FTC Targets Children’s Privacy and Stealth Advertising Directed at Children
Last week, the Federal Trade Commission (“FTC”) held an open meeting focused on issues related to children’s privacy and those pertaining to the use of endorsements and testimonials in advertising. In the meeting, the FTC adopted a new policy statement targeting data collection practices in educational technology. Further, the FTC proposed amendments to the Guides Concerning the Use of Endorsements and Testimonials in Advertising (“Endorsement Guides”) which would target child-directed marketing. Of note, one of the amendments would recognize that children may react to advertising practices differently than adults and thus advertising practices directed toward children may be treated differently by the FTC compared to those practices directed towards adults.
The FTC reaffirmed its commitment to strengthening protections for children’s privacy online by adopting, in a 5-0 vote, a new Policy Statement pertaining to the use of education technology (“ed-tech”). Following the FTC vote, the White House, which identified children’s privacy as an area of policy focus, issued a statement in support of the FTC’s Policy Statement.
The Policy Statement confirms the FTC intends to use its enforcement authority under the Children’s Online Privacy Protection Act (“COPPA”), to scrutinize ed-tech providers’ practices affecting children’s data because “the responsibility for COPPA compliance is on businesses, not schools or parents.” COPPA, enacted in the late 1990’s, outlines when and how certain websites, apps, and online services that are child-oriented (including digital assets that may be attractive to children) or knowingly collect the personal information of children must notify and obtain the consent of a child’s parent or legal guardian before collecting, using, or disclosing personal information from children under 13, among other restrictions and requirements. To implement COPPA, the FTC issued the COPPA Rule. The FTC advised it intends to use the full breadth of COPPA’s text to enforce against non-compliant ed-tech providers, and in particular, the FTC’s enforcement activities will focus on:
Prohibition Against Mandatory Collection: Ed-tech providers are prohibited from conditioning a child’s access to schoolwork on the child providing more information than is reasonably necessary to engage in the activity.
Use Prohibitions: Ed-tech providers are prohibited from using personal information collected from children pursuant to school authorization for activities exceeding the scope of the school authorization, such as in a manner not related to providing online education services (e.g., commercial purposes like marketing).
Retention Prohibitions: Ed-tech providers must not retain the personal information of students for longer than reasonably necessary to fulfill the purpose for collection.
Security Requirements: Ed-tech providers must have implemented procedures to safeguard the confidentiality, security, and integrity of children’s personal information. The FTC considers the absence of sufficient data privacy and security policies and procedures to be a COPPA violation even when a business has not suffered a breach incident.
The FTC and all state Attorneys General are empowered to enforce COPPA, which provides for statutory fines of over $46,000 per violation. Further, COPPA includes a safe harbor provision—businesses that join an approved safe harbor program and follow the program’s requirements are deemed to be in compliance with COPPA. Ed-tech providers should take care to meet COPPA obligations related to notice and consent, and must also have in place strong privacy protections for children’s data.
Advertising: Endorsements and Testimonials
In connection with its initiatives around children’s privacy, the FTC also proposed to amend the Endorsement Guides to address fake reviews, suppression of negative reviews, and update the guidance to follow developments in advertising and endorsements. Endorsements and testimonials in advertising are an enforcement priority. According to the FTC, “there is ample basis to recognize that children may react differently than adults to endorsements in advertising or to related disclosures.” In order to more adequately cover children’s advertising, the FTC proposed a new section in the Endorsement Guides that states, “Endorsements in advertisements addressed to children may be of special concern because of the character of the audience. Practices which would not ordinarily be questioned in advertisements addressed to adults might be questioned in such cases.” Proposed New Section 255.6. Simply put, the proposed amendment means advertising practices directed toward children may be treated differently by the FTC compared to those directed towards adults.
The FTC published its proposed revisions to the Endorsement Guides in a notice, as well as:
Warned social media platforms that endorser tools are inadequate and may open them up to liability. Although the FTC supports the development of disclosure tools that sufficiently alert consumers that a product is being advertised by an endorser on a social media platform, the FTC is concerned that existing disclosure tools are insufficiently contrasting, fleeting, too small, or may be placed in inconspicuous locations that do not capture the consumer’s attention. For example, a disclosure that uses poorly contrasted font colors is inadequate because it may be difficult for the consumer to notice or read the disclosure—the disclosures should be clear and conspicuous.
Clarified that fake reviews are covered under the guides and added a new principle that in procuring, suppressing, boosting, organizing, or editing consumer reviews, advertisers should not distort or misrepresent what consumers think of their products. The FTC cautioned that in the context of fake reviews, marketers may be liable for procuring fake reviews and also for any unsubstantiated claims made in those fake reviews.
The FTC explained that it is important to be transparent when a social media user tags a brand in a post, it conveys to viewers that the social media user likes or uses the brand, and clarified that tags in social media posts are covered under the guides and modified the definition of “endorsers” to bring computer-generated fictional influencers under the Endorsement Guides.
Finally, the FTC added an example addressing the microtargeting of a discrete group of consumers, and noted “[t]he adequacy of the disclosure will be evaluated from the perspective of the targeted individuals.”
Whilst the FTC did not develop detailed guidelines on how to take into account that children are inherently more susceptible to advertising, advertisers can turn to the detailed recently updated Guidelines for Responsible Advertising to Children issued by the Children’s Advertising Review Unit of the National Advertising Division of the National Better Business Bureaus.
Next Up: Virtual Event – October 19, 2022
As a next step, the FTC will host a virtual event on October 19, 2022 to follow-up on the discussion regarding children’s privacy. The event will focus on how to protect children from manipulative advertising in digital media, including:
Children’s capacity at different ages and developmental stages to recognize and understand advertising content and distinguish it from other content;
The harms to children resulting from the inability of children to recognize advertising;
What measures should be taken to protect children from blurred content in digital marketing; and
The need for and efficacy of disclosures as a solution for children of different ages, including the format, timing, placement, wording, and frequency of disclosures.
The FTC is seeking public contribution (e.g., research papers and written comments) on the topics outlined above. Individuals who wish to submit materials for the event may send the materials to [email protected]. The deadline for submissions is July 18, 2022.