Internet hosting service Geocities stands accused of selling personal information about members to marketing organisations, in a federal investigation that could prove a test case in this evolving area.
This is the first Internet privacy case brought by the US Federal Trade Commission. Geocities has agreed to settle the charges "in order to resolve the matter in an expeditious manner", while still denying all allegations.
The case shows the US government taking a tougher stand on privacy. A debate on whether this should be the subject of federal legislation has been raging for the past year. The Clinton administration was initially strongly in favour of the industry regulating itself, but has been gradually losing patience.
The FTC had complained that Geocities had required its two million members to fill out registration forms that included optional sections such as income and job - but had then disclosed this without permission.
It also accused the hosting service of passing data to third parties beyond those it had informed customers could receive their details.
Geocities has now agreed to advise customers its its data collection and sharing policies, and allow them to delete any information held on them.
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