Disney subsidiary Playdom agrees to $3M FTC children's online privacy settlement

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Playdom, a Disney Enterprises subsidiary, has agreed to pay $3 million to settle Federal Trade Commission (FTC) charges that it violated the Children's Online Privacy Protection Act (COPPA).

The alleged violations included illegally collecting and disclosing personal information from more than 1.2 million children under age 13 without parental consent, the FTC said this week.

The $3 million settlement is the largest civil penalty for a violation of the COPPA Rule, the FTC said. Sony BMG Music Entertainment and social networking site Xanga were each fined $1 million for previous violations in the last five years.

“This matter involved an FTC investigation of the practices of Acclaim Games, which was acquired by Playdom prior to Disney's acquisition of Playdom,” said Disney, in a statement. “Disney is pleased that Playdom has now resolved this matter amicably with the FTC.”

Disney declined additional comment.

Playdom took ownership of the websites after acquiring Acclaim Games in May 2010. The FTC said Playdom continued to operate the websites in violation of the COPPA Rule after the merger. Disney Enterprises, a subsidiary of The Walt Disney Co., acquired Playdom in August 2010.

Playdom, a developer of multiplayer games, operated 20 virtual world websites where consumers could access online games and other activities. One of its virtual worlds was specifically directed to children, while other sites attracted a significant number of minors, yet parents were not notified when children entered personal information, said the FTC.

Children's full names, ages, email addresses, instant messenger IDs and location, among other information, were collected from personal profile pages and in online community forums, according to the FTC.

Between 2006 and 2010, approximately 403,000 children registered on Playdom's general audience sites. About 821,000 consumers registered on the children's site.

“They had kids self-reporting their ages,” said Mamie Kresses, senior attorney at the FTC. “Despite knowing their ages, they registered them and collected information and allowed kids to participate in functions allowing them to disclose personal information.”

Regarding the severity of the fine, Kresses said: “Here the violations concerned a large number of children, extensive personal information, the ability for kids to post information publicly and long-running company violations.”

COPPA requires that website operators notify parents and obtain their consent before they collect, use, or disclose children's personal information, said the FTC in a statement. It also requires that website operators post a privacy policy that is clear, understandable and complete.

The settlement order permanently bars Playdom from violating the COPPA Rule and misrepresenting their information practices regarding children, in addition to the $3 million penalty.

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