Liberty Financial Companies, Inc

Text (OCR of the scan at left; may contain errors)

Complaint 128 F.T.C.

IN THE MATTER OF

LIBERTY FINANCIAL COMPANIES, INC.

CONSENT ORDER, ETC., IN REGARD TO ALLEGED VIOLATION OF SEC. 5 OF THE FEDERAL TRADE COMMISSION ACT

Docket C-3891. Complaint, Aug. 12, 1999--Decision, Aug. 12, 1999

This consent order, among other things, prohibits Liberty Financial Companies, Inc., the Massachusetts-based website operation, from misrepresenting the purpose for the collection or use of personal information from or about children or consumers age thirteen through seventeen. The consent order requires the respondent to provide clear and prominent notice with respect to its practices regarding its collection and use of personal information.

Participants

For the Commission: Toby Levin, Sydney Knight, Joel Winston, C. Lee Peeler and Louis Silversin.

For the respondent: William MacLeod, Collier, Shannon, Rill & Scott, Washington, D.C.

COMPLAINT

The Federal Trade Commission, having reason to believe that Liberty Financial Companies, Inc., 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 Liberty Financial Companies, Inc., is a Massachusetts corporation with its principal office or place of business at 600 Atlantic Avenue, Boston, Massachusetts. 2. Respondent has operated a World Wide Web ("Web") site located at http://www.younginvestor.com (the "Website"). 3. 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. 4. Respondent has disseminated or caused to be disseminated on its Website certain Web pages directed at children known as The Young Investor Measure Up Survey area. [Exhibit A]. At this area, respondent conducts a survey that collects from participants numerous items of information such as the individual's: weekly

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amount of allowance; types of financial gifts received such as stocks, bonds and mutual funds, and from whom; spending habits; part time work history; plans for college; and family finances including ownership of any mutual funds or investments in the Stein Roe Young Investor Fund offered by respondent. The survey states that "[a]ll of your answers will be totally anonymous." The survey ends with a section entitled "Entry Form" that asks participants what prize they would prefer if they win the "quarterly drawing," and asks if they "would like to be added to the Young Investor e-mail newsletter." The survey collects personal identifying information, including name, age, and gender, and participants in the survey are also told to provide e-mail address and street address in order to receive the newsletter and for identification purposes if they win the drawing. 5. Through the means described in paragraph four, respondent has represented, expressly or by implication, that it maintains the information it collects at the Measure Up Survey area in an anonymous manner.

6. In truth and in fact, respondent does not maintain the information it collects at the Measure Up Survey area in an anonymous manner because individuals can be identified with their responses to the survey. While respondent has not sold, rented, or otherwise marketed the information to any third party, respondent compiles and maintains a database that combines the personal identifying information that it collects in the Entry Form section of the survey, including name, address, and e-mail address, with all other survey responses. Therefore, the representation set forth in paragraph five was, and is, false or misleading. 7. The Measure Up Survey [Exhibit A] contains the following statements:

A. "Would you like to be added to the Young Investor e-mail newsletter?" B. "Each Quarter, one participant will win his or her choice of a digital video camera, CD ROM drive or flatbed scanner." C. "If you are chosen as a winner in the quarterly drawing, which prize would you like? o Connectix color digital video camera o CD ROM drive o Flatbed scanner"

The survey then requests personal identifying information from the participants, including name, residence, and e-mail address, and states

Complaint 128 F.T.C.

that this information "[m]ust be completed to get our newsletter" and "will only be used to contact you if you win." 8. Through the means described in paragraph seven, respondent has represented, expressly or by implication, that: A. Participants in the Measure Up Survey who submit the requested personal identifying information receive upon request respondent's Young Investor e-mail newsletter. B. In each quarter, a participant in the Measure Up Survey who submits the requested personal identifying information is selected to win his or her choice of specified prizes. 9. In truth and in fact:

A. Participants in the Measure Up Survey who submit the requested personal identifying information do not receive upon request respondent's Young Investor e-mail newsletter. Respondent has not provided an e-mail newsletter to any of the participants in the survey and, in fact, has never developed such an e-mail newsletter. B. A participant in the Measure Up Survey who submits the requested personal identifying information has not been selected in each quarter to win his or her choice of specified prizes.

