UNITED STATES OF AMERICA In the Matter of GEOCITIES, a corporation. DOCKET NO. The Federal Trade Commission, having reason to believe that GeoCities, a corporation ("respondent"), has violated the provisions of the Federal Trade Commission Act, and it appearing to the Commission that this proceeding is in the public interest, alleges: 1. Respondent GeoCities is a California corporation with its principal office or place of business at 1918 Main Street, Suite 300, Santa Monica, California 90405. 2. Respondent has operated a World Wide Web ("Web") site located at http://www.geocities.com. This Web site is a virtual community consisting of consumers' personal home pages that are organized into 40 themed neighborhoods. Respondent "hosts" a personal home page by posting it to an address in the consumer's chosen neighborhood. 3. Respondent has provided numerous services including free and fee-based personal home pages, free e-mail service, contests and children's clubs. Respondent provides personal home pages and e-mail addresses to adults and children who reveal personal identifying and demographic information when they register with the Web site. 4. Respondent has more than 1.8 million members whom it refers to as "homesteaders." As of December 2, 1997, approximately 200,000 GeoCities homesteaders were between the ages of 3 and 15. As of May 18, 1998, approximately 50,000 homesteaders were under age 13. Respondent's site is one of the ten most frequently visited Web sites, and was the sixth top trafficked site in April 1998 with 14.1 million unique visitors ages 12 and up. Among visitors between the ages of 12 and 17, it was the third most frequently visited Web site in March 1998. One out of five U.S. Web users visited respondent's Web site in October 1997. 5. Respondent has created opportunities for third party advertisers to promote products in a targeted manner to its more than 1.8 million members through respondent's collection of personal identifying, demographic, and "special interest" information obtained in the registration process and through the placement of members' personal home pages in themed neighborhoods. 6. Respondent has derived its revenues from: selling third party advertising space on the Web site (including rotated ad banners, pop-up ads, and sponsorships of major areas on the Web site); selling personal identifying, demographic, and/or interest information collected from consumers who register; GeoPlus, an enhanced fee-based service that provides members extra server space for their personal home pages, among other benefits; merchandising in the Web site's GeoStore; and respondent's publishing unit (GeoPress Publishing). 7. Respondent has required consumers, including children, to complete a "New Member Application" form to become a GeoCities member. The form requests certain mandatory information and certain other information that respondent describes as "optional." The form also asks consumers to designate whether they would like to receive "special offers" from a list of topics or from specific companies. The default setting on the form for special offers is for members to receive them unless members choose otherwise. 8. Respondent has promoted on its Web site a children's neighborhood called the "Enchanted Forest." The Enchanted Forest is designated as respondent's "KIDS" area, "[a] community for and by kids." To join the Enchanted Forest neighborhood, children must complete the New Member Application form and post personal home pages. As of May 18, 1998, there were approximately 40,300 homesteads in the Enchanted Forest neighborhood. 9. Respondent has promoted on its Web site a children's club in the Enchanted Forest neighborhood called the "GeoKidz Club." To join the GeoKidz Club, children must complete the "Official GeoCities GeoKidz Club Membership Request Form." This form requires applicants to be GeoCities members and to fill in all information requested, including name, age, e-mail address, GeoCities home page address, and gender. Respondent has also promoted on its Web site contests in the Enchanted Forest neighborhood for which children must complete the "Enchanted Forest Contest Entry Form," by providing their name, personal Web page address, and e-mail address. 10. Respondent has distributed a newsletter called the "World Report." The World Report is e-mailed at regular intervals to respondent's members and occasionally is posted on respondent's Web site. Members automatically receive the World Report but can discontinue receiving it by using respondent's "Profile Editor," a form used to revise members' registration information. The Profile Editor's default setting is for members to receive the World Report unless they request not to. 11. The acts and practices of respondent alleged in this complaint have been in or affecting commerce, as "commerce" is defined in Section 4 of the Federal Trade Commission Act. DECEPTIVE PRACTICES IN CONNECTION WITH RESPONDENT'S COLLECTION AND USE OF PERSONAL IDENTIFYING INFORMATION Misrepresentations involving information collection by GeoCities 12. Respondent has placed privacy