The FTC has requested information from the popular Internet portal about its practices, Yahoo said in an annual report filed with the Securities and Exchange Commission last week.
The FTC inquiry was prompted by the California Healthcare Foundation's report on the privacy lapses of 21 health Web sites, including Yahoo!'s, according to a Yahoo! spokesperson. The report, issued in January, found that the health sites were sharing information such as e-mail addresses that they had promised users was confidential.
"We are voluntarily providing information to the FTC," said the Yahoo! spokesperson. "We take privacy very seriously."
An FTC spokesman confirmed that the agency is conducting a "routine inquiry to determine whether they are in ... violation of Section Five of the US Federal Trade Commission act."
Section Five states that unfair and deceptive acts in commerce are unlawful and gives the FTC enforcement authority, the FTC said.
Agency sources noted that the inquiry could be as simple as a few questions about how Yahoo! gathers personal data about its visitors. Nevertheless, Yahoo! is required by the SEC to disclose anything that could impact the value of its stock.
Privacy spotlight
Over the last few months the FTC has stepped up its investigations into Web data collection.
In February, the FTC launched an informal inquiry into Internet ad firm DoubleClick's business practices and whether DoubleClick was engaging in unfair or deceptive practices. The inquiry came as DoubleClick was under fire for its intention to merge consumers' offline purchasing behavior with online surfing habits, a plan the company later put on indefinite hold.
In its SEC filing, Yahoo! said that it posts privacy policies concerning the use and disclosure of user data. Yahoo! noted that a Web community company it acquired, GeoCities, is required to comply with an FTC consent order that imposes restrictions on information collected from users.
"The government is getting increasingly involved in online privacy, and we will see where it all shakes out," said Lise Buyer, an analyst at Credit Suisse First Boston. She also noted that "smart companies" such as Yahoo! usually err on the side of conservatism with their privacy policies.
Some Internet privacy advocates said that Yahoo! has a good privacy reputation, as opposed to DoubleClick, against which they had campaigned for months.
"It's not like Yahoo! has been a target of privacy advocates for a number of months like DoubleClick had been," said Jason Catlett, president of privacy consulting firm Junkbusters. "Their record is really pretty good for a company of their size. Unlike DoubleClick, it has a direct relationship with its customers and a business that doesn't entail following them around the Web. If they do have a privacy problem, it's not likely to require major surgery to repair."
