FTC Targets Children's Gaming Company With Safe Harbor Action

The FTC continued to step up its U.S.-EU safe harbor enforce-

ment actions Tuesday, saying a children's online entertainment company agreed to settle a safe harbor complaint (http://1.usa.gov/1eRqk7A). The FTC alleged Fantage.com falsely claimed it was in compliance with the safe harbor agreement, which enables U.S. companies to legally transfer EU consumers’ data to the U.S., said an FTC Tuesday release. Accord-ing to the Commerce Department’s website, the company was certified June 10, 2011, but the FTC alleged it let that certification lapse while still claiming it was in compliance.

The action was notable because FTC had not previously

brought safe harbor actions against kid-focused companies, said Dor-sey & Whitney Internet privacy lawyer Melissa Krasnow. The FTC “has and will continue to vigorously enforce children’s privacy,” es-pecially when it comes to interactive websites and social networks, she said. Fantage.com describes itself as a “community for young computer users that is committed to providing kids with a safe and pleasant online environment.” The FTC said the company makes multiplayer online role-playing games directed at children ages 6-16.

In late January, the FTC revealed settlements with 12 compa-

nies spanning numerous industries for falsely claiming compliance with the safe harbor program (WID Jan 22 p4). Observers said the action — only the second round of safe harbor enforcement actions since the agreement took effect in 2000 — was spurred by European concerns over the program’s effectiveness and indicated the FTC was becoming more active in the area (WID Jan 23 p1). Privacy consulting firm Galexia found 427 businesses were making false claims about safe harbor membership (WID Oct 9 p5), and filed a complaint against Fantage.com last year, the FTC said.

WEDNESDAY, FEBRUARY 12, 2014 VOL. 15, NO. 29

Today’s News FTC'S SAFE HARBOR ENFORCE-MENT targets children-focused company. (P. 1) REGULATING VIRTUAL CUR-RENCY seen possibly heading off some misuse. (P. 3) PATENT ABUSE LEGISLATION seen getting slower, 'deliberative' Senate examination. (P. 4) SENATE NOT PLANNING OVER-HAUL of Communications Act, Pryor tells NARUC. Senate Commerce Re-publicans want one, they say. (P. 6) MAKE BROADBAND PAY USF fees, NARUC told. (P. 8) CAPITOL HILL: Thune wants Wheeler to return to Congress be-fore acting on net neutrality ... Lo-cal Radio Freedom Act lands 5 new House co-sponsors ... Schumer backs E-rate improvements. (P. 9) AGENCIES: Clapper backs contin-ued dual-hatted leadership of NSA and Cyber Command ... DOJ lifts three-year hiring freeze. (P. 10) INTERNATIONAL: Parents, not governments, should be responsible for keeping children safe online, EC official says. (P. 10)

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“Clearly the safe harbor program is critical for U.S. companies,” FTC Chairwoman Edith Ra-mirez said Monday during a University of Colorado Law School Silicon Flatirons event. “I think peo-ple forget the way the program was designed was so we would be getting referrals from the European data authorities when there were concerns about the protection of Europeans’ data.” But those refer-rals have not been plentiful, she said. That, combined with European concerns about lax U.S. govern-ment data privacy laws, spurred the FTC to be more vigorous. “Fortunately, we’ve done a good job of trying to address those concerns,” she said. “We’re engaged in a conversation with the Europeans about what we can do to improve the program.” The European Commission issued 13 recommenda-tions to strengthen the safe harbor program after a five-month review (WID Nov 29 p2). “We think it’s an effective program ... but there’s always room for improvement,” Ramirez said. FTC commis-sioners Maureen Ohlhausen, a Republican, and Julie Brill, a Democrat, have also defended the agree-ment’s economic importance (WID Jan 7 p1, Oct 30 p4).

The dozen companies that agreed to settle in January spanned several industries — data marketing,

healthcare, information security, mobile app, even professional football — but none was kid-oriented (http://1.usa.gov/KDG81F). “You’re hearing more and more about enforcement of children’s privacy by the FTC and state attorneys general,” Krasnow said. The FTC oversees the enforcement of the Children’s Online Privacy Protection Act (COPPA). According to Fantage.com’s privacy policy, FTC-approved cer-tification provider TRUSTe has concluded the company is compliant with COPPA (http://bit.ly/1dh8YAH).

Fantage.com allowed its safe harbor certification to lapse despite saying on its website the com-

pany was compliant, the complaint said. “However, this does not necessarily mean that the company committed any substantive violations of the privacy principles of the safe harbor framework or other privacy laws,” the FTC said. As of Tuesday, the Commerce Department website lists the company’s safe harbor certification status as “current.” Fantage.com’s privacy policy also says: “When we collect personal information from residents of the European Union, we follow the privacy principles for the

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U.S.-EU Safe Harbor Framework, which covers the transfer, collection, use, and retention of personal data from the European Union.” Companies can self-certify for safe harbor, which was the method Fan-tage.com was using, according to the Commerce Department’s website (http://1.usa.gov/1bmGaId). “Could they have used a third-party service provider to assist them in complying with the EU safe har-bor? Yes,” Krasnow said. “Or, alternatively, could they have complied themselves? Yes.” Fantage.com did not comment.

The commission voted unanimously in favor of the proposed settlement, which forbids Fan-

tage.com from misrepresenting its participation in any government-backed or self-regulatory pri-vacy or data security program. The public can submit comments on the agreement until March 13 (http://bit.ly/1aS451I). — Cory Bennett (cbennett@warren-news.com)