statements on its New Member Application form [Exhibit A]. This form collects from consumers, including children, certain mandatory information (first and last name, zip code, e-mail address, gender, date of birth, and member name) and certain other information respondent designates as "optional" (education level, income, marital status, occupation, and interests). The form also asks consumers to designate whether they wish to receive "special offers" from advertisers, to select from a list of special offer topics, and to designate whether they wish to receive specific products or services from individual companies. Respondent has also placed privacy statements on its "GeoCities Free Member E-mail Program" Web page [Exhibit B] and in the September 2, 1997 issue of the World Report newsletter [Exhibit C], which refer to consumers' information collected on the New Member Application form. Through the privacy statements in Exhibits A, B, and C, respondent has made the following statements about the uses and privacy of the information it collects:
13. Through the means described in Paragraph 12, respondent has represented, expressly or by implication, that the personal identifying information collected through its New Member Application form is used only for the purpose of providing to members the specific e-mail advertising offers and other products or services they request. 14. In truth and in fact, the personal identifying information collected through respondent's New Member Application form is not used only for the purpose of providing to members the specific e-mail advertising offers and other products or services they request. Respondent has also sold, rented, or otherwise marketed or disclosed this information, including information collected from children, to third parties who have used this information for purposes other than those for which members have given permission. For example, third parties have targeted unrequested e-mail advertising offers to individual members based on their chosen GeoCities neighborhoods. Therefore, the representation set forth in Paragraph 13 was, and is, false or misleading. 15. Through the means described in Paragraph 12, respondent has represented, expressly or by implication, that the "optional" information collected through its New Member Application form is not disclosed to third parties without the consumer's permission, and is used only to gain a better understanding of who is visiting GeoCities. 16. In truth and in fact, respondent has disclosed the "optional" information it collects through the New Member Application form to third parties without the consumer's permission, and for purposes other than to gain a better understanding of who is visiting GeoCities. Respondent has disclosed this information, including information collected from children, to third parties who have used this information to target advertising to GeoCities' members. Therefore, the representation set forth in Paragraph 15 was, and is, false or misleading. Misrepresentations involving sponsorship by GeoCities 17. Respondent has disseminated or caused to be disseminated Enchanted Forest Web pages [Exhibits D, H]. These Web pages have promoted children's activities in the Enchanted Forest, including the Official GeoCities GeoKidz Club, through print [Exhibit D] and audio [Exhibit E] messages, and contests through print messages [Exhibit H]. Respondent has also disseminated or caused to be disseminated the July 16, 1997 issue of the World Report newsletter [Exhibit F], which also promotes the Official GeoCities GeoKidz Club. These promotions have caused children to reveal personal identifying information through the Official GeoCities GeoKidz Club Membership Request Form [Exhibit G] and the Enchanted Forest Contest Entry Form [Exhibit I]. Through its Web page and e-mail promotions, respondent has made the following statements:
18. Through the means described in Paragraph 17, respondent has represented, expressly or by implication, that respondent collects and maintains the children's personal identifying information collected through the Official GeoCities GeoKidz Club Membership Request Form and Enchanted Forest Contest Entry Form. 19. In truth and in fact, respondent does not collect and maintain the children's personal identifying information collected through the Official GeoCities GeoKidz Club Membership Request Form and Enchanted Forest Contest Entry Form. In fact, the Official GeoCities GeoKidz Club and the GeoCities Enchanted Forest contests are run by third parties hosted on the GeoCities Web site, who collect the children's personal identifying information directly and maintain it. Therefore, the representation set forth in Paragraph 18 was, and is, false or misleading. 20. The acts and practices of respondent as alleged in this complaint constitute unfair or deceptive acts or practices in or affecting commerce in violation of Section 5(a) of the Federal Trade Commission Act. THEREFORE, the Federal Trade Commission this day of , 1998, has issued this complaint against respondents. By the Commission. Donald S. Clark |