FTC Expands Scope of Children's Privacy Law to Keep Pace With New Technologies
On December 19, 2012, the Federal Trade Commission (FTC) finalized amendments to the Children's Online Privacy Protection Rule (the Rule), which applies to operators of commercial websites or online services that (1) are directed to children under the age of 13 or (2) have actual knowledge that they are collecting personal information from a child under the age of 13. The Rule originally went into effect in 2000, pursuant to provisions in the Children's Online Privacy Protection Act of 1998 (COPPA) that required the FTC to issue and enforce a rule to protect the online privacy of children.
In the 13 years since the Rule was enacted, the rapid growth of interactive technologies—including social networks, smartphones and location-based applications—has provided new opportunities for websites and online services to engage with children. In light of these developments, the FTC initiated a two-year review of the Rule and announced final amendments that expand the reach of the Rule in several ways.First, the new Rule broadens the definition of an "operator" to include child-directed websites or online services that do not directly collect personal information from children, but that permit third parties (such as advertising networks and downloadable plug-ins) to collect personal information from users. The revised Rule holds such an operator strictly liable for personal information collected by third parties through its own site or service. During the comment period, industry representatives, technologists and members of the public voiced objections to this revision, arguing that child-directed properties will face unreasonable compliance costs and that the revision will cut off monetization opportunities and decrease the incentives for developers to create engaging content for children. The FTC, however, emphasized the importance of closing a loophole where personal information is collected from children through child-directed properties with no one responsible for the collection. The FTC further stated that although the child-directed site or service may not own, control or have access to the information collected, such information is collected on its behalf due to the benefits it receives by adding more attractive content, functionality or advertising revenue. Ultimately, the FTC decided that the operator is in the best position to know that its site or service is directed to children and to comply with the Rule by providing notice of its privacy practices to parents and obtaining verifiable parental consent.
Second, the amended Rule treats ad networks, providers of software plug-ins and other third parties as "co-operators" if they have actual knowledge that they are directly collecting personal information from users of a child-directed website or online service. In this case, the third-party operator will also be responsible for complying with the Rule. The FTC articulated that the actual knowledge standard will likely be met in cases when (1) the first-party operator of a site or service directly communicates the child-directed nature of its content to the third-party operator or (2) a representative of the third-party operator recognizes the child-directed nature of the content on the website or online service. At the same time, the FTC did not rule out that an accumulation of other facts could be sufficient to establish actual knowledge, but that those facts would need to be analyzed on a case-by-case basis. These changes are likely to be followed by an increase in FTC investigations, access letters and civil investigative demands as the FTC examines compliance efforts.Third, the new Rule expands the definition of "personal information" to include, among other things, geolocation information as well as photographs, videos and audio files that contain a child's image or voice. The amended definition of "personal information" also includes persistent identifiers (such as customer numbers held in cookies, IP addresses and unique device identifiers) that can be used to recognize users over time and across different websites or online services. A new exception, however, provides that operators that collect persistent identifiers for the sole purpose of providing support for the internal operations of the website or online service have no notice or consent obligations under the Rule. Photographs and persistent identifiers have long been covered by the Rule, but only where they were associated with other individually identifiable information, so the revised definition of "personal information" is likely to impose new obligations, even where operators have not changed their collection practices.
In addition to broadening the scope of the Rule, the FTC also introduced the following changes:
- Notice on the Website or Online Service: The Rule eliminates the lengthy recitation of an operator's collection, use and disclosure practices in favor of a simple statement about (1) the information the operator collects from children, including whether the website or online service enables a child to make personal information publicly available; (2) how the operator uses such information; and (3) the operator's disclosure practices for such information.
- Direct Notice to Parents: The Rule standardizes the direct notice requirement to ensure a more effective "just-in-time" message to parents about an operator's information practices. The amended Rule requires operators to provide parents with a simple statement about (1) the information they have already collected from the child; (2) the purpose of the notification; (3) the action the parent must or may take; and (4) what use, if any, the operator will make of the personal information collected. The direct notice to parents must also contain a link to the operator's online notice of its information practices.
