“Hooked on Phonics” Firm Settles FTC Privacy Charges

Gateway Learning Corporation, best known for its “Hooked on Phonics” products, has settled a privacy case brought by the Federal Trade Commission. The FTC had accused the firm of renting user information collected on its Web site, in violation of its privacy policy.

The FTC said Santa Ana, Calif.-based Gateway Learning amended its privacy policy to allow it to share information with third parties without notifying consumers or obtaining their consent. Then, it allegedly rented direct marketers its list, without excluding names that opted-in under the previous privacy policy. The prior policy had promised consumers they’d have the chance to opt-out in the event of a change, according to the FTC.

“It’s simple — if you collect information and promise not to share, you can’t share unless the consumer agrees,” said Howard Beales, director of the FTC’s Bureau of Consumer Protection. “You can change the rules, but not after the game has been played.”

The FTC charges are especially sensitive because they involve disclosure of information about children. The agency said Gateway had promised not to reveal personally identifiable information about children under 13 for any purpose. Then, in April 2003, the FTC says Gateway rented personal information including: people’s names, addresses, phone numbers, and the age ranges and gender of their children.

The settlement doesn’t constitute an admission of guilt by Gateway Learning, but the company agreed to avoid making deceptive claims about how it will use consumer information. It also said it wouldn’t make material changes in its privacy policy retroactively without obtaining consumers’ consent. Gateway Learning also agreed to forfeit the $4,600 it earned from renting the data.

“We’re pleased to have resolved this matter, which occurred a year ago, regarding our online customer privacy policy,” the company said in a statement. “Hooked on Phonics has become the number one trusted name in teaching children to read, and we are committed to keeping that trust.”

The settlement with the FTC is subject to a public comment period, after which the Commission will determine whether to make it final.

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