Therefore, the representations set forth in paragraph eight were, and are, false or misleading.

10. 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.

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240 Complaint

EXHIBIT A

The Measure up Survey The Young Investor

EXHIBIT A --

The Young Investor Young Investor Survey

See how you measure up to other kids in understanding money and investing.

Each Quarter, one participant will win his or her choice of a digital video camera, CD ROM drive or flatbed scanner.

Take the Survey Now

View Current Survey Results

See the Winner's List

8-1

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Complaint 128 F.T.C.

EXHIBIT A

The Measure up Survey

[The Young Investor Survey logo]

Thank you for taking part in our important study. This survey is being conducted to help us learn more about the experiences of students nationwide.

As you will notice as you fill out this questionnaire, many of the questions are about serious topics and issues. It is very important that you answer all questions truthfully and completely, saying exactly what you have experienced. This is not a test; there are no right or wrong answers. Again, please be as honest as you can in answering the following questions.

All of your answers will be totally anonymous.

A. Allowance

A1. How much of an allowance do you currently receive each week?

$ [blank box] O I don't receive an allowance O I'm not sure

A2. Do you usually save some of your allowance?

O Yes O No O I don't receive an allowance O Not sure

B. Gifts

B1. Have you received any of the following as a gift?

Check all that apply

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LIBERTY FINANCIAL COMPANIES, INC. 245 Complaint EXHIBIT A

The Measure up Survey

Yes No Not Sure 1. Savings Bonds O O O 2. Stocks O O O 3. Mutual Funds O O O 4. Cash O O O 5. Checks O O O 6. Certificates of Deposit (CDs) O O O 7. Gold Coins O O O

B2. Who has given you these types of gifts?

Check all that apply [ ] Parents [ ] Grandparents [ ] Aunts/Uncles [ ] Brothers/Sisters [ ] Family Friends [ ] Other [ ] None of the Above [ ] Not Sure

B3. What do you usually do with gifts of money?

Check all that apply [ ] Spend it on something I need [ ] Spend it on something I want, but don't really need [ ] Give it to my Parents to save for me [ ] Put it in my savings account [ ] Put it into a mutual fund account [ ] Buy an individual Stock or Bond [ ] I never receive gifts of money [ ] Not Sure

C. Work

C1. Do you currently have a part-time job during the school year?

O Yes O No O Not Sure

C2. To earn extra money, do you do odd jobs such as shoveling snow, mowing lawns, raking leaves or

B-3

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Complaint 128 F.T.C.

EXHIBIT A

[illegible] Measure up Survey [illegible]

babysitting? O Yes O No O Not Sure

D. How taught about Money

D1. How knowledgeable do you think you are about money compared to other people your age?

O Very knowledgeable O Somewhat knowledgeable O Not very knowledgeable O Not knowledgeable at all O Not Sure

D2. Who has taught you what you know about money and investing?

Check all that apply [] My parents [] My teachers [] My brothers or sisters [] My friends [] Television [] Books and/or Magazines [] I figured it out myself [] Not Sure

D3. Have you ever taken a class where you learn about money and investing?

O Yes, taken such a class O No, not taken such a class O Not Sure

D4. Would you like to take a class where you learn more about money and investing?

O Yes, would like to take such a class O No, would not like to take such a class O Not Sure

E. College

E1. Are you planning to attend college?

O Yes, planning to attend college

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EXHIBIT A

The Measure up Survey

O No, not planning to attend college O Not Sure

E2. Are you currently saving money for college?

O Yes, currently saving O No, not currently saving O Not Sure

E3. Are your parents currently saving money for your college education?

O Yes, currently saving O No, not currently saving O Not Sure

F. Family Finances

F1. Do your parents discuss family finances with you on a regular basis?

O Yes, discuss O No, don't discuss O Not Sure

F2. Do you own any mutual funds?

O Yes O No O Not Sure

F3. Are you a Stein Roe Young Investor Fund shareholder?

O Yes O No O Not Sure

G. Knowledge Questions

G1. If a movie star has to pay federal income tax on $2 million in income this year, about how much do you think this movie star will have to pay?

O $70,000 O $100,000 O $400,000 O $900,000

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Complaint 128 F.T.C.

