New technologies and the expansion of the Internet of Things have allowed children of this generation to experience seamless interactive technologies through microphones, GPS devices, speech recognition, sensors, cameras and other technological capabilities. These advancements create new markets for entertainment and education alike and, in the process, collect endless amounts of data from children–from their names and locations to their likes/dislikes and innermost thoughts.

The collection of data through this Internet of Toys is on the tongues of regulators and law enforcement, who are warning parents to be wary when purchasing internet-connected toys and other devices for children. These warnings also extend to connected toy makers, urging companies to comply with children’s privacy rules and signaling that focused enforcement is forthcoming.

Federal Trade Commission Makes Clear That Connected Toy Makers Must Comply with COPPA

On June 21 2017, the Federal Trade Commission (FTC) updated its guidance for companies required to comply with the Children’s Online Privacy and Protection Act (COPPA) to ensure those companies implement key protections with respect to Internet-connected toys and associated services. While the FTC’s Six Step Compliance Plan for COPPA compliance is not entirely new, there are a few key updates that reflect developments in the Internet of Toys marketplace. Continue Reading Regulating the Internet of Toys

2014 was a busy year for the Federal Trade Commission (FTC) with the Children’s Online Privacy Protection Act (COPPA).  The FTC announced something new under COPPA nearly every month, including:

  • In January, the FTC issued an updated version of the free consumer guide, “Net Cetera:  Chatting with Kids About Being Online.”  Updates to the guide include advice on mobile apps, using public WiFi securely, and how to recognize text message spam, as well as details about recent changes to COPPA.
  • In February, the FTC approved the kidSAFE Safe Harbor Program.  The kidSAFE certification and seal of approval program helps children-friendly digital services comply with COPPA.  To qualify for a kidSAFE seal, digital operators must build safety protections and controls into any interactive community features; post rules and educational information about online safety; have procedures for handling safety issues and complaints; give parents basic safety controls over their child’s activities; and ensure all content, advertising and marketing is age-appropriate.
  • In March, the FTC filed an amicus brief in the 9th U.S. Circuit Court of Appeals, arguing that the ruling of U.S. District  Court for the Northern District of California in Batman v. Facebook that COPPA preempts state law protections for the online activities of teenagers children outside of COPPA’ coverage is “patently wrong.”
  • In April, the FTC updated its “Complying with COPPA:  Frequently Asked Questions” (aka the COPPA FAQs) to address how COPPA applies in the school setting.  In FAQ M.2, the FTC discussed whether a school can provide the COPPA-required consent on behalf of parents, stating that “Where a school has contracted with an operator to collect personal information from students for the use and benefit of the school, and for no other commercial purpose, the operator is not required to obtain consent directly from parents, and can presume that the school’s authorization for the collection of students’ personal information is based upon the school having obtained the parents’ consent.”  But, the FTC also recommends as “best practice” that schools provide parents with information about the operators to which it has consented on behalf of the parents.  The FTC requires that the school investigate the collection, use, sharing, retention, security and disposal practices with respect to personal information collected from its students.
  • In July, COPPA FAQ H.5, FAQ H.10, and FAQ H.16 about parental consent verification also were updated.  In FAQ H.5, the FTC indicates that “collecting a 16-digit credit or debit card number alone” is not sufficient as a parental consent mechanism, in some circumstances, “collection of the card number – in conjunction with implementing other safeguards – would suffice.”  Revised FAQ H.10 indicates that a developer of a child-directed app may use a third party for parental verification “as long as [developers] ensure that COPPA requirements are being met,” including the requirement to “provide parents with a direct notice outlining [the developer’s] information collection practices before the parent provides his or her consent.” In revised FAQ H.16, the FTC addresses whether an app store operator that offers a verifiable parental consent mechanism is exposed to liability under COPPA.  Since an app store operator does not qualify as an “operator” under COPPA, the app store is not liable under COPPA “for failing to investigate the privacy practices of the operators for whom [they] obtain consent,” but could be liable under the FTC Act for false or deceptive practices.
  • In August, the FTC approved the Internet Keep Safe Coalition (iKeepSafe) program as a safe harbor oversight program. The FTC also called for public comments on AgeCheq, Inc.’s parental verification method, which sought to verify parental identity via a financial transaction or a hand-signed declaration.  The FTC subsequently rejected the proposed method in November because these methods have already been recognized as valid means of obtaining verifiable parental consent under COPPA and emphasized that companies are free to develop common consent mechanisms without Commission approval.
  • In September, Yelp was fined $450,000 for failing to comply with COPPA.  (See our blog post here).  Also in September, TinyCo (the developer of Tiny Pets, Tiny Zoo, Tiny Village, Tiny Monsters and Mermaid Resort) was fined $300,000 for collecting children’s email addresses, in exchange for in-game bonuses, without parental consent in violation of COPPA.
  • In November, AgeCheq, Inc. proposed a second parental consent verification method to ensure COPPA compliance.  The second proposed method consisted of a device-signed parental consent form with a multi-step method requiring entry of a code sent by text message to a mobile device. The Center for Digital Democracy urged the FTC to reject AgeCheq’s method in comments filed on December 29, 2014.  On January 29, 2015, the FTC announced its rejection of AgeCheq’s second proposed parental verification method.
  • In December, the FTC warned BabyBus, a China-based children’s app developer, that its apparent collection of user geolocation information may violate COPPA if (i) user geolocation information is indeed being collected and (ii) if the company does not get parents’ consent before collection the information from children under age 13.  The FTC noted that “COPPA and its related rules apply to foreign-based Web sites and online services that are involved in commerce in the United States.”

