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Financial Services Law Insights and Observations

FTC, DOJ reach $1.5 million settlement with weight-loss companies

Federal Issues FTC Enforcement DOJ Privacy/Cyber Risk & Data Security COPPA FTC Act

Federal Issues

On March 4, the FTC and DOJ announced a $1.5 million settlement with an international weight loss service organization and its subsidiary (collectively, “defendants”) accused of allegedly using unfair and deceptive practices to obtain personal information of underage users without parental consent. As previously covered by InfoBytes, the agencies claimed that the defendants violated the Children’s Online Privacy Protection Act (COPPA) and Section 5 of the FTC Act by collecting and keeping personal information from children under 13 without providing notice to or obtaining consent from their parents. The agencies’ settlement announcement stated that the defendants’ signup process originally “encouraged younger users to falsely claim they were over the age of 13, despite text indicating that children under 13 must sign up through a parent,” and that even after the signup process was revised, the defendants allegedly “failed to provide a mechanism to ensure that those who choose the parent signup option were indeed parents and not a child trying to bypass the age restriction.” Additionally, the defendants allegedly violated COPPA’s data retention provisions “by retaining children’s personal information indefinitely and only deleting it when requested by a parent.”

Under the terms of the settlement, unless verified parent consent has been subsequently obtained, the defendants are required to refrain from disclosing, using, or benefiting from previously collected personal information that did not comply with COPPA’s parental notice and consent requirements, and must destroy all previously collected personal information, as well as any affected work product that used illegally collected data. The settlement also orders the defendants to pay a $1.5 million civil penalty.