UPDATE 2-U.S. FTC settles with Google over Buzz roll-out

* Google agrees to privacy audits every two years

* Practices were deceptive, FTC alleges

* A penitent Google apologizes, says will not repeat error
(Adds Google, FTC, privacy expert comment, adds SAN FRANCISCO
to dateline)

By Diane Bartz and Alexei Oreskovic

WASHINGTON/SAN FRANCISCO, March 30 (Reuters) – Search giant
Google Inc (GOOG.O: Quote, Profile, Research) has settled with U.S. regulators
investigating privacy problems that cropped up in its botched
roll-out of social network Buzz, the Federal Trade Commission
said on Wednesday.

Under the deal, Google agreed to have independent privacy
audits every two years for the next 20 years.

“This order technically applies only to Google but we think
that many of the provisions of the order are good business
practices” that the rest of the industry should follow, said
Jessica Rich, deputy director of the FTC’s Consumer Protection
Bureau.

Launched in February 2010 to compete with Twitter, Buzz
initially used its Gmail customers’ email contact lists to
create social networks of Buzz contacts that the rest of the
world could see, which led to an uproar.

Google quickly changed the settings so that contacts were
kept private by default. Analysts generally consider the
product a flop.

“It’s a big deal,” said Marc Rotenberg, executive director
of the Electronic Privacy Information Center, which filed the
original complaint about Buzz with the FTC.

Rotenberg said that although Google has a privacy policy
already, the order will mean that it will have to be improved.

“I think they were overly aggressive. I think they
basically decided that they were going to convert their Gmail
users to a social network overnight,” said Rotenberg.

EPIC’s complaint included stories of people who were signed
up to Buzz along with people they did not want to be connected
with — in one case an abusive ex-husband.

But a person familiar with the matter said that privacy
policy improvements they have already made largely satisfied
the requirement for a comprehensive privacy policy referenced
in the settlement.

Google tightened its privacy policy in the wake of
revelations that Google’s Street View cars, which take
panoramic pictures of city streets, inadvertently collected
data from unsecured wireless networks in more than 30
countries.

Google initially said that information was limited to
“fragments” of unencrypted data but later acknowledged that the
cars actually collected more extensive information, including
complete emails and passwords.

The U.S. Federal Trade Commission closed its investigation
into the issue, which was also probed by the governments of
Britain, France, Singapore and Switzerland, among others.

The big difference is that now Google’s privacy behaviors
will be evaluated by a third-party every two years, the source
said.

That audit will not be made public, the FTC said.

The FTC charged that Google was deceptive in leading its
Gmail customers to believe that they could decline to
participate in Buzz. Those who declined were still included in
certain Buzz features.

“For users who joined the Buzz network, the controls for
limiting the sharing of their personal information were
confusing and difficult to find,” the FTC said in a statement.

Under the settlement, if Google makes assertions about how
a customers’ private data will be treated it must get their
consent before shifting to a less restrictive privacy policy.

“This is a 20-year order, and if they don’t comply with the
order they can be subject to (a) $16,000 (fine) per violation,”
added Rich.

Google apologized for the Buzz botch in a blog post on
Wednesday, and pledged not to repeat the error.

“The launch of Google Buzz fell short of our usual
standards for transparency and user control — letting our
users and Google down,” wrote Alma Whitten, director of
privacy, product and engineering.

“We’ll receive an independent review of our privacy
procedures once every two years, and we’ll ask users to give us
affirmative consent before we change how we share their
personal information.”
(Reporting by Diane Bartz and Alexei Oreskovic, editing by
Gerald E. McCormick, Tim Dobbyn and Matthew Lewis)

UPDATE 2-U.S. FTC settles with Google over Buzz roll-out