On December 17, 2015, the FTC issued a press release noting it is settling with two app companies over COPPA violations. You will note the date of this blog post is five days later. Like many working in the COPPA compliance field, I’m only now able to speak on this matter after spending four days out cold on the floor from the shock of learning the FTC is actually aware of COPPA. [Okay, a weekend Christmas party may have something to do with the delay.]
As an attorney who enjoys flaying the FTC alive for its lack of interest in enforcing COPPA, one must give credit where it is due. Not only is the FTC hitting non-compliant app companies, but the Commission is even focusing on a nuanced COPPA issue instead of the low hanging fruit we’ve seen in previous enforcement actions. [Ex: Yelp’s age gateway coding error – gotcha!] The question is whether this is a blip on the enforcement screen or the FTC is finally getting serious about COPPA compliance?
The COPPA Settlements
The new COPPA enforcement actions focus on two app companies with offerings directed at children under 13. LAI Systems, LLC produces My Cake Shop, My Pizza Shop, Hair Salon Makeover…and you get the idea. Retro Dream offers a similar group of stimulating apps for young children including enticing offerings such as Ice Cream Jump, Happy Pudding Jump, Ice Cream Drop, Sneezies, Wash the Dishes and…wait…”Sneezies”? That app alone should produce a lawsuit.
The FTC is accusing both companies of failing to obtain verified parental consent before collecting personal information from young tikes using the apps, which is a rather obvious COPPA violation. However, the FTC chose to focus on an aspect of the COPPA Rule not yet highlighted in any enforcement action – the relationship between an app and third party ad networks. Specifically, the FTC accuses the two defendants of allowing ad networks to gather information from child users of the apps in violation of the law.
In the case involving LAI Systems, LLC, the company failed to notify the ad networks its app products were directed at young children. The enforcement action, thus, highlights the fact app companies have such an obligation. The $60,000 settlement further highlights the importance of meeting this obligation or seriously worrying about the monthly mortgage payment.
The Retro Dream case represents a slightly different, yet more damning scenario. Not only did the company fail to notify ad networks children were being targeted, but the company chose to ignore one of the ad networks that alerted it to COPPA. Unsurprisingly, Retro Dream is being forced to pay out a bit more, $300,000, than LAI Systems to resolve its COPPA problems.
Giving the FTC…Credit?
To say I’ve taken the FTC to task in the past over a lack of COPPA enforcement actions would be a minor understatement. If ever there was a case for public floggings and “your tax dollars not at work” statements from on high, the FTC and its COPPA compliance efforts have been deserving targets.
Like that moment when you’ve kissed the mail room girl under the mistletoe at the firm Christmas party after a few too many eggnogs, the question is now what? A few commentators in the media are suggesting this is the first of a wave of COPPA enforcement actions in the app niche.
If history really does repeat itself [mental note – stay away from mistletoe next year], there will be much hand-wringing over these two cases. Then pundits will retire for the holidays with the FTC COPPA team adjourning to the back office for a hibernation session with a stomach full of…well, let’s hope not Sneezies…for a few years.
Let us hope this is not the case.
If the FTC does return to dreams of POM Wonderful executives being forced to admit to deceptive advertising, perhaps it really doesn’t matter. After all, the EU is issuing a new privacy directive that will employ a COPPA-type compliance framework with one tiny difference:
The compliance age may be 16 instead of 13 in certain countries.
If you put your ear close to your screen and listen closely, you can just hear Mark Zuckerberg yell,
“Gott im Himmel!”
Richard A. Chapo, Esq.