Given California’s new student privacy law, Student Online Personal Information Protection Act (effective January 1, 2016), and the recent increased focus on student privacy resulting from President Obama’s announcement about the Student Privacy Act, we expect that 2015 also will be an active year for children’s privacy.  Stay tuned!

On January 27, 2015, U.S. Federal Trade Commission (FTC) staff released an extensive report on the “Internet of Things” (IoT). The report, based in part on input the FTC received at its November 2013 workshop on the subject, discusses the benefits and risks of IoT products to consumers and offers best practices for IoT manufacturers to integrate the principles of security, data minimization, notice and choice into the development of IoT devices. While the FTC staff’s report does not call for IoT specific legislation at this time, given the rapidly evolving nature of the technology, it reiterates the FTC’s earlier recommendation to Congress to enact strong federal data security and breach notification legislation.

The report also describes the tools the FTC will use to ensure that IoT manufacturers consider privacy and security issues as they develop new devices. These tools include:

  • Enforcement actions under such laws as the FTC Act, the Fair Credit Reporting Act (FCRA) and the Children’s Online Privacy Protection Act (COPPA), as applicable;
  • Developing consumer and business education materials in the IoT area;
  • Participation in multi-stakeholder groups considering guidelines related to IoT; and
  • Advocacy to other agencies, state legislatures and courts to promote protections in this area.

In furtherance of its initiative to provide educational materials on IoT for businesses, the FTC also announced the publication of “Careful Connections: Building Security in the Internet of Things”.  This site provides a wealth of advice and resources for businesses on how they can go about meeting the concept of “security by design” and consider issues of security at every stage of the product development lifecycle for internet-connected devices and things.   

This week’s report is one more sign pointing toward our prediction regarding the FTC’s increased activity in the IoT space in 2015. 

The Federal Trade Commission (FTC) announced last week that Yelp – the online service through which consumers can read and write reviews about local businesses – has agreed to pay $450,000 to settle the FTC’s charges that Yelp knowingly and without verifiable parental consent (VPC), collected personal information from children under the age of 13 through its mobile app in violation of the federal law, the Children’s Online Privacy Protection Act (COPPA).

COPPA was enacted in 1998. The FTC, which is responsible for enforcing COPPA, implemented regulations in April 2000 that are known as the COPPA Rule. The FTC issued an amended COPPA Rule in December 2012, which became effective July 1, 2013. 

