June, the company disclosed that it was the subject of an FTC investigation. In an interview Thursday, Geocities president Thomas Evans said the settlement "will have absolutely no impact on our business model."

Evans added that he was happy his company could take the lead in the online privacy debate.
Ronald Plesser, the company's lawyer, said, "It's important to note that there was no admission of wrongdoing, no fine or penalty."
The company would not disclose the terms under which it gave personal information about subscribers to advertisers and others.

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FTC attorney Toby Levin said, "We are not trying to tell them what their privacy policies ought to be. They just have to disclose those policies."
The commission's research shows that the Geocities case is not unique. An FTC study made public in June showed that 92 percent of 600 Web sites surveyed collected personal information on visitors or subscribers, while only 2 percent of those offered a privacy statement that disclosed how the information would be used.
Congress and privacy groups have complained that more needs to be done to protect the privacy of people, particularly children, using the Web. But the Clinton administration has chosen to allow the industry to regulate itself on this issue. In a broad privacy initiative published last month, Vice President Al Gore's office said, "The administration will continue to press for self-regulation" for online privacy "with enforcement mechanisms."
A group of large companies, the Online Privacy Alliance, has drafted a self-enforcement plan, hoping to avert direct regulation. But the FTC's leaders have indicated they are impatient with self-regulation.
Ms. Levin said the FTC is investigating other Web sites and may bring additional actions.
Marc Rotenberg, executive director of the Electronic Privacy Information Center in Washington, a research group, said, "It's significant on one hand that the FTC is now ready to enforce privacy concerns on the Internet. But this leaves open the question of how privacy should be enforced." He said he would prefer a government policy that sets limits on the dissemination of personal information collected on the Web.
The Geocities site still collects copious personal information from new subscribers. But the new privacy statement, reached from a tiny link on the company's home page, now says:
"For those who elect to receive promotional materials from Geocities or third parties, and who indicate that they do in their profile, we do release personally identifiable information" including "name, street address, e-mail address, interests, Geocities neighborhood, and the broader personal information (e.g., level of education, occupation and marital status)."
Previously, the commission said, the site's registration page said, "We will not share this information without your permission," though the company did release it, even without permission.
Geocities also agreed to discourage children under 13 from using the site without parental permission.

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