[Federal Register Volume 69, Number 134 (Wednesday, July 14, 2004)]
[Notices]
[Pages 42176-42177]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-15922]


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FEDERAL TRADE COMMISSION

[File No. 042 3047]


Gateway Learning Corporation; Analysis to Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreement.

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SUMMARY: The consent agreement in this matter settles alleged 
violations of Federal law prohibiting unfair or deceptive acts or 
practices or unfair methods of competition. The attached Analysis to 
Aid Public Comment describes both the allegations in the draft 
complaint that accompanies the consent agreement and the terms of the 
consent order--embodied in the consent agreement--that would settle 
these allegations.

DATES: Comments must be received on or before August 6, 2004.

ADDRESSES: Comments should refer to ``Gateway Learning Corporation, 
File No. 042 3047,'' to facilitate the organization of comments. A 
comment filed in paper form should include this reference both in the 
text and on the envelope, and should be mailed or delivered to the 
following address: Federal Trade Commission/Office of the Secretary, 
Room H-159, 600 Pennsylvania Avenue, NW., Washington, DC 20580. 
Comments containing confidential material must be filed in paper form, 
as explained in the Supplementary Information section. The FTC is 
requesting that any comment filed in paper form be sent by courier or 
overnight service, if possible, because U.S. postal mail in the 
Washington area and at the Commission is subject to delay due to 
heightened security precautions. Comments filed in electronic form 
(except comments containing any confidential material) should be sent 
to the following e-mail box: [email protected].

FOR FURTHER INFORMATION CONTACT: Jessica Rich, FTC, Bureau of Consumer 
Protection, 600 Pennsylvania Avenue, NW., Washington, DC 20580, (202) 
326-3224.

SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal 
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46(f), and Section 2.34 
of the Commission's Rules of Practice, 16 CFR 2.34, notice is hereby 
given that the above-captioned consent agreement containing a consent 
order to cease and desist, having been filed with and accepted, subject 
to final approval, by the Commission, has been placed on the public 
record for a period of thirty (30) days. The following Analysis to Aid 
Public Comment describes the terms of the consent agreement, and the 
allegations in the complaint. An electronic copy of the full text of 
the consent agreement package can be obtained from the FTC home page 
(for July 7, 2004), on the World Wide Web, at http://www.ftc.gov/os/2004/07/index.htm. A paper copy can be obtained from the FTC Public 
Reference Room, Room 130-H, 600 Pennsylvania Avenue, NW., Washington, 
DC 20580, either in person or by calling (202) 326-2222.
    Public comments are invited, and may be filed with the Commission 
in either paper or electronic form. Written comments must be submitted 
on or before August 6, 2004. Comments should refer to ``Gateway 
Learning Corporation, File No. 042 3047,'' to facilitate the 
organization of comments. A comment filed in paper form should include 
this reference both in the text and on the envelope, and should be 
mailed or delivered to the following address: Federal Trade Commission/
Office of the Secretary, Room H-159, 600 Pennsylvania Avenue, NW., 
Washington, DC 20580. If the comment contains any material for which 
confidential treatment is requested, it must be filed in paper (rather 
than electronic) form, and the first page of the document must be 
clearly labeled ``Confidential.'' \1\ The FTC is requesting that any 
comment filed in paper form be sent by courier or overnight service, if 
possible, because U.S. postal mail in the Washington area and at the 
Commission is subject to delay due to heightened security precautions. 
Comments filed in electronic form should be sent to the following e-
mail box: [email protected].
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    \1\ Commission Rule 4.2(d), 16 CFR 4.2(d). The comment must be 
accompanied by an explicit request for confidential treatment, 
including the factual and legal basis for the request, and must 
identify the specific portions of the comment to be withheld from 
the public record. The request will be granted or denied by the 
Commission's General Counsel, consistent with applicable law and the 
public interest. See Commission Rule 4.9(c), 16 CFR 4.9(c).
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    The FTC Act and other laws the Commission administers permit the 
collection of public comments to consider and use in this proceeding as 
appropriate. All timely and responsive public comments, whether filed 
in paper or electronic form, will be considered by the Commission, and 
will be available to the public on the FTC Web site, to the extent 
practicable, at http://www.ftc.gov. As a matter of discretion, the FTC 
makes every effort to remove home contact information for individuals 
from the public comments it receives before placing those comments on 
the FTC Web site. More information, including routine uses permitted by 
the Privacy Act, may be found in the FTC's privacy policy, at http://www.ftc.gov/ftc/privacy.htm.

Analysis of Proposed Consent Order To Aid Public Comment

    The Federal Trade Commission has accepted an agreement, subject to 
final approval, to a proposed consent order from Gateway Learning 
Corporation (``GLC''). GLC markets and sells products designed for 
children who are learning math and reading under the ``Hooked on 
Phonics'' brand name and trademark.
    The proposed consent order has been placed on the public record for 
thirty (30) days for receipt of comments by interested persons. 
Comments received during this period will become part of the public 
record. After thirty (30) days, the Commission will again review the 
agreement and the comments received and will decide whether it should 
withdraw from the agreement and take other appropriate action or make 
final the agreement's proposed order.

