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From Antitrust Law Daily, January 8, 2018

VTech settles with FTC over collection of information from children

By Jeffrey May, J.D.

To settle FTC charges that it violated the Children’s Online Privacy Protection Act by collecting personal information from children without direct notice and parental consent, and by failing to take reasonable steps to secure the data it collected, electronic toy maker VTech Electronics Limited and its U.S. subsidiary have agreed to pay a $650,000 civil penalty and to refrain from the challenged practices as part of the settlement with the agency. A complaint was filed in the federal district court in Chicago, along with a proposed consent decree intended to resolve the allegations (U.S. v. VTech Electronics Limited, FTC File No. 162 3032, Civil Action No. 1:18-cv-00114).

According to the complaint, the defendants sell portable devices known as "electronic learning products" or "ELPs," which offer online games for children ages 3 – 9. The defendants also develop and operate the Learning Lodge Navigator online service—a platform similar to an app store—that allows customers to download child-directed apps, games, e-books, and other online content. One of the apps available to customers was Kid Connect. With respect to Kid Connect, VTech allegedly failed to provide direct notice of its information collection and use practices to parents and did not link to its privacy policy in each area where personal information was collected from children.

The FTC also contended that the company did not take reasonable steps to protect the information it collected through Kid Connect, such as implementing adequate safeguards and security measures to protect transmitted and stored information and implementing an intrusion prevention or detection system to alert the company of an unauthorized intrusion of its network. In November 2015, VTech was informed by a journalist that a hacker accessed its computer network and personal information about consumers, including children, who used its Kid Connect app.

Misrepresentations in privacy policy. The FTC asserted that VTech violated the FTC Act by falsely stating in its privacy policy that most personal information submitted by users through the Learning Lodge and Planet VTech would be encrypted. The company, however, did not encrypt any of this information.

Settlement terms. In addition to the monetary settlement, the proposed consent decree would prohibit VTech from violating COPPA in the future and from misrepresenting its security and privacy practices. VTech also is required to implement a comprehensive data security program, which will be subject to independent audits for 20 years.

VTech is not the first toy maker to settle FTC allegations over COPPA violations. Back in 2002, Ohio Art Company resolved FTC concerns over its purported improper collection of personal information from children on its www.etch-a-sketch web site without first obtaining parental consent.

Companies: VTech Electronics Limited

MainStory: TopStory Advertising ConsumerProtection FederalTradeCommissionNews

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