FTC Looks Into Possible Privacy Violations at DoubleClick - TheStreet

FTC Looks Into Possible Privacy Violations at DoubleClick

The company's stock dropped before being halted on the news.
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Updated from 4:03 p.m. EST

The

U.S. Federal Trade Commission

is conducting an informal investigation into whether the data-collection practices of the online advertising company

DoubleClick

(DCLK)

violate Internet users' privacy.

The precedent-setting inquiry could have an impact on DoubleClick's ability to amass information by combining online and off-line tracking resources.

Investors reacted harshly to the disclosure, which was made in a filing by DoubleClick with the

Securities and Exchange Commission

and became public Wednesday afternoon. In after-hours trading Wednesday, DoubleClick's shares plunged 14 1/2, or 13.6%, to 92, according to

Instinet

. Earlier, the stock had been trading down 4 15/16, or 4.43%, at 106 1/2, when trading was halted through the 4 p.m. EST close.

DoubleClick said in the SEC filing, made Feb. 14, that it was cooperating with the inquiry. The New York-based company, which is also the defendant in several class action suits contending that it unlawfully obtains and sells Internet users' personal information, did not return calls for comment.

In November, privacy advocates cried foul when DoubleClick acquired

Abacus Direct

, the country's largest catalog database firm, making it possible to combine anonymous Internet profiles of consumers in the DoubleClick online database with the personal information contained in the Abacus off-line database.

"The acquisition of Abacus gave DoubleClick the ability to merge offline data with online data," said Tara Long, an analyst with C.E. Unterberg, Towbin. "Marketers have never been able to do this."

The FTC approved that deal, but since then privacy advocates have put the pressure on the trade commission to review DoubleClick's practices. Last week, the

Electronic Privacy Information Center

filed a complaint with the FTC claiming that DoubleClick engages in "unfair and deceptive trade practices."

Long, who rates DoubleClick a strong buy and has not done any underwriting for the company, said the FTC's investigation could put a damper on DoubleClick's stock price in the near term.

"When the FTC probes a company there is radio silence," she said. "That might scare investors."

On Monday, DoubleClick tried to take the offensive, announcing a plan to deal with the online privacy issues of consumers.