FTC Testifies in Support of Federal Legislation Protecting Children's Online Privacy

Enactment of the "Children's Online Privacy Protection Act of 1998" is important and necessary to protect the privacy of children when they go online, Federal Trade Commission Chairman Robert Pitofsky said today as he presented Commission testimony in support of the legislation. The legislation, introduced by Senators Richard Bryan (D-NV) and John McCain (R-AZ), would require Web sites to provide actual notice of their information practices and to obtain prior parental consent when dealing online with children age 12 and under. "This legislation should provide children and their parents with greater confidence in using the Internet because it places parents in control of the online collection and use of personal information from their children," Pitofsky said.

The testimony summarizes the Commission's role in addressing online privacy issues and highlights the agency's concerns with respect to children's online privacy. Pitofsky referred to the Commission's law enforcement work and its recent report, "Privacy Online: A Report to Congress," which recommends legislation to protect children online. The testimony outlines an agency survey, described in the Report, which "reveals that a significant amount of identifying information is collected from children [online] without any apparent parental involvement." This widespread collection of information from young children contrasts sharply with the strongly expressed preferences of parents, the testimony explains. Noting that some industry groups have taken steps to develop self-regulatory means to protect children online, the Chairman said that "these efforts have not produced an adequate level of protection."

The Commission presented testimony to a House Subcommittee in July of this year, which states that the Commission is still hopeful that industry self-regulation will achieve online

privacy protections for adult consumers. The Commissioners testified, however, that there remain considerable barriers to be surmounted for self-regulation to work. "Unless industry can demonstrate that it has developed and implemented broadbased and effective self-regulatory programs by the end of this year, additional governmental authority in this area would be appropriate and necessary," the Commission testimony states.

Today's testimony, presented before the Senate Subcommittee on Communications, states that children are using the Internet in growing numbers. "In 1998, almost 16 million of America's 69.6 million children under age 18 are reported to be online, almost doubling the number of children (9.8 million) reported to be online only a year ago," the Commission said.

"The increasing number of children online coupled with their growing economic impact create enormous opportunities for marketers to promote their products and services to an eager, targeted, and vulnerable audience," the testimony notes.

The March survey of child-oriented Internet sites found that almost 90 percent of the sites collected personnel information, using a variety of means such as registration pages, user surveys, online contests, electronic pen pal programs, guest books, and application forms. Less than 10 percent of these sites made any apparent effort to notify the child's parents to obtain the parent's consent, the Chairman said.

In outlining the Commission's law enforcement efforts, the testimony refers to a letter to the Center for Media Education, which provides guidance to Web site operators as to what information practices involving children are likely to be deceptive or unfair under Section 5 of the FTC Act. The testimony also explains the Commission's recent settlement with GeoCities, one of the most popular sites on the Web. "The GeoCities case demonstrates that Section 5 of the FTC Act provides a basis for Commission action to protect children's online privacy under certain circumstances. It is not clear, however, that Section 5 authorizes the Commission to take action in all circumstances necessary to protect children's online privacy," the Commission explained.

The testimony states that the Children's Online Privacy Act would allow parents to know about and control the online collection of information from their children. "By establishing these ground rules, the bill would create a level playing field for all such sites," the Commission said. In addition, "the bill's safe harbor provision, would allow industry groups and others to establish sector-specific guidelines, subject to governmental approval, while providing a strong incentive both for ongoing self-regulatory efforts and for the development of new, more effective industry efforts." The testimony also notes that the legislation would give the FTC rulemaking authority to promulgate both procedural mechanisms for approval of industry guidelines and to implement the legislation's substantive provisions governing the online collection of personal information from children.

"As a result of our activities over the past three years, the Commission has developed significant expertise regarding children's privacy," Pitofsky said. "We believe the bill, as currently structured, will enable the Commission to work cooperatively with industry and consumer organizations to develop flexible, practical, and effective approaches to protect children's privacy on commercial Web sites."

The Commission vote to approve the testimony was 4-0.

Copies of the testimony, the report, "Privacy Online: A Report to Congress," the letter to the Center for Media Education, as well as other information on the Commission's privacy initiative are available from the FTC's web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-FTC-HELP (202-382-4357); TDD for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.

(FTC File No. 954807)