The FTC also alleged that, after collecting consumers' information,
Gateway Learning simply changed its privacy policy to allow it to
share the information with third parties – without notifying
consumers or getting their consent.
This is the first FTC case to challenge deceptive and unfair
practices in connection with a company's material change to its
privacy policy.
The proposed settlement bars Gateway Learning from making
deceptive claims about how it will use consumers' information and
from applying material changes in its privacy policy retroactively,
without consumers' consent. It also requires that the company give
up $4,600 it earned from renting the data.
Gateway Learning, which markets and sells products under the
"Hooked on Phonics" brand name, is based in Santa Ana,
California.
"It's simple – if you collect information and promise not to
share, you can't share unless the consumer agrees," said Howard
Beales, Director of the FTC's Bureau of Consumer Protection. "You
can change the rules but not after the game has been played."
Since 2000, Gateway Learning has marketed its "Hooked on
Phonics" products on the Internet at www.hop.com. The site's
privacy policy stated: 2We do not sell, rent or loan any personally
identifiable information regarding our consumers with any third
party unless we receive customer's explicit consent."
Another statement said, "We do not provide any personally
identifiable information about children under 13 years of age to
any third party for any purpose whatsoever." The policy also said
that if Gateway Learning changed its policy, it would give
consumers the chance to opt-out of having their information
shared.
According to the FTC, in April 2003, despite these promises,
Gateway Learning started renting personal information provided by
consumers – including their names, addresses, phone numbers, and
age ranges and gender of their children – to target marketers to
send mailings and make telemarketing calls.
In June 2003, Gateway Learning revised the privacy policy on its
Web site to say that "from time to time" Gateway Learning would
provide consumers' personal information to "reputable companies"
whose products or services consumers might find of interest, the
FTC complaint says.
However, according to the FTC, Gateway Learning continued to
rent information collected under the earlier policy. The FTC
alleges that Gateway Learning did not contact consumers who had
already provided their information to say that it had revised its
privacy policy, nor did it highlight on its web site the fact that
the privacy policy had changed. On 1st July, 2003, Gateway Learning
halted its rentals of consumer data collected on-line.
The settlement bars misrepresentations about how Gateway
Learning will use data it collects from consumers. It prohibits
Gateway Learning from sharing any personal information collected
from consumers on its Web site under the earlier privacy policy
unless it first obtains express affirmative ("opt-in") consent from
consumers, and prohibits it from applying future material changes
to its privacy policy retroactively without consumers' consent. It
also requires Gateway Learning to give up $4,608 it earned from
renting consumers' information.
