Mobile application developer, W3 Innovations, has reached a $50,000 settlement with the Federal Trade Commission for violating the Children’s Online Privacy Protection Act (“COPPA”). W3 Innovations was charged, by the FTC, with collecting and storing information from children, such as e-mail addresses and messages posted on public message boards, without parental consent. This is the first time that the FTC has charged a mobile app company for violating COPPA. Mr. John Leibowitz, Chairman of the FTC, stated that companies must “give the parents the opportunity to make smart choices when it comes to their children’s sharing of information on smart phones.”
[Companies must] give the parents the opportunity to make smart choices when it comes to their children’s sharing of information on smart phones.”
The tracking of individual online habits is an emerging market that has not yet reached its growth potential. The problem for most companies is that they are unable, or in some circumstances, unwilling, to implement a comprehensive data governance program into their overall corporate strategy. Primary reasons for this include: (1) it does not make economic sense – the business owner has limited financial resources, and therefore will choose revenue generation over risk management protocols; and (2) naiveté on the part of legal counsel and C-level management. Is a $50,000 settlement with the FTC for failing to securing mission-critical data, sound business judgment? The FTC is charged with ensuring that firm’s employ proper controls for tracking user behavior online, or face the potential regulatory fines and costs. While no uniform standard of care exists for safeguarding mission-critical data, and laws like COPPA often confuse the matter further, entrepreneurs need to bring the discussion of data governance into the boardroom as they plot the growth of the business.