EXHIBIT A

The Measure up Survey

O $1,500,000 O Not Sure

G2. Please pick the closest definition for a mutual fund from the choices below.

O An investment company that raises money from shareholders and invests in securities O Debt instrument issued by a bank that usually pays interest. O An interest bearing security that obligates the issuer to pay the holder a specified sum of money and repay principal amount a maturity. O Ownership of a corporation represented by shares that are claims on the company's earning and assets. O Not Sure

G3. Over twenty years' time, where would you expect to make the most money: the stock market, the bond market, or bank certificates of deposit (CDs)

O Stock Market O Bond Market O Bank Certificates of Deposit (CDs) O Not Sure

G4. Do you think the federal deficit is good, bad, or has no effect on the economy:

O Good O Bad O No effect O Not Sure

G5. What percentage of American adults do you think are currently out of work?

O Less than 1% O 1-5% O 6-10% O 11-15% O 16-20% O 21% or more O Not Sure

G6. What percentage of American adults do you think make more than $100,000 a year?

O Less than 1%

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8 - G

1 9

5/29/98 4:43 PM

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EXHIBIT A

The Measure up Survey:

O 1-5% O 6-10% O 11-15% O 16-20% O 21% or more O Not Sure

G7. At what age do you think that you will retire? [ 10 ] O Never O Not Sure

H. Demographic Questions

H1. Are you:

O Male O Female

H2. How old are you? [ ]

H3. How often do you surf the web?

O Daily O A few times a week O Once a week O A few times a month

H4. What do you think of the Young Investor Web Site?

O One of the best sites on the web O Helpful in understanding money O I would recommend it to my friends O It sucks

H5. Will you come back to the Young Investor Web Site?

O Yes O No O Not sure O Only if I win a great prize

H6. What is your main computer?

O Intel-based PC O Apple Macintosh

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Complaint EXHIBIT A

For Measure up survey

O Other

I. Entry Form

If you are chosen as a winner in the quarterly drawing, which prize would you like?

O Connectix color digital video camera O CD ROM drive O Flatbed scanner

Would you like to be added to the Young Investor email newsletter?

O Yes O No

* Must be completed to get our newsletter First Name * Last Name * Street Address * City * State * Zip Code * Country E-Mail Address *

send in my form

This information will only be used to contact you if you win. Take me back to the Measure Up Survey Page

7 of 7 52998 4:37 PM

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DECISION AND ORDER

The Federal Trade Commission having initiated an investigation of certain acts and practices of the respondent named in the caption hereof, and the respondent having been furnished thereafter with a copy of a draft of complaint which the Bureau of Consumer Protection proposed to present to the Commission for its consideration and which, if issued by the Commission, would charge respondent with violation of the Federal Trade Commission Act; and The respondent, its attorneys, and counsel for Federal Trade Commission having thereafter executed an agreement containing a consent order, an admission by the respondent of all the jurisdictional facts set forth in the aforesaid draft of complaint, a statement that the signing of said agreement is for settlement purposes only and does not constitute an admission by respondent that the law has been violated as alleged in such complaint, or that the facts as alleged in such complaint, other than jurisdictional facts, are true and waivers and other provisions as required by the Commission's Rules; and The Commission having thereafter considered the matter and having determined that it had reason to believe that the respondent has violated the said Act, and that complaint should issue stating its charges in that respect, and having thereupon accepted the executed consent agreement and placed such agreement on the public record for a period of sixty (60) days, the Commission hereby issues its complaint, makes the following jurisdictional findings and enters the following order:

1. Respondent Liberty Financial Companies, Inc., is a Massachusetts corporation with its principal office or place of business at 600 Atlantic Avenue, Boston, Massachusetts. 2. The Federal Trade Commission has jurisdiction of the subject matter of this proceeding and of the respondent, and the proceeding is in the proceeding is in the public interest.

ORDER

DEFINITIONS

For purposes of this order, the following definitions shall apply:

1. "Child" or "children" shall mean an individual under the age of thirteen (13).

Decision and Order 128 F.T.C.

2. "Parents" or "parental" shall mean a legal guardian, including, but not limited to, a biological or adoptive parent.

