FTC Schools “Smart” Toys with Updated COPPA Compliance Guidance

by Hogan Lovells
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[co-author: Eugene Kim]

The Federal Trade Commission (“FTC”) released an updated guidance document for complying with the Children’s Online Privacy Protection Act (“COPPA”).  The revised guidance, released on June 21, 2017, explicitly identifies connected toys and other Internet of Things devices as being covered under COPPA and adds clarity to web operators’ responsibility for the activities of third parties, such as ad networks and plug-ins, that collect personal information protected under COPPA.  It also includes recently approved methods for obtaining verifiable parental consent.The new guidance comes shortly after Senator Mark R. Warner (D-VA) urged the FTC to strengthen protections for children’s personal information in light of recent concerns stemming from allegedly unsecured “smart” toys, such as a doll that reportedly left audio recordings vulnerable to snooping.  Such Internet-enabled devices, which continue to grow in prevalence, have also drawn the attention of privacy advocates and law enforcement officials concerned with the safety and security of children that use them.

Covered Operator Obligations Under COPPA

COPPA protects children under the age of 13 by regulating the collection, use, and disclosure of their personal information (e.g., name, address, Social Security number, geolocation data, audio and video, user names, etc.).  The act applies to “operators of commercial websites and online services (including mobile apps) directed at children under 13 that collect, use, or disclose personal information from children.”  COPPA’s protective measures also apply to operators with actual knowledge that they are collecting, using, or disclosing personal information from children under 13, even if the website or service is targeted at general audiences.  Duties imposed on covered operators include posting clear online privacy policies, providing notice and obtaining verifiable consent from parents before data collection, and taking reasonable steps to maintain the security and integrity of the data collected.

Revised Guidance Accounts for Connected Devices and Updates Methods for Obtaining Parental Consent

To provide organizations with further clarity regarding their responsibilities under COPPA, the FTC originally released the six-step compliance plan in June 2013.

Although the majority of the compliance plan remains unchanged under the June 21 update, the FTC made a number of notable additions:

  1. The guidance now explicitly includes “connected toys or other Internet of Things devices” under the examples of covered websites or online services.  This is a fairly broad formulation that will likely sweep in a large segment of new devices like voice-enabled, connected speakers.
  2. The guidance emphasizes COPPA compliance for child-directed sites or services that utilize ad networks or plug-ins that collect personal information, even if the child-directed website or service does not collect information itself.  This requires more vigilance on the part of child-directed service operators that incorporate third-party products and services into their platforms.
  3. Finally, the FTC updated the guidance to include recently approved mechanisms for obtaining verifiable parental consent: (1) knowledge-based challenge questions and (2) using facial recognition software to cross-check photos against submitted driver’s licenses or other photo IDs.  These mechanisms provide additional options for parental consent verification prior to processing children’s personal information.  Other approved mechanisms, including debit or credit card notifications for transactions and toll-free numbers staffed by trained personnel, remain valid.

Review Compliance Plans and Prepare for FTC Enforcement

Operators of connected toys that collect the personal information of children are on notice that they must comply with COPPA.  Those operators and other covered operators alike should review their products and formulate a compliance plan appropriate for their business.  For example, makers of connected devices that record children’s voice inputs, but that lack screens or physical inputs, may consider using the devices’ voice recording capability to collect answers to knowledge-based challenge questions as a means of securing verifiable parental consent.

In addition, child-directed websites or online services that utilize third-party plug-ins should evaluate existing relationships to determine whether third-party data collection triggers COPPA obligations.  If partner relationships result in COPPA compliance obligations, website and online service operators may need to take steps to comply, including by updating their privacy policy as appropriate, instituting a method for obtaining verifiable parental consent, and confirming that reasonable security safeguards are in place.

This latest update to the FTC’s COPPA guidance materials may signal impending COPPA enforcement activity related to emerging categories of connected devices.  Previous updates, such as the July 2013 rule amendment that added persistent identifiers to the list of protected data under COPPA, were followed by FTC actions that emphasized the evolving coverage.  Recent FTC enforcement trends suggest that future agency action will focus on both privacy and security concerns raised by new technology.  Companies potentially subject to COPPA’s requirements should take seriously the prospect of FTC enforcement.  Penalties for non-compliance include civil fines of up to $40,654 per violation.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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