Antitrust Law Daily Wrap Up, PRIVACY NEWS: FTC officials defend COPPA rule changes, (Jul 9, 2013)

By Lynn Stanton, TRDaily

FTC officials and privacy advocates yesterday pushed back against critics who argue that the agency’s recently-implemented changes to its Children Online Privacy Protection Act (COPPA) impose unclear obligations on advertisers and others that collect information through other parties’ apps and websites and who contend that the rule changes threaten free content and innovation.

The rule changes, adopted last December and effective on July 1, added geolocation information, photographs, videos, and audio files that may contain a child’s image or voice to the list of “personal information” that cannot be collected without parental consent, and extended the rule to cover collection of “persistent identifiers,” such as IP addresses and mobile device identification numbers “that can recognize users over time and across different websites or online services.”

Third-party “entities that place cookies do not know … whether the site is directed at children,” said Stuart Ingis, a partner in the law firm of Venable LLC who represent clients in the advertising sector, during a Capitol Hill briefing on COPPA organized by TechFreedom.

Kandi Parsons, staff attorney in the FTC’s Division of Privacy and Identity Protection, said that if third-parties don’t know that a site is directed at children, they are not liable if they don’t obtain parental consent before collecting information. First parties, such as website operators and app providers, “are strictly liable for third parties collecting on their sites,” she added.

“We think you [third parties] can rely on the first party’s assessment of whether it is child-directed,” observed Parsons. She said that third parties have no duty to investigate whether a site is child-directed. However, “there would be a huge loophole in COPPA if first parties were able to embed third-party” ad network delivery and not be liable.

“The whole magic of the Internet is sharing data across sites … otherwise we’re just dealing with a bunch of magazines you can access online,” Mr. Ingis said. He added, “you can’t have it both ways,” that is, the FTC can’t limit collection of information without limiting the benefits of collection.

Laura Moy, a graduate fellow at the Institute for Public Representation at Georgetown Law School, rejected arguments that COPPA was enacted just to protect children from creepy strangers collecting information about them online and was not intended to affect advertisers. “COPPA really does come from a place not just of protecting kids in a physical security sense but also from things that attempt to influence children,” she said. “I think the changes are clearly within the COPPA authority” and that the changes provide “a good example of how a statute to protect privacy can be adapted over time.”

Lydia Parnes, a partner in the law firm of Wilson Sonsini Goodrich & Rosati and a former director of the FTC’s Bureau of Consumer Protection, said that the FTC’s decision to treat persistent identifiers as personal information is “big” and is “essentially a kind of de facto prohibition on interest-based advertising.”

Mr. Ingis said, “I was around when we were representing the DMA [Direct Marketing Association] during the legislative debates [on COPPA] … [and] the DMA agreed to support it … What the current rule does is not the deal that was agreed to at the time.” He said that cookie-based advertising and online behavioral advertising “were contemplated at the time and were left out of the statute.”

Ms. Parnes said that for many small and mid-size companies, “the truth is they don’t want to deal with Washington,” and their first reaction to the COPPA rule changes is not how to comply but how to structure their operations so that they don’t fall under COPPA at all.

Ms. Parsons said that the FTC “is not interested in gotcha cases.”

Gabriel Rottman, legislative counsel and policy adviser in the American Civil Liberties Union’s Washington Legislative Office, said that to the extent the COPPA rule “now applies to sites that may incidentally attract a certain number of children,” the rule changes raise First Amendment concerns.

On a separate panel, Maneesha Mithal, associate director of the Federal Trade Commission’s Bureau of Consumer Protection, said, “I think all of the rule changes are consistent with [COPPA] purposes.”

Mithal remarked that the FTC “absolutely” cares about encouraging interactivity on child-directed sites. “For example, instead of putting parties on the hook when they should have known they were on child-directed site, we used an actual knowledge standard,” she said.

Ms. Mithal also said that “all of these arguments” offered by critics of the recent rule changes “were made in 1998” during debate over COPPA itself. People said, “Oh, this is going to dry up content, no one is going to go through” the burden of compliance, she added.

She also acknowledged that it is “probably true” that “sites may go away,” but she said that allowing that possibility was “a judgment Congress made in 1998.”

News: ConsumerProtection Privacy FederalTradeCommissionNews