The FTC recently announced a $3 million settlement with Playdom, Inc. regarding alleged violations of the Children's Online Privacy Protection Act (COPPA). According to the FTC, Playdom, Inc., and the previous owner of Playdom's websites where the violations occurred, collected and disclosed personal information about children who had registered on the websites without first obtaining parental consent. Playdom is a developer of online interactive game websites with a general audience that includes a significant number of children, and at least one website targeted directly towards children. Over the span of four years, Playdom and its predecessor collected information from over 400,000 children across twenty different websites. The complaint alleges Playdom collected children's ages and email addresses upon registration and allowed children to publicly post their personal information in online communities without providing proper parental notice or obtaining parental consent. In addition, the FTC also alleged Playdom misrepresented its information collection practices in violation of the FTC Act by stating in its privacy policy that children under the age of thirteen would not be able to post personal information on Playdom websites.

Under the settlement, Playdom agreed to pay $3 million in civil penalties and is permanently barred from violating the provisions of COPPA or misrepresenting its information and privacy practices regarding children, and must provide notice and obtain parental consent when collecting information from children.

TIP:  Companies that are directed to or appealing to children have an obligation to obtain parental consent before collecting personally identifiable information from children online. When purchasing a company that might engage in these activities, include in any due diligence an assessment of if these requirements are being followed.