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ADventures in Law

FTC Concerns over Marketing to Kids – It’s Not Just About COPPA Anymore

Nuances of Pixel Tracking, Legal Implications of Pixel Use Discussed in Podcast

Jennifer Kurcz Quoted in Law360 Article on Biggest Patent Rulings of 2024

Matt Thurlow Stresses Need to Assert/Reassert Confidentiality on Trade-Secret Data

The Federal Trade Commission (FTC or Commission) has signaled for some time that while the Children’s Online Privacy Protection Act (COPPA) is limited to children under the age of 13, it also has concerns about the vulnerability of anyone under the age of 18 in the digital world. The FTC’s Staff Perspective on “<a href="https://www.ftc.gov/system/files/ftc_gov/pdf/p214505kidsadvertisingstaffperspective092023.pdf">Stealth Advertising in Digital Media</a>” specifically defines kids as anyone under the age of 18. And in his introduction, the bureau director noted areas where kids are particularly vulnerable, including dark patterns, blurred lines between advertising and content, and fraud. A settlement reached by the agency yesterday shows that the FTC is serious with respect to protecting not just preteens but also teens.

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The FTC and California entered into a settlement with NGL Labs, which marketed an anonymous messaging app to teens and preteens. According to the allegations in the complaint, there were plenty of traditional Section 5 violations to be found, including sending fake messages and then trying to upsell users into a paid membership that would supposedly help them uncover the identity of the sender. In addition, the company allegedly also committed violations of both ROSCA and COPPA. Had the complaint stopped there, this blog likely wouldn’t exist. But this Commission has breathed new vigor into its unfairness authority, and the complaint also features an unfairness allegation. Count II states that defendants “have specifically targeted children and teens knowing that the use of anonymous messaging apps by these groups causes substantial injury” and that this targeting is an unfair act. (As a reminder, an unfair act is one that causes substantial injury to consumers that consumers cannot reasonably avoid themselves and that is not outweighed by countervailing benefits to consumers or competition.)

Presumably, this now means that the Commission believes that, much like tobacco and alcohol, it is unlawful to market anonymous messaging apps (and perhaps other forms of anonymous online platforms) to teens and preteens. Consistent with that view, the company was banned from doing so going forward. Of course, the sale of tobacco and alcohol to children is prohibited by legislation, not Section 5. The Commission’s two Republican members, while they were onboard for the allegations in Count I, vehemently <a href="https://www.ftc.gov/legal-library/browse/cases-proceedings/public-statements/concurring-statement-commissioner-andrew-n-ferguson-joined-commissioner-melissa-holyoak-matter-ngl">opposed</a> Count II’s unfairness allegation. The two commissioners acknowledged both the benefits of and harms from online anonymity. They were troubled, however, by the First Amendment implications of the majority’s view and the fact that the Commission appeared to be supplanting extensive federal and state authority, which, while regulating this area, has not banned it.

Of course, this case was settled, so no court challenge will take place. However, if the Commission continues down this path (or a similar one) and a case does end up in court, it will be interesting to see how it fares. As has been noted in the press and on this <a href="https://www.adventures-in-law.com/blogs/the-chevron-decision-will-create-some-challenges-for-ftc-law-enforcement-and-rulemaking/">blog</a> as well, the Supreme Court has been no friend of the expansion of agency authority. Using Section 5 and unfairness in this manner hearkens back to the Commission’s ill-fated attempt to ban certain types of advertising to kids in the 1970s and could well earn the Court’s disapproval if and when the opportunity arises.

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