FTC Confirms Expanded Kids Privacy Rule Effective Date Is July 1, 2013: Online Advertisers and Services Displaying Ads among Potentially Affected Enterprises Announced Following FTC's Release of Long-Awaited Overhaul of COPPA FAQs

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The Federal Trade Commission (FTC) unanimously voted this week to keep July 1, 2013, as the effective date for the amended Children's Online Privacy Protection Rule (COPPA Rule).1 The COPPA Rule applies to operators of commercial websites and online services (including mobile apps) that are directed to children under 13 years of age or that have actual knowledge of collecting certain information from children under 13 years of age. The July 1 compliance date is significant because the amended COPPA Rule contains major changes to an already complex and challenging rule for businesses subject to its requirements—a group that has vastly expanded under the amended rule.

Due to the extensive changes and stiff penalties associated with COPPA violations, several trade associations and the U.S. Chamber of Commerce had petitioned the FTC to delay the effective date of the amendments. The petitioners sought more time so that industry and newly affected entities could modify their practices to comply. In denying the request, the FTC noted that the process of amending the COPPA Rule has taken several years and included a number of opportunities for industry participants to express their concerns, and that the agency accounted for the costs and burdens of complying with the amended COPPA Rule when it chose a six-month time frame for compliance. In addition, the FTC stressed that it has provided guidance to help ease the transition to compliance under the amended COPPA Rule. Importantly, in keeping the effective date of the changes, the agency noted that it "will exercise prosecutorial discretion in enforcing the Rule, particularly with respect to small businesses that have attempted to comply with the Rule in good faith in the early months after the Rule becomes effective."2

Highlights of Significant Changes to the COPPA Rule

As discussed in a previous WSGR Alert,3 some of the most significant amendments to the COPPA Rule include the following:

  • Operators of websites and online services directed to children, or that have actual knowledge that particular users are children, are strictly liable for third-party collection of "personal information" from children under the age of 13, such as collection by social media plug-ins and ad networks.
  • Ad networks, providers of software plug-ins, and other third parties are deemed covered "operators" that must comply with the COPPA Rule if they have actual knowledge that they are collecting personal information directly from users of a child-directed website or online service.
  • The definition of "personal information" will be expanded to include persistent identifiers used to recognize a user over time and across different websites or online services, such as those used for interest-based online and mobile advertising. However, when the only personal information collected from a child is a persistent identifier used for the sole purpose of providing support for internal operations, then there is an exception to the obligation to provide notice and obtain parental consent.
  • The definition of "personal information" also will be expanded to include: (i) photographs, videos, and audio files that contain a child's image or voice; and (ii) screen or user names that function as "online contact information."

The announcement that the FTC will stand by the July 1 effective date for the amended COPPA Rule follows on the heels of the FTC's recent guidance regarding the changes, which it set forth in its revised "Complying with COPPA: Frequently Asked Questions" (COPPA FAQs) guide published on its website last month.4 Some clarifications that may be of interest to companies affected by the amendments are detailed below.

Prior Collection of Data Now Deemed "Personal Information"

The COPPA Rule expanded the set of data categories triggering COPPA compliance by adding new categories of information to the definition of personal information. In the revised COPPA FAQs, the FTC addresses how operators should deal with newly covered information that was collected prior to July 1, 2013, including the following:

  • Parental consent for previously collected geolocation information must be obtained immediately. The FTC explains that while geolocation information is now a stand-alone category within the definition of personal information, location information that is precise enough to identify the name of a street and city or town was previously covered elsewhere by the COPPA Rule, so parental consent is required regardless of when the data was collected.
  • Parental consent is not required for the collection prior to July 1 of photographs, videos, and audio files containing a child's image or voice, or a screen name functioning in the manner of online contact information (but that does not reveal an individual's email address). However, the FTC recommends as a best practice that operators either discontinue the use or disclosure of such previously collected information or obtain parental consent. The FTC further advises that a previously collected screen or user name is covered if the operator associates new information with it after the effective date of the amended COPPA Rule.
  • An operator need not obtain parental consent for persistent identifiers not combined with individually identifiable information and collected prior to July 1. The FTC maintains, however, that an operator that continues to collect, or associates new information with, such a persistent identifier (such as information about a child's activities on a website) must obtain prior parental consent, unless the collection falls under one of the COPPA Rule's exceptions, such as for support for the internal operations of the website or online service.