In general, COPPA and the COPPA Rule prohibit operators of websites, mobile applications or other digital services (collectively, “digital services”) from knowingly collecting personal information from children under age 13 unless and until the digital service operator has VPC. 

Under the amended COPPA Rule, COPPA has a broader scope than digital service operators may realize.  COPPA applies not only to digital services that are directed to children, but also to any general-audience digital service when the operator of the digital service has “actual knowledge” that the digital services is collecting personal information from children under age 13 without VPC. 

COPPA does not require operators of general-audience digital services to ask users for age or date of birth information but, under the actual knowledge test, if the digital service collects information that establishes that a user is under 13, the digital service must be COPPA compliant, which means (among other requirements) obtaining VPC before collecting personal information from the under-age-13 user.

The FTC concluded that Yelp had “actual knowledge” that it was collecting personal information from children under age 13 because the registration page on Yelp’s app asked users to enter their date of birth but did not block access to the app for users who were too young (i.e., under age 13).   

Key Takeaway: If your general-audience digital service asks a user for his or her birth date, make sure that a user who is under age 13 is blocked from using the digital service.  Also, to help prevent users who are too young from circumventing the block, consider one or all of the following techniques:

  1. Request birth date in a neutral manner, i.e., no prompt is given to the age of eligibility, such as “You must be age 13 or older to register.”
  2. Present a neutral on-screen error message when a user is under age 13, such as “Sorry, you’re not eligible,” rather than “Sorry, you are under age 13.”
  3. Deploy a cookie or other functionality to prevent an under-age user whose access was blocked from using the back button (or similar technique) to re-enter an old-enough birth date.      

The Federal Trade Commission’s (FTC) amended Children’s Online Privacy Protection Act (COPPA) Rule (16 CFR § 312 et seq.), effective July 1, 2013, allows industry groups and companies to apply for FTC approval of new parental consent methods that aim to provide substantially the same or greater protections for children’s online privacy than the parental consent methods described in COPPA.  COPPA requires parental consent to be “verifiable.”  Thus, the key to establishing a new parental consent verification method under COPPA is to demonstrate that the authentication process is sufficiently reliable to ensure that the person providing consent is the child’s parent.

To date, three companies have applied to the FTC proposing new consent methods.  The first application, filed in June 2013, proposed a social network-based verification method whereby the system would ask a parent’s “friends” on a social network to verify whether the person providing consent is the child’s parent.  The FTC rejected the proposal as lacking sufficient proof of reliability.  The FTC noted that, although the proposed method requires a minimum number of verifiers and a minimum “trust score,” the proposal failed to establish a particular “trust score” or a particular number of verifiers as adequate for authentication purposes.  The FTC viewed the proposed method as involving an emerging technology and requiring further efficacy studies.

Unlike the first application, the other two applications both proposed more conventional knowledge-based authentication (KBA) methods similar to those used by financial institutions and credit bureaus.  According to the FTC, these types of KBA methods, when implemented properly, are sufficiently reliable for identity authentication.

The second application, filed in August 2013, proposed a system that requires a child signing up on a website or mobile app to provide the name and email address of a parent.  The system would send an email notification to the email address provided by the child that contained a link for the parent to grant consent and provide name, address, birthdate and the last four digits of his/her Social Security number (SSN).  Then, the system would verify the parent’s identity by cross-checking the information provided against various consumer databases.  If the parent’s identity cannot be verified by the cross-checking process, the system, as the fallback option, would ask the parent to answer a series of knowledge-based personal questions (previous addresses, phone numbers, etc.).

The third application, filed in October 2013, adopted a similar but more rigorous process than the process described in the second application.  The third proposed method would use the name, address and last four digits of SSN provided by the parent to locate the parent’s “unique data record” from consumer databases and to generate up to six random questions that the parent must correctly answer for verification to be successful.  The parent also would be required to provide a telephone number for the system to call to complete the process.  This third application is open to public comment until late January 2014.

