Gateway Learning Is Ordered to Pay in FTC Privacy Case

The Federal Trade Commission has ordered the company known for its Hooked on Phonics program to give up the money it earned by surreptitiously disclosing personal information about its customers, the agency said Wednesday.

Gateway Learning Corp. of Santa Ana agreed to pay $4,608, the FTC said. The company also agreed not to share consumer data without consent and not to retroactively change its privacy policy without alerting customers. If it does, it faces an $11,000 fine per violation, the FTC said.

Gateway Learning, which admitted no wrongdoing, couldn’t be reached Wednesday.

According to the FTC, privately held Gateway Learning began marketing its Hooked on Phonics program on the Internet in 2000. In a privacy statement on its website, the company said it didn’t sell, rent or loan identifiable data without the “customer’s explicit consent” or share any information about children younger than 13. It also assured customers that if the policy changed, they could ask the company not to share their information.

But in April 2003, the FTC alleged, Gateway Learning began renting personal information from its customer list of about 30,000 to telemarketers without informing its customers. The information included names, addresses, phone numbers and children’s age ranges and genders.

That June, the company changed its privacy policy to say that “from time to time” it would share personal information.

“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.”

On July 1, 2003, Gateway Learning stopped renting consumer data collected online, the FTC said. The company’s current Promise of Privacy warns that it may “provide your name, address and telephone number (not your e-mail address) to reputable companies.”

Robert Ellis Smith, publisher of the monthly Privacy Journal, said the FTC ruling protected consumers and reaffirmed “the idea that once you commit yourself, you’ve got to stick with it or it’s a breach of contract.”

Chris Hoofnagle, associate director of the Electronic Privacy Information Center, agreed: “It’s a good deal for consumers.”