Privacy & Information Security Law Blog

On December 17, 2015, the FTC announced a pair of COPPA settlements against operators of child-directed mobile apps available for download in the major app stores. These cases are the FTC’s first COPPA actions involving the collection of persistent identifiers, and no other personal information, from children since the FTC’s updated COPPA Rule went into effect in 2013. The FTC levied civil penalties, totaling $360,000, in both cases.

Defendant LAI Systems, LLC markets child-directed apps such as My Cake Shop, Hair Salon Makeover and Animal Sounds on the Apple App. LAI’s apps are free to download and generate revenues through in-app advertising and in-app purchases. Defendant Retro Dreamer markets child-directed apps such as Ice Cream Jump, Sneezies and Tappy Pop. Some of Retro Dreamer’s apps are free to download; others are paid apps. The FTC named Retro Dreamer’s President and Vice-President individually in its civil penalty action.

Both LAI and Retro Dreamer permitted third party ad networks to collect persistent identifiers from users of its apps in order to serve them with behaviorally targeted ads. The FTC’s complaints allege that the defendants failed to inform these ad networks that their apps were directed to children, and failed to instruct or contractually require the ad networks to refrain from targeting their users with interest-based advertising. The complaints further allege that the defendants never provided COPPA-required parental notices or obtained parental consent.

With respect to Retro Dreamer, the FTC’s complaint further alleged that the app developers were aware of COPPA, including the regulatory change that swept persistent identifiers into the COPPA Rule, and had been informed by one ad network that the developers’ apps would be excluded based on their child-directed nature. According to the FTC, the Retro Dreamer defendants continued to permit persistent identifiers used for behavioral advertising to be collected by other ad networks operating in their apps.

The FTC’s settlements include injunctive provisions requiring future compliance with COPPA. In addition, LAI Systems is required to pay $60,000 in civil penalties and the Retro Dreamer defendants must pay $300,000 in penalties.