3. "Personal information" shall mean individually identifiable information about an individual collected online, including first and last name, home or other physical address including street name and name of a city or town, e-mail address, telephone number, Social Security number, or any information concerning the child or the parents of that child that the website collects online from the child and combines with an identifier described in this definition.

4. "Disclosure" shall mean, with respect to personal information, (a) the release of personal information collected from a child in identifiable form for any purpose, except where such information is provided to a person other than respondent who provides support for the internal operations of the website and does not disclose or use that information for any other purpose, and (b) making personal information collected from a child by a website directed to children or at any commercial website where respondent has actual knowledge that it is collecting personal information from a child, publicly available in identifiable form, by any means including, but not limited to, public posting through the Internet, or through a home page of a website, a pen pal service, an electronic mail service, a message board, or a chat room.

5. "Clear(ly) and prominent(ly)" shall mean in a type size and location that are not obscured by any distracting elements and are sufficiently noticeable for an ordinary consumer to read and comprehend, and in a typeface that contrasts with the background against which it appears.

6. "Electronically verifiable signature" shall mean a digital signature or other electronic means that ensures a valid consent by requiring: (1) authentication (guarantee that the message has come from the person who claims to have sent it); (2) integrity (proof that the message contents have not been altered, deliberately or accidentally, during transmission); and (3) non-repudiation (certainty that the sender of the message cannot later deny sending it).

7. "Verifiable parental consent" shall mean obtaining consent by any reasonable effort (taking into consideration available technology), including a request for authorization for future collection, use, and disclosure described in the notice, to ensure that a parent of a child receives notice of the respondent's personal information collection, use, and disclosure practices, and authorizes the collection, use, and

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disclosure, as applicable, of personal information and the subsequent use of that information before that information is collected from that child. Such reasonable efforts may include any of the following means: (1) a signed statement transmitted by postal mail or facsimile; (2) authorizing a charge to a credit card via a secure server; (3) e-mail accompanied by an electronically verifiable signature; (4) a procedure that is specifically authorized by statute, regulation, or guide issued by the Commission; or (5) such other procedure that ensures verified parental consent and ensures the identity of the parent, such as the use of a reliable certifying authority.

8. "Website directed to children" shall mean a commercial website targeted to children, or that portion of a commercial website that is targeted to children. Provided however, that a commercial website or a portion of a commercial website shall not be deemed directed to children solely for referring or linking to a commercial website directed to children by using information location tools, including a directory, index, reference, pointer, or hypertext link. 9. Unless otherwise specified, "respondent" shall mean Liberty Financial Companies, Inc., its successors and assigns and its officers, agents, representatives, and employees.

10. "Commerce" shall mean as defined in Section 4 of the Federal Trade Commission Act, 15 U.S.C. 44.

I.

It is ordered, That respondent, directly or through any corporation, subsidiary, division, or other device, in connection with any online collection of personal information from children and/or consumers age thirteen (13) through seventeen (17), in or affecting commerce, shall not make any misrepresentation, in any manner, expressly or by implication:

A. That the information collected is maintained in an anonymous manner;

B. That children and/or consumers age thirteen (13) through seventeen (17) who submit such information will receive an e-mail newsletter or any other represented product or service; C. That children and/or consumers age thirteen (13) through seventeen (17) who submit such information are eligible to win prizes in respondent's drawing or contest; or

Decision and Order 128 F.T.C.

D. Regarding the collection or use of personal information from or about children and/or consumers age thirteen (13) through seventeen (17).

II.

It is further ordered, That respondent, directly or through any corporation, subsidiary, division, or other device, in connection with the online collection of personal information at a website directed to children, or at any commercial website where respondent has actual knowledge that it is collecting personal information from a child, in or affecting commerce, shall not collect personal information from any child if respondent has actual knowledge that such child does not have his or her parent's permission to provide the information to respondent. For purposes of Parts II, III, IV, and V of this order, respondent shall not be deemed to have actual knowledge if the child has falsely represented that (s)he is not a child and respondent does not knowingly possess information that such representation is false.

III.