Obligations of Third Parties That Discover They Have Collected Personal Information via Child-Directed Services

The revised COPPA FAQs clarify that an operator of a third-party service, such as a plug-in or advertising network, that discovers that it has been collecting information now considered "personal information" under COPPA from users of child-directed websites or online services must take steps to comply with COPPA. The FTC states that the third-party service should:

  • immediately cease data collection from the child-directed service until it complies with its COPPA obligations; and
  • take the personal information collected through the child-directed service offline and either obtain verifiable parental consent to use it, or delete the personal information and close the relevant user accounts.

The COPPA FAQs address several other topics, including the following:

  • Where an app directed to children should post its privacy policy.
  • The point in the download process when an app directed to children should send parents the required direct notice.
  • Whether a website or online service directed at children may age-screen users in order to either give notice only to parents of children under 13, or to block children under 13 from using the website or service.
  • The circumstances in which an ad network or third-party plug-in will be deemed to have acquired "actual knowledge" that it has collected personal information directly from users of another website or online service directed to children.
  • The obligations of websites and apps directed to children to determine what information is being collected by third-party plug-ins.

Implications

The FTC's refusal to delay the July 1 effective date suggests that the FTC is eager to see affected businesses adjust their practices to comply with the amended COPPA Rule. Since the original COPPA Rule became effective in April 2000, the FTC has aggressively enforced COPPA. Noncompliance can result in civil penalties up to $16,000 per violation. (For example, the operator of the Path social networking app recently agreed to pay $800,000 to settle alleged COPPA violations,5 and Sony BMG paid $1 million to settle its alleged COPPA violations.6) We expect the FTC to actively monitor compliance with the amended COPPA Rule and would not be surprised to see enforcement actions brought soon after the July 1 effective date.

If they have not already done so, commercial websites, mobile apps, third-party plug-ins, ad networks, and other online services that may collect information (including persistent identifiers) from children, or that permit third parties to operate on their websites or services, should review whether they are covered by COPPA and, if so, whether they are in compliance with its obligations. The amended COPPA Rule will impose compliance obligations on many companies that previously were not covered and will require new and different obligations for covered entities. Not only is time of the essence, but careful consideration must be given to the many nuanced aspects of COPPA compliance, including proper implementation of age screening, parental notice, and verifiable parental consent where required.

Our attorneys routinely counsel clients on the subtleties of COPPA and other rapidly changing domestic and international privacy issues. If you have questions relating to children's privacy, please contact Tonia Klausner at tklausner@wsgr.com or (212) 497-7706; Lydia Parnes at lparnes@wsgr.com or (202) 973-8801; Gerry Stegmaier at gstegmaier@wsgr.com or (202) 973-8809; Matthew Staples at mstaples@wsgr.com or (206) 883-2583; Wendell Bartnick at wbartnick@wsgr.com or (202) 973-8963; or any of the many members of our privacy and data security practice.


1 Federal Trade Commission, 16 C.F.R. Part 312: Children's Online Privacy Protection Rule: Final Rule Amendments and Statement of Basis and Purpose (Dec. 19, 2012), available at http://ftc.gov/os/2012/12/121219copparulefrn.pdf (Final Rule and SBP).

2 The FTC's letter responding to the request to delay the effective date is available at http://www.ftc.gov/os/2013/05/130506copparule.pdf.

3 The WSGR Alert regarding the amendments to the COPPA Rule is available at http://www.wsgr.com/WSGR/Display.aspx?SectionName=publications/PDFSearch/wsgralert-COPPA-final-amendments.htm.

4 "Complying with COPPA: Frequently Asked Questions: A Guide for Business and Parents and Small Entity Compliance Guide" (April 2013), available at http://business.ftc.gov/documents/Complying-with-COPPA-Frequently-Asked-Questions.

5 The WSGR Alert regarding the Path settlement with the FTC is available at http://www.wsgr.com/WSGR/Display.aspx?SectionName=publications/PDFSearch/wsgralert-social-networking-mobile-COPPA.htm.

6 The WSGR Alert regarding the Sony BMG settlement with the FTC is available at http://www.wsgr.com/WSGR/Display.aspx?SectionName=publications/PDFSearch/clientalert_COPPA_sony.htm.