June 9, 2009, 12:00 AM

Sears settles with feds over program that tracked online shoppers

The shoppers voluntarily participated in the program, but the Federal Trade Commission says Sears did not make clear enough that it would be tracking consumers as they moved around the web.

Sears’ parent company has reached a settlement with the U.S. Federal Trade Commission over a program that tracked the web behavior of consumers who voluntarily agreed to participate in return for a $10 payment. The FTC says Sears did not adequately explain the program or how much data would be collected.

As part of the settlement, Sears Holdings Management Corp. has agreed to destroy the data collected, remove any software still on participants’ computers and prominently disclose the type of data that would be collected in any similar program in the future. Sears is No. 7 in the Internet Retailer Top 500 Guide.

“Sears Holdings takes the safety and security of our customers` private information very seriously,” the retailer said in a statement. “The company conducted a research project nearly two years ago with a small panel of consumers who were recruited online to better understand the surfing behavior of U.S. retail customers. The panelists were informed upfront of the nature of the work being conducted and were paid for their participation in the study. At all times, Sears Holdings ensured the privacy and security of the personal information of all participants who enrolled in the program.”

The statement goes on to say that the research was concluded more than a year ago, the software was removed from participants’ computers and that no similar studies are planned.

According to the FTC complaint filed earlier this year, Sears presented a pop-up box to 15 of every 100 visitors to Sears.com and sister site Kmart.com inviting them to join a program called “My SHC Community.” “Ever wish you could talk directly to a retailer? Tell them about the products, service and offers that would really be right for you?” began the invitation. It went on to invite the visitor to participate in a “highly interactive on-line community” and to enter an e-mail address to receive more information.

Participants ultimately downloaded software that allowed Sears to monitor their Internet activity, including on other sites. That included, according to the FTC, tracking what individuals put into shopping carts, their online bank statements, prescription drug records, video rental and library records, and with whom they exchanged e-mails.

The FTC says Sears did not properly disclose the extent of the data to be collected. “Only in a lengthy user license agreement, available to consumers at the end of a multi-step registration process, did Sears disclose the full extent of the information the software tracked,” the FTC says in its announcement of the settlement. The FTC says that behavior constituted a deceptive practice under the Federal Trade Commission Act. There was no mention of a financial penalty.

The settlement underscores the importance of online marketers adhering to the principles the FTC laid out in February in a policy statement regarding advertising to consumers based on their online behavior, says Jordan Cohen, senior director of industry relations at e-mail certification provider Goodmail Systems Inc. The FTC emphasized in that document the importance of letting consumers know what data is being collected and giving them control over the use of their personal information, Cohen says.

“The lesson here is that even if data collection and use is completely benign, marketers need to work closely with their legal advisors to audit and clearly disclose to consumers the full scope of how they collect personal information, the types of information collected, and how it will be used,” Cohen says. “Make sure not to leave out a thing or the FTC might come knocking on your door.”

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