[[Page 42177]]

    This matter concerns alleged misrepresentations about how personal 
information collected from consumers through the proposed respondent's 
Web site would be used and alleged unfair practices in connection with 
proposed respondent's changes to its online privacy policy. The 
proposed respondent collects personal information from consumers on its 
Web site, including information from parents who purchase Hooked on 
Phonics products for their children. Such information includes the 
parent's first and last name, address, phone number, email address, 
purchase history, and his or her child's age range and gender. The 
proposed respondent maintains a privacy policy on its Web site that 
describes how it handles personal information collected from consumers.
    The Commission's complaint charges that the proposed respondent 
falsely represented that information collected from consumers through 
its Web site would not be sold, rented, or loaned to third parties and 
that personal information about children under the age of thirteen 
would not be provided to any third party for any purpose. In fact, the 
complaint alleges, proposed respondent rented to third parties 
information about consumers and the age range and gender of their 
children. This information was used to send direct mail and make 
telemarketing calls to consumers.
    The complaint also alleges that by posting a revised privacy policy 
containing material changes to its practices that were inconsistent 
with its original promise to consumers and retroactively applying such 
changes to previously-collected information, the proposed respondent 
engaged in an unfair practice. As alleged in the complaint, the 
proposed respondent collected personal information under a privacy 
policy that specifically stated that it did not sell, rent, or loan 
such information to third parties. It then changed its posted privacy 
policy to state that it may provide such information to third parties 
and, without providing any additional notice to consumers, applied this 
change to information collected under the earlier policy. Thus, without 
sufficient notice to consumers, the proposed respondent adopted a new 
policy and practice of sharing information with third parties that 
directly contradicted the promise made to consumers when the 
information was collected. The complaint alleges that this retroactive 
application of proposed respondent's revised privacy policy caused or 
is likely to cause substantial injury to consumers by subjecting them 
to unwanted direct mail and telemarketing calls. Further, such injury 
is not outweighed by countervailing benefits to consumers or 
competition and is not reasonably avoidable by consumers.
    Lastly, the complaint alleges that the proposed respondent 
misrepresented that it would notify consumers of material changes to 
its information practices, when in fact, it did not notify consumers of 
material changes to its information practices. Instead, the proposed 
respondent posted a revised privacy policy on its Web site without any 
indication that the policy had materially changed or what aspects of 
the policy had changed.
    Part I of the consent order prohibits the proposed respondent, in 
connection with the collection of personal information from or about an 
individual, from misrepresenting (1) That it will not sell, rent, or 
loan to third parties such personal information; (2) that it will not 
provide to any third party personal information about children under 
the age of thirteen; (3) the manner by which it will notify consumers 
of changes to its privacy policy; or (4) the manner in which it will 
collect, use, or disclose personal information.
    Part II of the order prohibits the proposed respondent from 
disclosing to any third party any personal information collected on its 
Web site prior to the date it posted its revised privacy policy 
permitting third-party sharing (June 20, 2003), unless it obtains the 
express affirmative (``opt-in'') consent of the consumers to whom such 
personal information relates. Part III of the order prohibits the 
proposed respondent, in connection with the posting in the future of 
any privacy policy that contains a material change from the previous 
version of the policy, from applying such changes to information 
collected from or about consumers before the date of the posting, 
unless it obtains the express affirmative (``opt-in'') consent of the 
consumers to whom such personal information relates. Part IV of the 
order requires the proposed respondent to pay $4,608 to the United 
States Treasury as disgorgement of its profits from renting customer 
data.
    The remainder of the proposed order contains standard requirements 
that the proposed respondent: maintain copies of privacy statements and 
other documents relating to the collection, use or disclosure of 
personally identifiable information and to any efforts to obtain the 
consent of consumers and documents demonstrating such consent as 
required by Parts II and III of the order; distribute copies of the 
order to certain company officials and employees; notify the Commission 
of any change in the corporation that may affect compliance obligations 
under the order; and file one or more reports detailing its compliance 
with the order. Part IX of the proposed order is a provision whereby 
the order, absent certain circumstances, terminates twenty years from 
the date of issuance.
    The purpose of this analysis is to facilitate public comment on the 
proposed order, and is not intended to constitute an official 
interpretation of the agreement and proposed order or to modify in any 
way its terms.
    The proposed order, if issued in final form, will resolve the 
claims alleged in the complaint against the named respondent. It is not 
the Commission's intent that acceptance of this consent agreement and 
issuance of a final decision and order will release any claims against 
any unnamed persons or entities associated with the conduct described 
in the complaint.

    By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 04-15922 Filed 7-13-04; 8:45 am]
BILLING CODE 6750-01-P