Analysis of
Proposed Consent Order to Aid Public Comment

The Federal Trade Commission has accepted, subject to final approval, an agreement containing a consent order from Liberty Financial Companies, Inc. ("Liberty Financial"), the operator of a website on the World Wide Web located at ("website").

The proposed consent order has been placed on the public record for sixty (60) days for reception of comments by interested persons. Comments received during this period will become part of the public record. After sixty (60) days, the Commission will again review the agreement and the comments received and will decide whether it should withdraw from the agreement or make final the agreement's proposed order.

The Liberty Financial website features several different areas targeted to children and teens. One such area is the Measure Up Survey area. Participants in this area survey fill out a survey seeking financial information, including the individual's: weekly amount of allowance; types of financial gifts received such as stocks, bonds and mutual funds, and from whom; spending habits; part time work history; plans for college; and family finances. Later, the survey elicits the individual's name, address, age and email address.

The Commission's complaint alleges that Liberty Financial made three misrepresentations in connection with its collection of this information on its website. First, the complaint alleges that Liberty Financial represented that the information collected would be "totally anonymous." In fact, according to the complaint, all of the information collected in the survey area -- the questionnaire responses and the participants' personal information -- are maintained in one database in identifiable form. Thus, the financial information participants provide can be linked to them personally.

The complaint also alleges that Liberty Financial falsely represented that participants in the Measure Up Survey who submit the requested personal identifying information will receive the company's Young Investor e-mail newsletter. In fact, according to the complaint, Liberty Financial did not provide a newsletter to any of the participants in the Survey.

Finally, the complaint alleges that Liberty Financial falsely represented that every three months, a participant in the Measure Up Survey who submits the requested personal information is selected to win his or her choice of certain specified prizes. In fact, according to the complaint, Liberty Financial has not selected quarterly winners as represented.

The proposed consent order contains provisions designed to remedy the violations charged and to prevent the respondent from engaging in similar acts and practices in the future.

Part I of the proposed order prohibits Liberty Financial from making any misrepresentation about its collection or use of personal information from children under the age of eighteen, the group from whom Liberty Financial had previously collected such information. The order defines "personal information" as "individually identifiable information about an individual collected online, including 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 in this definition."

Part II of the proposed order prohibits Liberty Financial from collecting personal identifying information from any child under age thirteen if Liberty Financial has actual knowledge that the child does not have a parent's permission to provide the information.

Part III of the proposed order requires Liberty Financial to post a clear and prominent privacy statement on its child-directed websites explaining Liberty Financial's practices with regard to its collection and use of personal identifying information. The notice must include the following:

(a) what information is being collected;
(b) how Liberty Financial uses such information;
(c) Liberty Financial's disclosure practices for such information; and
(d) how the consumer can obtain access to the information.

Liberty Financial may comply with this Part by posting a Privacy Notice on its home page along with a clear and prominent hyperlink to that notice at each location on the site at which personal identifying information is collected. The hyperlink would be accompanied by the following statement:

NOTICE: We collect personal information on this site. To learn more about how we use your information click here.

Part IV of the proposed order sets forth the principles of parental choice and control. This Part requires Liberty Financial to implement a procedure to obtain "verifiable parental consent" prior to collecting and using children's identifying information, a procedure commonly referred to as "opt-in." The order specifies ways in which Liberty Financial can ensure that parents receive notice of the collection and authorize it.

Part V addresses the information that Liberty Financial previously collected from children. It requires Liberty Financial to delete all personal information collected from children prior to the effective date of the order.

Part VI of the order states that once the Children's Online Privacy Protection Act of 1998 and any regulations implementing the statute become effective, Liberty Financial's compliance with that Act and regulations will be considered compliance with Paragraphs II through IV of the order.

Part VII outlines Liberty Financial's recordkeeping requirements under the proposed order. Part VIII requires Liberty Financial to deliver a copy of the order to certain company officers and personnel. Parts IX and X require Liberty Financial to notify the Commission of any change in its corporate structure that might affect compliance with the order; and to file compliance reports with the Commission. Part XI is a "sunset" provision, dictating that the order will terminate in twenty years absent certain circumstances.

The purpose of this analysis is to facilitate public comment on the proposed order. It is not intended to constitute an official interpretation of the agreement and proposed order or to modify in any way their terms.