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Yahoo! Drops on FTC Inquiry

The Internet company's consumer information practices are being investigated.

Updated from 4:39 p.m. EST

Yahoo!

shares

(YHOO)

fell sharply Wednesday afternoon following the disclosure that the

Federal Trade Commission

is conducting an inquiry into the Internet company's "consumer information practices."

In a filing with the

Securities and Exchange Commission

Thursday, the Santa Clara, Calif.-based company said the FTC had asked Yahoo! to provide information about company practices and submit various documents and other materials to the government agency.

Yahoo!'s stock, which had traded as high as 187 1/16 earlier in the day, closed down 7 9/16, or 4%, at 169 1/2, after hitting a low of 160 1/4.

"We have been contacted by the FTC and have been asked to help them understand certain of our data collection practices," Yahoo! said. "We understand that this inquiry was prompted by the

California Healthcare Foundation's Report

, dated January 2000, on the health Web sites of 21 companies. We are voluntarily providing information to the FTC. We take privacy very seriously."

In a report issued Feb. 1, the nonprofit

TheStreet Recommends

California HealthCare Foundation

concluded that visitors to health-related Web sites are not anonymous, even if they think they are, and that the practices of some of the 21 most popular health sites on the Internet conflict with their stated privacy policies.

Among its other findings, the report found that personal information supplied by Web users for a health assessment test on Yahoo! was transmitted to another company that conducted the actual assessment. The report stated that Yahoo! didn't make it clear that the information was being transmitted to a third party, or what rights that third party had to use that information for its own purposes.

Over the last several weeks, privacy issues related to the information that Internet marketers gather about consumers have been a hot button for both activists and investors.

In mid-February, shares of Internet advertising company

DoubleClick

(DCLK)

fell from 113 3/4 to 90 3/4 -- more than 20% -- over two days as news spread that the company's information-gathering practices were the subject of inquiries from not only the FTC but also the New York state attorney general.

DoubleClick's shares, which subsequently traded as high as 118 7/8, closed down 1 3/16, or 1%, at 96 7/16 Thursday.

One Yahoo! shareholder discounted the news. "I grope to find the significance of a simple inquiry into Internet practices by the FTC, and what material effect it would have on Yahoo!'s financial position -- particularly coming on the heels of the DoubleClick inquiry," says Jeffrey Diecidue, managing director of

Unicom Capital

.

Yahoo! is scheduled to release its first-quarter financial results on April 5.

As the company has previously disclosed, Yahoo! already operates under consent order issued by the FTC to

GeoCities

, the free Web-site-building company it acquired in 1999. That order already imposes certain obligations and restrictions regarding information Yahoo! collects from users.