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FTC settles with Fantage over privacy in children's software

Staff writer |
A children's online entertainment company has agreed to settle Federal Trade Commission (FTC) charges that it falsely claimed it was abiding by an international privacy framework "U.S.-EU Safe Harbor" that enables U.S. companies to transfer consumer data from the EU to the U.S. in compliance with EU law.

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According to a complaint filed by the FTC, Fantage.com, the maker of a popular multiplayer online role-playing game directed at children ages 6-16, deceptively claimed, through statements in its privacy policy, that it held current certifications under the U.S.-EU Safe Harbor framework. The U.S.-EU Safe Harbor framework is a voluntary program administered by the U.S. Department of Commerce in consultation with the European Commission.

To participate, a company must self-certify annually to the Department of Commerce that it complies with the seven privacy principles required to meet the EU's adequacy standard: notice, choice, onward transfer, security, data integrity, access, and enforcement. A participant in the U.S.-EU Safe Harbor framework may also highlight for consumers its compliance with the Safe Harbor by displaying the Safe Harbor certification mark on its website.

The FTC complaint charges Fantage.com with representing that it held a current Safe Harbor certification, even though the company had allowed its certification to lapse. The Commission alleged that this conduct violated Section 5 of the FTC Act. However, this does not necessarily mean that the company committed any substantive violations of the privacy principles of the Safe Harbor framework or other privacy laws.

Under the proposed settlement agreement, which is subject to public comment, the company is prohibited from misrepresenting the extent to which it participates in any privacy or data security program sponsored by the government or any other self-regulatory or standard-setting organization.

The Commission issues an administrative complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of up to $16,000.


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