Recent high school graduates will no doubt recall filling out those dreaded surveys that ask about personal interests, background and grade point average. Survey results are supposed to go to public and private universities.
But instead of heading toward halls of higher education, some of these surveys end up in the hands of commercial marketers.
On Wednesday, the Federal Trade Commission settled a case alleging that survey companies that collected student data for "educational purposes" sold that data to marketers.
The Student Marketing Group and its nonprofit subsidiary, the Educational Research Center of America, agreed to settle FTC charges that their practices violated federal law.
According to New York's attorney general, the companies agreed to pay $75,000 to settle similar charges that their practices violated state law.
The settlements could have larger implications for companies that make deceptive privacy statements and misrepresent how data they glean will be used commercially.
"This is one decision in a series that's creating a common law of privacy and expanding individuals' rights," said Chris Jay Hoofnagle, legislative counsel with the Electronic Privacy Information Center.
"This will have a significant effect in educating teachers and administrators about the real purposes of surveys," he added. "The student profilers will do a better job in giving notice and perhaps it will have a limiting effect on student profiling."
The FTC began investigating deceptive student surveys in December 2001. According to the investigation, ERCA sent surveys to teachers and guidance counselors that asked for students' names, addresses, gender, date of birth, religious affiliation, racial and ethnic background and extracurricular interests.
The FTC found that information collected from high school and middle school students, which was supposed to be sent on to colleges and universities, was also being shared with banks, consumer goods and service providers, and other list brokers.
"We found very little middle school data was tabulated into any report shared with colleges and universities," said Laura Mazzarella, attorney for the FTC's bureau of consumer protection.
The FTC alleges that the companies had violated Section 5 of the FTC Act, which prohibits deceptive or unfair trade practices.
The two companies sold personally identifiable information from millions of students to target marketers by sending surveys to "just about every high school in the country," Mazzarella said.
Under the terms of the proposed consent agreement, the companies must destroy any information they have collected from children under the age of 13. The agreement prohibits the companies from using previously collected student information for non-educational marketing purposes. The settlement also bars them from using data collected in the future for non-educational marketing purposes, unless they disclose exactly how the data will be used.
The agreement acknowledges a provision in the No Child Left Behind Act, which requires schools to get parental consent before allowing marketers to collect any information from kids at school, Mazzarella said.
In agreeing to the settlement, Student Marketing Group and ERCA did not pay any penalty or admit any wrongdoing or violation of law. Instead, the companies agreed to disclose that information collected from here on out could be used for non-educational marketing purposes.
"We believe that the settlement reflects our view that there was no attempt to mislead students, but simply a disagreement over the level of detail that should be provided in connection with the collection of information," said Jan Stumacher, Student Marketing Group president, in a statement.
The case is the latest in an FTC crackdown on marketers who violate the FTC Act through deceptive privacy statements and misrepresentations about how personal information is used.
In October, the FTC settled cases against American Student List and the National Research Center for College and University Admissions for collecting personal information from children using surveys administered under the pretense of college admissions and scholarship opportunities.
The latest settlement could have larger implications for the entire database marketing industry, privacy experts say. For example, a company that gathers personal information for a product warranty but uses it for marketing purposes could be taken to task, Hoofnagle said.
"This case is pushing the law to a point where privacy policies will be necessary for personal-information collection," Hoofnagle said. "It's the bridge between a system that's entirely self-regulated and doesn't require a privacy policy to one that does. Any business that collects data under one pretense and uses it for a secondary use may experience liability."
Although school-survey companies will likely put more prominent notices disclaiming how information will be used, the practice of selling information to commercial marketers will continue, observers say.
"This will lead to more detailed notices, but not necessarily better privacy," Hoofnagle said.
Still, the FTC hopes the settlement will send a message to database companies.
"We hope that this case will have a larger impact," Mazzarella said. "You have to be a lot more clear with statements about how information is going to be used. You can't say that you will collect data for one purpose and use it for another."
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