A web analytics company, Compete Inc., has agreed to settle Federal Trade Commission (FTC) charges that it violated federal law by using its web-tracking software to collect consumers’ personal data without sufficient disclosure and protection.  According to the FTC, Compete’s tracking software collects data on the browsing behavior of millions of consumers, then uses the data to prepare and sell reports to clients wishing to improve their website traffic and sales.

The FTC alleged that Compete induced consumers to download its tracking software, including by urging them to join a “Consumer Input Paneling” to win rewards while sharing their opinions about products and services.  Once installed, Compete’s software operated in the background, collecting information about consumers’ online activity, including their user names, passwords and search terms, as well as sensitive credit card and other financial identifying information.  Compete also licensed its web-tracking software to other companies, one of which settled similar FTC charges earlier this year.

The FTC charged that Compete’s business practices were unfair or deceptive and violated the law, both in failing to disclose to consumers the detailed information that Compete’s software collected and in making “false and deceptive assurances to consumers that their personal information would be removed from the data it collected.”

The FTC’s proposed settlement order requires both Compete and its clients using the software to fully disclose information they collect and get consumers’ express consent to future data collection.  The settlement also prohibits any misrepresentations about Compete’s privacy and data security practices and requires that it “implement a comprehensive information security program with independent third party audits every two years for 20 years.”

This settlement illustrates the FTC’s increasingly aggressive enforcement of laws governing online collection and use of consumers’ personal data.  And, for businesses relying on third party software or services for online targeted marketing and search engine optimization (SEO), this serves as a warning that you must understand what information is being collected and how it’s being used.  For the FTC Release on this settlement, go to http://www.ftc.gov/opa/2012/10/compete.shtm.