Agency Alleged Website Made False Promises About Collection of Personal Information from Children and Teens
In another effort to address children's online privacy, the Federal Trade Commission today announced a settlement with Liberty Financial Companies, Inc., the operator of the Young Investor website. The Young Investor website is directed to children and teens, and focuses on issues relating to money and investing. The Commission alleged that the site falsely represented that personal information collected from children in a survey would be maintained anonymously, and that participants would be sent an e-mail newsletter as well as prizes. In fact, the personal information about the child and the family's finances was maintained in an identifiable manner. The consent agreement, which was announced today for public comment, prohibits such misrepresentations in the future and would require Liberty Financial to post a privacy notice on its children's sites and obtain verifiable parental consent before collecting personal identifying information from children. The website's address is http://www.younginvestor.com.
"This case is another example of the Commission's effort to protect children online," said FTC Chairman Robert Pitofsky. "We will continue to monitor how websites collect information from children and are committed to pursuing law enforcement actions in appropriate cases."
Liberty Financial is a large asset management company based in Boston, Massachusetts. It provides various fixed and variable annuities as well as management of private and institutional accounts in addition to mutual funds. Liberty Financial's Young Investor Website, states that it is "a place to learn about money and maybe even earn some too."
The Young Investor website featured several different areas that appealed to children by, for example, using contests and prizes. According to the FTC, at one such area, the Measure Up Survey area, children were invited to provide financial information including the child's: weekly amount of allowance; types of financial gifts received such as stocks, bonds and mutual funds; spending habits; part time work history; plans for college; and family finances. In addition, the site asked for personal identifying information such as name, address, age and e-mail address in connection with providing the children with an e-mail newsletter and eligibility to receive prizes. At the beginning of the survey, Liberty Financial expressly stated that, "All of your answers will be totally anonymous," the FTC said.
According to the FTC's complaint, Liberty Financial did not maintain the information it collected at the Measure Up Survey area anonymously because Liberty Financial could identify individuals with their responses to the survey. In addition, the Commission's complaint alleges that Liberty Financial did not send Measure Up Survey participants the company's Young Investor e-mail newsletter as promised. Finally, the complaint alleges that the website falsely represented that every three months, a participant in the Measure Up Survey who submitted the personal information would be selected to win his or her choice of certain prizes. The FTC alleged, however, that the company had not selected winners for the prizes as represented.
The proposed consent order would prohibit Liberty Financial from making any false statements about the collection or use of personal information from children under the age of eighteen. The proposed order defines "personal information" as "individually identifiable information about an individual collected online" such as first and last name, home or other physical address including street name and name of a city or town, e-mail address, telephone number, Social Security number or any information concerning the child or the parents of that child that the website collects online from the child and combines with an identifier described above.
In addition, for children under 13, the proposed order would prohibit Liberty Financial from collecting personal information if Liberty Financial has actual knowledge that the child does not have a parent's permission to provide the information.
Liberty Financial also would have to post a clear and prominent privacy statement on its websites directed to children under 13 explaining Liberty Financial's practices with regard to its collection and use of personal information. The notice must disclose: what information is collected, its intended uses, to whom it will be disclosed, and the means by which a parent can access and remove the information that has been collected.
The proposed order also would require Liberty Financial to obtain "verifiable parental consent" before collecting and using personal identifying information from children under 13. These requirements are consistent with the requirements of the recently enacted Children's Online Privacy Protection Act of 1998, and the proposed order expressly provides that compliance with that statute, and its implementing regulations, will be deemed compliance with the order. On April 20, 1999, the Commission proposed for public comment rules implementing the statute. The proposed rules may be found at http://www.ftc.gov/privacy/index.html.
The Commission vote to accept the consent agreement for public comment was 4-0.
A summary of the proposed consent agreement will be published in the Federal Register shortly. The agreement will be subject to public comment for 60 days, after which the Commission will decide whether to make it final. Comments should be addressed to the FTC, Office of the Secretary, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580.
NOTE: A consent agreement is for settlement purposes only and does not constitute an admission of a law violation. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of $11,000.
Copies of the complaint, proposed consent order, and an analysis of the proposed consent order to aid public comment are available from the FTC's web site: http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-FTC-HELP (202-382-4357); TDD for the hearing impaired 1-866-653-4261. Consent agreements subject to public comment also are available by calling 202-326-3627. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.
(FTC File No. 982 3522)
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