On December 23, 2013, the FTC approved the method described in the second application as satisfying the requirements of the COPPA Rule.  Since it is more rigorous than the already-approved method, approval of the third method is expected after the public comment period expires.

New technologies enable marketers to collect and analyze more — and more specific— data than ever before.  Marketers can track consumers across the internet and mobile applications, and can deliver advertising based on consumers’ interests inferred from the collected data.  In theory, consumer tracking enables marketers to present advertising to consumers who are predisposed to a specific product or service, producing a higher purchase rate and transaction price, and a greater return on investment in marketing activities.

While these new technologies make advertising and marketing more targeted and efficient, they also present new challenges for marketers.  Although a majority of consumers understand the “pay with data” model through which websites, mobile applications and other digital services are made available at no cost, they do not want advertisers to track them or to aggregate the tracking data into so-called “big data” databases.  Consequently, consumer digital privacy has been the subject of many recent news articles – from lawsuits filed by consumers against email service providers and social media platforms for undisclosed data mining to senatorial requests to data brokers for transparency.

In this four-part series, we will highlight of some recent developments in consumer data privacy law and suggested steps for marketers on how to address them.

Children’s Online Privacy Protection Act Amendments

The Children’s Online Privacy Protection Act (COPPA) is a federal statute enacted in 1998 that requires operators of commercial digital services to provide parental notification and obtain verifiable parental consent prior to collecting personal information from children under 13.  To implement COPPA, the Federal Trade Commission (FTC) issued a set of regulations known as the Children’s Online Privacy Protection Rule (COPPA Rule).  On December 19, 2012, the FTC released amendments to the COPPA Rule which became effective July 1, 2013.

The amended COPPA Rule enhances online privacy protection for children and makes digital services’ operators more accountable for data collection activities involving children under age 13.  Notable for marketers is a new liability standard for third-party service providers.  Specifically, effective July 1, 2013:

  • The operator of “children-directed” (i.e., intended for children under age 13) online or mobile websites and services is strictly liable for actions of independent third parties – including social media plug-ins – on/through its website and mobile services if the third party is acting as its agent or service provider or if the operator benefits by allowing the third party information collection; and
  • A software plug-in, ad network or similar party that collects information on or through a third-party’s online or mobile website or service now is liable under COPPA if that party has actual knowledge it is collecting personal information on a children-directed platform.

The amended COPPA Rule makes several other key changes to the original COPPA Rule, including:

  • An expanded definition of personal information to include geo-location information, a child’s photo or audio or video file, screen or user names, and persistent identifiers, such as information held in a cookie, an IP address, a mobile device ID number, that can be used to identify an individual consumer over time and across different websites or online services;
  • Further clarification about the test for determining whether an online service is children-directed (which remains a highly fact-specific inquiry that depends on the totality of the circumstances);
  • The addition of an age-screening safe harbor for online services that fit the directed-to-children criteria but do not target children as their primary audience;
  • Streamlined disclosure requirements for parental notification and privacy statement regarding information practices with respect to children; and
  • Expanded acceptable methods for obtaining verified parental consent.

Action Step for Marketers

To ensure compliance with the amended COPPA Rule, all marketers need to evaluate their data collection activities with respect to children on their own digital services and third-party digital services to ensure that disclosures about data collection from children are accurate and up-to-date.  Even though operators of digital services directed to children are strictly liable for their third-party service providers or if they have actual knowledge of data collection from children, marketers should consider checking their services agreements to make sure that service providers’ compliance with the amended COPPA Rule (and data privacy and security laws in general) is covered by existing provisions.

For more information, please see our article in the Boston Bar Journal,Protecting Children Online: New Compliance Obligations for Digital Marketing to Children.”

October 21, 2013 Digital advertising based on tracking users’ interests and related privacy concerns have been the subject of many recent news articles. What does this mean for businesses?  Evolving industry practices and new legislation relating to online privacy and user tracking likely require changes to online privacy practices and policies.

To read the full article, click here.