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Playdom Hit With $3 Million Settlement In FTC COPPA Case

Playdom Hit With $3 Million Settlement In FTC COPPA Case

May 12, 2011 | By Christian Nutt

The Disney Interactive social games subsidiary Playdom has settled with the FTC over claims that virtual worlds operated by Acclaim, which it acquired in 2010, violated rules protecting kids online.

The FTC had filed a case against Playdom and Howard Marks, former Acclaim CEO, over the fact that several of the company's games -- including some targeted specifically to children, including Pony Stars -- improperly collected and distributed children's personal information under U.S. law.

According to the FTC's press release, between 2006 and 2010, approximately 403,000 children registered for its general-audience games, while an additional 821,000 users registered for Pony Stars.

These games were not COPPA compliant when operated by Acclaim, which was acquired by Playdom in May 2010. Playdom, in turn, was acquired by Disney in July of that year.

COPPA, or the Children's Online Privacy Protection Act, governs how websites and online services collect and treat children's personal information online in the U.S.

The FTC's complaint alleges that Playdom collected children's ages and email addresses from them, and then enabled them to publicly post this and other sensitive information -- such as their full names and instant messenger contact info -- without obtaining the proper consent from parents. The FTC notes that in addition to COPPA, this is also in violation of Playdom's own policies.

Beyond the $3 million penalty, which the company has agreed to pay, Playdom is now permanently barred by the FTC from violating COPPA and misrepresenting its information practices regarding children.

At the time of the Acclaim acquisition, Marks served as the head of Playdom's Acclaim studio, though the company soon after shut down most of the Acclaim titles -- which were largely free-to-play client-based MMOs.

Pony Stars shut down on December 1, 2010, according to a notice on its website. Playdom still operates at least one Acclaim title -- Facebook-based music title RockFREE -- though it is not listed on Playdom's website.

Marks, no longer with Playdom, recently founded mobile games startup Gamezee.

"Let’s be clear: Whether you are a virtual world, a social network, or any other interactive site that appeals to kids, you owe it to parents and their children to provide proper notice and get proper consent," said Jon Leibowitz, Chairman of the Federal Trade Commission. "It’s the law, it’s the right thing to do, and, as today’s settlement demonstrates, violating COPPA will not come cheap."

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