Sony BMG to pay US$1 million to FTC for COPPA violations

Sony BMG Music Entertainment will pay US$1 million to the U.S. Federal Trade Commission for collecting data on at least 30,000 children under the age of 13 without their parents' consent, behavior that violates the U.S. Children’s Online Privacy Protection Act (COPPA).

The penalty, which was announced by the FTC Thursday, is the largest to date in a COPPA case and settles a lawsuit filed in court by the FTC.

COPPA protects children from Internet marketers by prohibiting unfair or deceptive acts or practices to collect or disclose personal information about children. It also requires that parents be notified and give consent if necessary to collect information about children.

Sony BMG is a subsidiary of Sony Corporation of America, which oversees recording labels that represent hundreds of musicians and entertainers. Sony BMG operates more than 1,000 Web sites for those labels and requires people to submit personal information to register for the sites.

The FTC claimed that on 196 of its Web sites, Sony BMG collected personal information from at least 30,000 underage children without first obtaining parental consent. Sony BMG also allowed children to interact with other Sony BMG fans, including adults, without their parents' knowledge, the FTC said.

The FTC also charged Sony BMG with violating Section 5 of the FTC Act by falsely stating in its privacy policy that users who sign up on their sites and claim to be under the age of 13 will be restricted from participating in Sony BMG's Web site activities. In fact, Sony BMG accepted registrations from children, the FTC said.

Sony BMG could not be reached immediately for comment Thursday.

The COPPA settlement is not the first time Sony BMG has run afoul of U.S. regulators. The company got a black eye three years ago for shipping copy protection software with its music CDs that included stealth rootkit software. Sony BMG eventually paid millions of dollars to settle lawsuits generated by this debacle.

One of COPPA's backers applauded the FTC's lawsuit, saying it sent a strong signal to Internet companies that the law must be taken seriously.

"In recent years, online data collection has become increasingly sophisticated, expanding into a variety of new platforms -- from social networks to mobile phones to interactive games -- that are now central tools in young people's lives," said Kathryn Montgomery, a communications professor with American University, in a statement.

(Robert McMillan in San Francisco contributed to this report.)

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Copyright © 2008 IDG Communications, Inc.

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