Kids’ Online Privacy: FTC’s New Rules Won’t End the Battle

Federal regulators have taken a significant step toward strengthening rules that protect children’s online privacy. On Tuesday, the Federal Trade Commission recommended restrictions that would make it harder for advertisers and social networks to gather information on children without parental permission. But how will the new rules play out in the real world?

While praising the FTC’s latest move, advocates say they are now watching to see whether companies catering to kids will embrace the spirit of the proposal or try to find ways around it.

What the Proposals Do

The FTC proposal would close loopholes that have weakened the effectiveness of the 1998 Children’s Online Privacy Protection Act, or COPPA. When the law was passed, no one envisioned the popular data-gathering tools used today, such as Facebook’s “Like” button or games played on smartphones – which automatically record the choices users make.

Under the proposal, social networks and data brokers that partner with Web sites won’t be able to gather data on children younger than 13 years without parental consent. Sites already need permission before storing children’s names, email addresses and other personal information.

The FTC Stirs

“The FTC has finally woken up to the 21st century,” said Jeffrey Chester, executive director of the Center for Digital Democracy, a privacy advocacy group.

It’s about time. Even the FTC acknowledged that it was caught off guard by the sophistication of today’s data-gathering tools. “The commission did not foresee how easy and commonplace it would become for child-directed sites and services to integrate social networking and other personal information-collection features in the content offered to their users, without maintaining ownership, control, or access to the personal data,” the FTC said.

Chances are the FTC’s work won’t get any easier. While calling the commission’s proposal a “giant step to protect children’s privacy,” Chester warned that companies that run so-called family sites, such as the Walt Disney Co., could lobby for an exemption from the new rules. These companies often claim they are not talking directly to children.

“You’re really using the mom or parent as a digital Trojan horse to get the kid’s eyeballs on the site and then collect data,” he said.

Over the next few weeks, the Center for Digital Democracy will be monitoring the data-collection practices on family sites and present its findings to the FTC, Chester said. “We need to achieve a balance between protecting privacy and monetization.”

How Much Money Is At Stake?

While it’s obvious that money is behind advertisers’ interest in children, the amount at total may be surprising. Children between the ages of 8 and 12, the so-called tweens, are responsible for $43 billion in annual spending, according toresearch firm EPM Communications.

The days of reaching these kids through traditional media – TV and magazines – are nearly over. Today, advertisers need to use the mobile Web and smartphone and tablet applications and games.

Social media is also a favorite haunt, Even though Facebook has an official minimum participant age of 13, a SodaHead survey of more than 1,000 parents found that 55% had 12-year-old children on Facebook, 32% had 11-year-olds and 19% 10-year-olds.

In a filing with the FTC in December, Facebook argued that its “Like” button should be exempt from COPPA, according to The Wall Street Journal. The company says data gathered by the software isn’t used in targeted ads based on user behavior.

The Battle Goes On

So, even if adopted, the FTC’s proposals are unlikely to be the final word in finding that balance between children’s privacy and advertising. With so much at stake, advertisers and websites are likely to continue pushing the envelope for some time.

The FTC is taking public comments on its proposals until Sept. 10.