It is further ordered, That respondent, directly or through any corporation, subsidiary, division, or other device, in connection with the online collection of personal information from children, at a website directed to children, or at any commercial website where respondent has actual knowledge that it is collecting personal information from a child, in or affecting commerce, shall provide clear and prominent notice with respect to respondent's practices regarding its collection and use of personal information. Such notice shall include:

A. What information is being collected (e.g., "name," "home address," "e-mail address," "age," "interests"); B. How respondent uses such information;

C. Respondent's disclosure practices for such information (e.g., parties to whom it may be disclosed, such as "advertisers of consumer products," "mailing list companies," "the general public"); D. A description of a means that is reasonable under the circumstances by which a parent whose child has provided personal information may obtain, upon request and upon proper identification, (i) a description of the specific types of personal information collected from the child by respondent, (ii) the opportunity at any

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time to refuse to permit the respondent's further use or maintenance in retrievable form, or future online collection, of personal information from that child, and (iii) any personal information collected from the child.

Such notice shall appear on the home page of respondent's website(s) directed to children, or at any commercial website where respondent has actual knowledge that it is collecting personal information from a child, and at each location on the site(s) at which such information is collected.

Provided, however, that for purposes of this Part, compliance with all of the following shall be deemed adequate notice: (a) placement of a clear and prominent hyperlink or button labeled PRIVACY NOTICE on the home page(s), which directly links to the privacy notice screen(s); (b) placement of the information required in this Part clearly and prominently on the privacy notice screen(s), followed on the same screen(s) with a button that must be clicked on to make it disappear; and (c) at each location on the site at which any personal information is collected, placement of a clear and prominent hyperlink on the initial screen on which the collection takes place, which links directly to the privacy notice and which is accompanied by the following statement in bold typeface:

NOTICE: We collect personal information on this site. To learn more about how we use your information click here.

IV.

It is further ordered, That respondent, directly or through any corporation, subsidiary, division, or other device, in connection with the online collection of personal information from children at a website directed to children, or at any commercial website where respondent has actual knowledge that it is collecting personal information from a child, in or affecting commerce, shall maintain a procedure by which it obtains verifiable parental consent for the collection, use or disclosure of such information from children.

V.

It is further ordered, That respondent Liberty Financial Companies, Inc., and its successors and assigns, shall delete from its website(s) directed to children, and at any commercial website(s)

Decision and Order 128 F.T.C.

where respondent has actual knowledge that it is collecting personal information from a child, all personal information collected from children prior to the date of service of the order.

VI.

It is further ordered, That after the effective date of the Children's Online Privacy Protection Act of 1998 and any regulations or guides promulgated by the Commission pursuant to the Act, compliance with such statute, regulations, and guides shall be deemed to be compliance with the definition section of this order and Parts II, III and IV of this order.

VII.

It is further ordered, That respondent Liberty Financial Companies, Inc., and its successors and assigns, shall maintain and upon request make available to the Federal Trade Commission for inspection and copying the following:

A. For five (5) years after the last date of dissemination of a notice required by this order, a print or electronic copy in HTML format of all documents relating to compliance with Parts III through V of this order, including, but not limited to, a sample copy of every information collection form, Web page, screen, or document containing any representation regarding respondent's information collection and use practices pertaining to children. Each Web page copy shall be accompanied by the URL of the Web page where the material was posted online. Electronic copies shall include all text and graphics files, audio scripts, and other computer files used in presenting information on the World Wide Web; and

B. For five (5) years after the last collection of personal information from a child, all materials evidencing the verifiable parental consent given to respondent.

Provided, however, that after creation of any Web page or screen in compliance with this order, respondent shall not be required to retain a print or electronic copy of any amended Web page or screen to the extent that the amendment does not affect respondent's compliance obligations under this order.

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VIII.

It is further ordered, That respondent Liberty Financial Companies, Inc., and its successors and assigns, shall deliver a copy of this order to all current and future principals, officers, directors, and managers, and to all current and future employees, agents, and representatives having responsibilities with respect to the subject matter of this order. Respondent shall deliver this order to current personnel within thirty (30) days after the date of service of this order, and to future personnel within thirty (30) days after the person assumes such position or responsibilities.

IX.

