Companies that collected detailed personal information from students as young as 10 years old by deceptively claiming that they would use the data only for educational purposes have agreed to settle Federal Trade Commission charges that their practices violated federal law. The FTC alleges that the companies sold personally identifiable information about millions of students to target marketers. The proposed consent agreement requires that the companies destroy any information they have collected from children under 13 years old. In addition, the settlement bars the respondents from using previously collected student information for non-educational-related marketing purposes; bars them from using data collected in the future for non-educational-related marketing purposes unless they disclose how the data actually will be used; and bars further deceptive statements. Also today, the Attorney General of New York announced that the companies have agreed to settle similar charges that their practices violated state law.
"I hope that teachers and administrators will look closely at what information surveys propose to collect from students and how it will be used," said Howard Beales, director of the FTC's Bureau of Consumer Protection. "The lesson in this case for marketers is that it's deceptive to promote a student survey as purely educational, then use it for commercial marketing."
The FTC’s settlement names Education Research Center of America, Inc. (ERCA) and its principal, Marian Sanjana, and Student Marketing Group, Inc. (SMG), and its principal, Jan Stumacher. ERCA and Sanjana are based in Pittsburgh, Pennsylvania. SMG and Stumacher are based in Lynbrook, New York. This settlement is the latest in a series of FTC cases targeting marketers who collect personal identifying information from minors in violation of the FTC Act, which prohibits deceptive marketing claims.
According to the FTC, ERCA sent surveys to teachers and guidance counselors asking them to administer the surveys to their students in school. Using statements like, "Your participation is critical to your students’ post-secondary future," and "This information will be used by both public and private universities and colleges," the survey asked for students’ names, addresses, genders, dates of birth, religious affiliations, racial and ethnic background, and a broad array of extracurricular interests.
Middle and junior high school teachers and counselors received surveys stating, "As the trend toward colleges’ student recruitment has moved earlier and earlier into the student’s high school career, we must begin to administer this poll at the middle and junior high school level in order to provide a complete report." The material states that ERCA "will compile the information into a survey report that details the interests and trends among today’s students," and provide it to colleges and universities.
The FTC alleges that the survey's privacy statement, accompanying cover letters, and Web site represent that the respondents will share the information they collect only with colleges, universities, and other entities providing education-related services. The complaint charges that the respondents shared survey data with commercial marketers, including banks, consumers goods and service providers, and other list brokers. In addition, the FTC charges that the respondents provided colleges and universities with little if any of the information collected from middle and junior high school students and compiled into survey reports. Further, the FTC alleges that the information is primarily shared with commercial entities for marketing purposes. The complaint charges that respondents' claims violated the FTC Act.
The proposed consent agreement announced today for public comment bars the defendants from misrepresenting how information they collect will be used or disclosed. It requires that if they collect information from students for "non-education-related marketing purposes" they disclose how the information will be used and that it is personally identifiable. It prohibits the disclosure for any non-education-related marketing purpose of any personally identifiable information that was collected through surveys distributed prior to July 30, 2002. Finally, it requires the destruction of any personally identifiable information collected from any student under the age of 13.
The FTC today released a consumer alert with information for teachers and school administrators to consider when they are asked to distribute a survey to students. The FTC recommends that teachers or administrators check to see if the survey form includes a Privacy Statement. It's also wise to know:
Copies of the Alert are available at: http://www.ftc.gov/opa/2003/01/ercaalert.pdf
The Commission vote to accept the proposed settlement was 5-0. An announcement regarding the proposed consent agreement will be published in the Federal Register shortly. The agreement will be subject to public comment for 30 days, until February 28, after which the Commission will decide whether to make it final. Comments should be addressed to the FTC, Office of the Secretary, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580.
NOTE: A consent agreement is for settlement purposes only and does not constitute an admission of a law violation. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of $11,000.
Copies of the proposed consent agreement, the complaint, an analysis to aid public comment and the consumer alert are available from the FTC's Web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint, or to get free information on any of 150 consumer topics, call toll-free, 1-877-FTC-HELP (1 877-382-4357), or use the complaint form at http://www.ftc.gov. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.