Caveat Vendor

FTC Puts Children’s Sites On Notice; Is Your Refrigerator Next?

March 12, 2013

By Paul Hastings Professional

What do kids and refrigerators have in common?

Well, nothing really - unless you have a teenager, in which case your adolescent and your fridge probably enjoy quite an intimate relationship. (A subject for another blog, I think.)

But, for those of you who watch the Federal Trade Commission’s privacy pronouncements, you probably noticed that on Friday the FTC served notice that both are on its privacy enforcement agenda.

First, an FTC senior attorney, speaking at the International Association of Privacy Professionals’ annual conference in Washington, warned kids’ sites that they are responsible under the Children’s Online Privacy Protection Act (“COPPA”) if third parties with whom they have service agreements collect kids’ information from their sites. The sites are responsible even if their contracts with those providers preclude the practice.

In other words, kids’ sites cannot ignore evidence that a provider – such as an ad network or plug-in – is collecting personal data in violation of an agreement. Even more, the FTC attorney’s admonition that sites do “everything you can” to prevent the activity points to an affirmative obligation to investigate what partners are doing and stop any COPPA-violative practices.

At the same conference, new FTC chair nominee Edith Ramirez also identified COPPA as an area of emphasis in the year ahead. In addition, she identified “smart” refrigerators and other emerging technologies as an issue for the agency’s examination. The agency first will study the issue before issuing any rules (what the FTC terms “guidance”) or taking enforcement action.

Ramirez stressed her intention to continue to use the agency’s authority to prevent “unfair” trade practices as a tool to pursue privacy violations. Ramirez commented that, while the agency will not pursue cases where harm is “speculative,” she views “harm” more broadly than mere monetary loss.

The scope of the agency’s authority to employ the “unfairness” prong of its statutory authority in this manner is currently the subject of litigation. The Wyndham hotel and resort chain has challenged the FTC in federal court in Arizona after the agency filed suit against it for alleged failures to protect customers’ personal information. (Wyndham’s motions to dismiss can be found here.)

In sum, it appears as though Ramirez seems intent on following in the activist footsteps of her predecessor, John Leibowitz, all of which should make for an interesting four years ahead….

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