- New ways to obtain verifiable parental consent. The Rule has always required operators to obtain verifiable parental consent prior to collecting, using or disclosing personal information from children, with some limited exceptions. The original Rule provided a nonexhaustive list of approved methods for obtaining such consent, but the new Rule expands this list and introduces several new methods, including electronic scans of signed parental consent forms; videoconferencing; the use of government-issued IDs; and alternative payment systems. The revised Rule also retains the "email plus" method of obtaining parental consent in certain situations, despite the FTC's earlier proposal to eliminate this means of obtaining consent. Finally, to encourage innovation in this area, the new Rule also establishes a voluntary process for operators to submit new consent mechanisms to the FTC for approval.
- Stronger data security protections. The amended Rule requires operators to take reasonable steps to ensure that before releasing children's personal information to service providers and third parties, these entities are capable of maintaining the confidentiality, security and integrity of the information. Operators must inquire about entities' data security capabilities and, either by contract or otherwise, receive assurances from such entities about how they will treat the personal information they receive. The Rule also requires operators to retain personal information from children "for only as long as is reasonably necessary" and to delete such information using "reasonable measures" to protect against unauthorized access to, or use of, the information in connection with its deletion.
- Additional monitoring of safe harbor programs. COPPA established a "safe harbor" for participants in approved self-regulatory programs, whereby operators that fully comply with an approved program would be deemed to be in compliance with the Rule for purposes of enforcement. This safe harbor provision was intended to encourage industry members to develop their own COPPA oversight programs and to reward operators' good faith efforts to comply. The amended Rule now provides for greater FTC oversight of approved programs, which includes an obligation for such programs to audit their members and report combined results to the FTC on an annual basis.
The amended Rule goes into effect on July 1, 2013. Over the last decade, the FTC has aggressively enforced the Rule, and the recent amendments indicate that children's privacy will continue to be an important focus for the agency. As a result, operators of websites and online services that collect information from users—or that allow ad networks, plug-ins or other third parties to collect information—should carefully evaluate whether the new Rule will require them to make changes to their current business practices.
 In determining whether a website or online service is directed to children, the FTC will look to the totality of the circumstances and consider the site's or service's subject matter, visual content, use of animated characters or child-oriented activities and incentives, music or other audio content, age of models, presence of child celebrities or celebrities who appeal to children, language, and advertisements. 16 C.F.R. § 312.2 (revised 2012). The revised Rule clarifies that when a site or service is directed to children, but does not target children as its primary audience, it may use an age screen in order to apply the Rule's protections only to visitors who self-identify as under the age of 13. Id.
 15 U.S.C. §§ 6501-6508. The same strict liability standard will apply to general audience websites or services that allow third parties to collect personal information from a specific user when the operator of the site or service has actual knowledge that the user is a child.
 The same strict liability standard will apply to general audience websites or services that allow third parties to collect personal information from a specific user when the operator of the site or service has actual knowledge that the user is a child.  The FTC clarified, however, that the revised definition of an "operator" does not encompass marketplace platforms, such as the App Store and Google Play, where such platforms merely offer access to someone else's child-directed content. In these instances, the Rule is intended to cover only those entities that design and control the content, i.e., the app developer or site owner.
 "Support for the internal operations of the website or online service" is defined as activities necessary to (1) maintain or analyze the functioning of the website or online service; (2) perform network communications; (3) authenticate users of, or personalize the content on, the website or online service; (4) serve contextual advertising on the website or online service or cap the frequency of advertising; (5) protect the security or integrity of the user, website or online service; (6) ensure legal or regulatory compliance; or (7) fulfill the request of a child as permitted by two exceptions to COPPA's verifiable parental consent requirements. Note that the definition of "support for the internal operations of the website or online service" specifically excludes the collection of persistent identifiers to contact a specific individual, including through behavioral advertising, and to amass a profile on a specific individual. 16 C.F.R. § 312.2 (revised 2012).
 The "email plus" method involves obtaining verifiable parental consent through an email from the parent, as long as the email is coupled with another piece of information, such as obtaining a postal address or telephone number from the parent and confirming the parent's consent by letter or telephone call, or sending a delayed confirmatory email to the parent after receiving consent. "Email plus" is only a viable option if the operator of the site or service uses the information it collects for internal purposes and does not disclose it to third parties or make the information publicly available, such as through a social network or blog.
 16 C.F.R. § 312.10 (revised 2012).© 2013 Perkins Coie LLP