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FTC Eyes Children’s Privacy and Telemarketing

November 2012

As 2012 winds to a close, the Federal Trade Commission (FTC) continues to take an aggressive stance on privacy issues in ways that could cause businesses noticeable problems. Two areas in the FTC's crosshairs at the moment are children's privacy and telemarketing.

COPPA Amendments Expected Soon

The FTC is currently conducting a rulemaking proceeding to revise its regulation implementing the Children's Online Privacy Protection Act (COPPA) of 1998. (A summary of the FTC's proposals is available here.) COPPA generally prohibits online services from collecting personally identifiable information from children under the age of 13 unless the service has received prior verifiable parental consent.

Although the FTC's proposal was warmly received by a number of privacy advocates, the business community expressed grave concerns. A major area of contention is the potentially broad reach of the proposed revisions, which would extend COPPA obligations to a number of businesses that currently are not subject to COPPA regulations.

One FTC idea that has raised particular concerns within the business community is its proposal to redefine "personally identifiable information" to include "persistent identifiers"—and it regards an Internet Protocol address as such an identifier. Commenters raised concern that the FTC's new interpretation could effectively shut down analytics services.

A related proposal would treat third-party plug-ins as "operators" subject to COPPA compliance obligations. That might result in the developers of plug-ins having obligations with respect to websites even when they have no control over what websites choose to use their software. In addition, commenters expressed concern that the FTC would define app platforms from which users may obtain plug-ins—and even device manufacturers—as themselves being subject to COPPA as "operators."

Another potentially problematic initiative from a business perspective is the FTC's proposal to treat third-party advertising networks as "operators" fully subject to COPPA—including the obligation to obtain verifiable parental consent. This would follow from the use by ad networks of "persistent identifiers." Although profiling of users for advertising purposes is a far cry from the concern about child predators that led Congress to enact COPPA 14 years ago, the FTC's proposal could have profound implications for online revenue models.

Finally, some commenters contended that the proposed rules improperly would restrict access by older teens and adults to constitutionally protected content.

The FTC is reviewing the comments. It is expected to announce its final rule by the end of 2012.

The National "Do Not Call" Registry Continues to Grow and be Enforced

In October, the FTC issued the latest statistics on the National Do Not Call Registry. As of September 30, more than 217 million numbers were on the list, an increase of some 8 million from the year before.

Also, the FTC received more than 3.8 million consumer complaints about calls. An increasing number of complaints concerned robocalls.

The FTC convened a "summit" in mid-October to discuss issues relating to robocalls. In a cloud-sourcing initiative, it is now offering a $50,000 reward to anyone who can develop an easy-to-use consumer technology for blocking robocalls.

The growing number of complaints serves as a reminder that businesses need to take care to comply with the requirements. A recent case from the U.S. Court of Appeals for the Ninth Circuit notes that businesses skirt the edges of the rule at their peril. In Chesbro v. Best Buy Stores Inc., the appellate court ruled that a prerecorded call from Best Buy reminding the recipient that his reward certificates were about to expire, informing him of how to reprint them online and thanking him for shopping at Best Buy constituted a telemarketing call. Although the call may also have had an informational purpose, under FTC regulations a "dual purpose" call constitutes an unsolicited advertisement. The court rejected Best Buy's contention that the call was merely an informational courtesy call, concluding that the calls encouraged recipients to engage in future purchasing activity.