'Hooked on Phonics' Firm Settles Data-Sharing Complaint
Gateway shared the information of about 30,000 online customers, and the data was used for telemarketing and direct mail, the FTC said. Information included names, addresses, phone numbers, age ranges and gender of customers' children.
As part of the settlement, Gateway will surrender $4,600 it earned from rental of the data. The money will go to the federal government, said Howard Beales, director of the FTC's consumer protection bureau. The company agreed to cease sharing the data and will ensure that it is no longer in use for marketing purposes.
The FTC did not press charges under the Children's Online Privacy Protection Act, which calls for fines of $11,000 per violation. COPPA charges were not warranted in this case because Gateway collected information from parents and not directly from children.
The settlement will act as a deterrent to other online marketers regarding deception in their privacy policies, Beales said. Changes in privacy policies can be made, but the policies must state in advance what the process is for making changes. Marketers must abide by that process.
"The order itself and the attendant publicity is part of the disincentive," Beales said. "Our goal is to take whatever you make from the list rentals, so there's no gain here."
In a statement, Gateway Learning said it was pleased to have resolved the charges.
Toysmart.com later sold the database to a subsidiary of The Walt Disney Co., which was a majority owner of Toysmart.com. Disney then destroyed the database.