It is further ordered, That respondent Liberty Financial Companies, Inc., and its successors and assigns, shall notify the Commission at least thirty (30) days prior to any change in the corporation that may affect compliance obligations arising under this order, including, but not limited to, a dissolution, assignment, sale, merger, or other action that would result in the emergence of a successor corporation; the creation or dissolution of a subsidiary, parent, or affiliate that engages in any acts or practices subject to this order; the proposed filing of a bankruptcy petition; or a change in the corporate name or address. Provided, however, that, with respect to any proposed change in the corporation about which respondent learns less than thirty (30) days prior to the date such action is to take place, respondent shall notify the Commission as soon as is practicable after obtaining such knowledge. All notices required by this Part shall be sent by certified mail to the Associate Director, Division of Enforcement, Bureau of Consumer Protection, Federal Trade Commission, Washington, D.C.

X.

It is further ordered, That respondent Liberty Financial Companies, Inc., and its successors and assigns, shall, within sixty (60) days after service of this order, and at such other times as the Federal Trade Commission may require, file with the Commission a report, in writing, setting forth in detail the manner and form in which they have complied with this order.

Decision and Order 128 F.T.C.

XI.

This order will terminate on August 12, 2019, or twenty (20) years from the most recent date that the United States or the Federal Trade Commission files a complaint (with or without an accompanying consent decree) in federal court alleging any violation of the order, whichever comes later; provided, however, that the filing of such a complaint will not affect the duration of:

A. Any Part in this order that terminates in less than twenty (20) years; B. This order's application to any respondent that is not named as a defendant in such complaint; and C. This order if such complaint is filed after the order has terminated pursuant to this Part.

Provided, further, that if such complaint is dismissed or a federal court rules that the respondent did not violate any provision of the order, and the dismissal or ruling is either not appealed or upheld on appeal, then the order will terminate according to this Part as though the complaint had never been filed, except that the order will not terminate between the date such complaint is filed and the later of the deadline for appealing such dismissal or ruling and the date such dismissal or ruling is upheld on appeal.

B.A.T. INDUSTRIES P.L.C., ET AL. 259

259 Set Aside Order

IN THE MATTER OF

B.A.T. INDUSTRIES P.L.C., ET AL.

SET ASIDE ORDER IN REGARD TO ALLEGED VIOLATION OF SEC. 7 OF THE CLAYTON ACT AND SEC. 5 OF THE FEDERAL TRADE COMMISSION ACT

Docket 9271. Consent Order April 19, 1995--Set Aside Order, Aug. 12, 1999

This order reopens a 1995 consent order -- which required the respondents to divest certain cigarette brands and a cigarette manufacturing facility -- and sets aside the prior approval provision pursuant to the Commission's Prior Approval Policy Statement. Thus the consent order is set aside in its entirety because no further obligation remains under the order, besides an annual reporting requirement.

ORDER SETTING ASIDE ORDER

On April 29, 1999, British American Tobacco p.l.c. ("BAT"), the successor to B.A.T. Industries p.l.c. and Brown & Williamson Tobacco Corporation, the respondents in the above-referenced order ("Order"), filed its Petition to Reopen and Modify Order ("Petition") in this matter. BAT asks that the Commission reopen and modify the Order pursuant to Section 5(b) of the Federal Trade Commission Act ("FTC Act"), 15 U.S.C. 45(b), and Section 2.51 of the Commission's Rules of Practice and Procedure, 16 CFR 2.51, and consistent with the Statement of Federal Trade Commission Concerning Prior Approval and Prior Notice Provisions, issued on June 21, 1995 ("Policy Statement").¹ The Petition requests that the Commission reopen and modify the Order to eliminate the prior approval provision in paragraph IV of the Order. The thirty-day comment period on the Petition ended June 29, 1999. No comments were received. For the reasons discussed below, the Commission has determined to grant BAT's Petition. Because there would remain no further affirmative obligations under the Order, besides an annual reporting requirement, the Commission has determined to set aside the Order in its entirety. The complaint in this matter alleges that BAT's acquisition of the American Tobacco Company ("ATC") violated Section 5 of the FTC Act, as amended, 15 U.S.C. 45, and Section 7 of the Clayton Act, as amended, 15 U.S.C. 18, by lessening competition in the United States

--- ¹ 60 Fed. Reg. 39,745-47 (August 3, 1995); 4 Trade Reg. Rep. (CCH) ¶ 13,241.