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FTC Brings First Mobile Apps Case

8 Sep, 2011 By: Linda A. Goldstein


The Federal Trade Commission (FTC) has brought its first case involving mobile applications (a.k.a. apps) against a company known as W3 Innovations (d/b/a Broken Thumbs Inc.) and its owner and president Justin Maples, for allegedly violating the Children’s Online Privacy Protection Act (COPPA) and the FTC’s COPPA Rule by collecting and disclosing personal information collected from children under the age of 13 without prior parental consent. The settlement requires the defendants to pay a $50,000 fine and to refrain from violating COPPA in the future. This is the first time that the FTC has brought any type of case involving mobile apps.

In this case, the defendants developed and operated various mobile applications through the iPhone and iPad that allowed users to share information and play games. Some of these apps were specifically directed to children and in fact were listed for download in the Games-Kids section of the Apple App Store. The apps were highly interactive and, according to the FTC complaint, encouraged children to publicly post and share personal information. For example, the apps allowed kids to play classic games, to create virtual models and dress them up, to send E-mails or blogs to a fictitious character named Emily in the app, to post information on a public message board and to E-mail their friends.

The COPPA Rule prohibits website operators from collecting, using or disclosing personal information from kids under the age of 13 online without first providing notice to the child’s parent and obtaining verifiable parental consent. COPPA sets forth very detailed way in which parental consent may be obtained depending on the use that will be made of the data. Historically, the FTC has been very vigilant in enforcing COPPA and has imposed stiff penalties on companies that violate the rule. However, until this case, all of the FTC cases have involved the collection of personal information from children online through a website.

This case makes clear that the FTC views mobile apps as equivalent to the Internet for purposes of enforcement of any of its rules relating to online behavior. In fact, the FTC complaint specifically alleges that because these interactive apps “send and receive information over the Internet” they are “online” services subject to COPPA.

While there is no specific privacy legislation yet governing the general use and collection of information from adults online, the FTC through its numerous enforcement actions involving privacy and data security has made it clear that it believes marketers must have a properly disclosed privacy policy that sets forth accurately and completely exactly what information is being collected from users and how the marketer intends to use that information. The FTC considers the failure to include a proper privacy policy to be an unfair and deceptive marketing practice.

In addition, as the industry is well aware, there are numerous pieces of privacy legislation that have been introduced into Congress this year. While again, many of these bills have been focused on the collection and use of information online, this case is a good indicator that whatever legislation ultimately does pass will apply equally to mobile and to online marketing efforts.

Whether in the realm of privacy or claim substantiation, the FTC will be watching the mobile platform closely and it is likely that we will see even more cases in the future as mobile marketing continues to grow.

Linda Goldstein is chair of the Advertising, Marketing and Media division of Manatt, Phelps & Phillips LLP, based in the firm’s New York office. She can be reached at lgoldstein@manatt.com.


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