MARKETERS HIT WITH ONLINE PRIVACY FINES

Published on .

April 19, 2001

By Ira Teinowitz

WASHINGTON (AdAge.com) -- The Federal Trade Commission for the first time has fined marketers for violating the Children's Online Privacy Protection Act, while a new report suggests that though marketers may have made changes to their services because of the law, they still may not be doing enough.

The FTC today announced it had fined Bigmailbox.com; Monarch Services and Girls' Life; and Looksmart LTD a total of $100,000 for violating the online privacy law, and it is requiring the Web sites dump their existing data files on children and start over.

Up to now, the FTC has been working with marketers to get them to comply to the statute voluntarily. The law, approved by Congress in 1998, went into effect April 21, 2000, and is intended to prevent Web sites from obtaining or revealing personal information on children under 13 without their parents' permission. The law, along with FTC rules to implement it, puts limits on Web sites revealing personal information on children, even their e-mail addresses.

Lee Peeler, FTC associate director of advertising practices, said the commission felt it had been the nice guy long enough.

'Time to act'
"We have been working for a year before [rules took effect] and a year after to educate marketers and we have sent out notices to sites," he said. "If after all this they are still not in compliance," it is time to act.

The three sites, which all settled the cases voluntarily, were accused of collecting personally identifiable information from children without taking steps required by the law.

Bigmailbox.com, which offers free e-mail boxes to a number of sites, including sites directed to children, was accused of asking children under 13 for their names, addresses and interests. The FTC said children reaching bigmailbox.com via other child-oriented Web sites were told "You must be at least 13 years old or have your parent's permission to join this program," but that a child only had to hit an "I accept" button to get the e-mail account. The FTC also said the company didn't have a clear privacy policy.

Looksmart was accused of running an online message board at www.insidetheweb.com that was linked to by sites directed toward children, and that it posted children's full names and e-mail addresses. The company was also accused of asking for more personal information on children than was necessary and failing to get parental permission.

Monarch and its Girls' Life unit were accused of offering e-mails and contests to children under 13; listing children home pages on its site; asking for more personal information than is necessary; and failing to obtain parental consent.

Study: Marketers still fall short
The actions came as the Center for Media Education, whose original 1996 "Web of Deception" study, about marketers asking children for their parents income, launched the push for the law, issued a new report. The center says marketers have cut back on the amount of information they are seeking from children, but that they still aren't properly seeking parental consent before collecting information and aren't disclosing privacy policies prominently enough.

The report, written before the latest FTC actions, also called on the commission to do more to enforce children's privacy legislation.

"Overall, we are fairly encouraged," said CME president Kathryn Montgomery. "The law appears to have changed what many marketers collect. There has been a significant reduction in the types and amount of data."

Creative approaches
She said, however, that some sites appear to be encouraging children to falsify information in order to participate and others haven't displayed their privacy policies prominently enough. Several sites, she said, showed innovative approaches to giving children a chance to talk and react without providing personal information. she cited among them Nickelodeon's nick.com, Lego's lego.com and Mattel's barbie.com.

The Center for Media Education examined 153 commercial Web sites.

The report is the second in recent weeks about Web sites' compliance with children's online rules. A March report from the Annenberg School for Public Policy suggested marketers were not adequately complying with the law.

Copyright April 2001, Crain Communications Inc.

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