Company Fined for Renting Out Customer Data

Information Management Journal, Sep/Oct 2004 by Swartz, Nikki

Gateway Learning Corp., maker of the "Hooked on Phonics" learning system, recently settled a Federal Trade Commission (FTC) complaint that the company sold data about its customers to outside marketers despite promising to keep the information private.

According to The Washington Post, Gateway Learning Corp. provided marketers with information that included names, addresses, phone numbers, and the ages and sexes of children of families who bought the program. The company's privacy policy posted on its Web site promised not to "sell, rent or loan any personally identifiable information regarding our consumers with any third party unless we receive a customer's explicit consent," according to the complaint.

The company agreed to pay a fine of $4,600, the amount it earned in renting out the data. The case arose from a July 2003 Post article identifying Gateway Learning Corp. as one of several companies renting or selling customer data in violation of their privacy policies. Gateway Learning Corp. rented the information for $95 per 1,000 names. The Post said customer lists comprise a multimilliondollar annual marketplace of information trading hands.

The FTC noted that changing policies retroactively without telling customers first and giving them a chance to remove their data is an unfair practice. "It's simple: If you collect information and promise not to share, you can't share unless the customer agrees," said J. Howard Beales III, head of the FTC's consumer protection bureau.