FTC nets record settlement under COPPA

The Federal Trade Commission has settled with two Web site operators charged with violating the Children's Online Privacy Protection Act (COPPA), netting the agency's largest civil penalty yet under the rule.

Bonzi Software and UMG Recordings were accused of collecting personal information from children online without their parents' consent, and settled for $75,000 and $400,000, respectively.

The cases represent the ninth and tenth settlements obtained under COPPA since the rule went into effect in April, 2000.

The legislation prevents companies from knowingly obtaining information from children under 13 without parental permission.

UMG Recordings operates several hundred music-related Web sites and was charged with collecting birth date information from children through its online registration process, the FTC said. Its settlement represents the largest the agency has collected under COPPA.

Bonzi Software, which distributes a free software download called BonziBUDDY, was also charged with failing to obtain parental permission before collecting children's personal information. Its case is the first under COPPA to challenge the information collection practices of online services related to a software product, the FTC said.

Both companies were also accused of failing to post clear and complete privacy notices, and of failing to direct notices at parents telling them what information they sought from children, the FTC said.

The companies agreed to consent decrees, which do not constitute an admission of guilt.

Although privacy advocates have shown support for COPPA, some see it as more of a tool for raising awareness than for enforcing standards.

In fact, the FTC used the latest cases as an opportunity to release a "business alert" that educated Web site operators on COPPA's actual knowledge standard, which states that the rule applies to Web site operators and online services that have actual knowledge that they are collecting information from children under 13. The alert is available on the agency's Web site.

The IDG News Service is a Network World affiliate.