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Disney to pay $3-million settlement over children's online privacy

The FTC charged that several sites once operated by Disney's Playdom games division illegally collected and disclosed personal information from thousands of children, in violation of the Children's Online Privacy Protection Act.

May 14, 2011|By Dawn C. Chmielewski and Alex Pham, Los Angeles Times

Walt Disney Co. has agreed to pay $3 million to settle charges that online virtual worlds once operated by its Playdom games division violated federal rules designed to protect the safety and privacy of children younger than 13 on the Internet.

The Federal Trade Commission charged that several sites, including one online virtual world targeting children called Pony Stars, illegally collected and disclosed personal information from thousands of children, in violation of the Children's Online Privacy Protection Act.

Some 821,000 children registered with Pony Stars from 2006 to 2010, according to the FTC. An additional 403,000 children provided their information to some of the 19 other virtual worlds operated by Playdom, including 2 Moons, 9 Dragons and My Diva Doll.

The fine comes as Reps. Joe L. Barton (R-Texas) and Edward J. Markey (D-Mass.) last week vowed to introduce a bill to beef up online privacy protections for children. Their proposed Do Not Track Kids Act would, among other things, ban companies from using children's personal information for targeted ads and marketing.

"We commend FTC for holding Playdom accountable for what seems like blatant disregard of the law," said James Steyer, chief executive of Common Sense Media, a San Francisco family advocacy group. "The fact that this continued for four years underscores the need for new privacy legislation."

The FTC's complaint, filed Wednesday in federal district court in Los Angeles, maintains that Playdom's sites collected children's ages and email addresses during the registration process, and allowed kids to publicly post personal information — including their real names and locations. The FTC charged that the company and the executive who oversaw the sites, Howard Marks, failed to get parents' consent before collecting or disclosing this information.

"This matter involved a Federal Trade Commission investigation of the practices of Acclaim Games Inc., a company that was acquired by Playdom prior to Disney's acquisition of Playdom last year," Disney Interactive Media Group spokeswoman Carrie Davis said in a statement. "Disney is pleased that Playdom and the FTC have now resolved this matter amicably."

The sites had been created by Acclaim Games, a company that Marks founded and sold to Playdom on May 18, 2010. Marks, who indicated on his profile on LinkedIn that he left Playdom in February to found another game company in Los Angeles called Gamzee, did not respond to messages requesting comment.

By the time Disney acquired Playdom for $563 million on Aug. 27, Playdom had shut down most of the online virtual worlds operated by Acclaim, but transferred some of the sites to operators outside the U.S., the FTC maintained in its complaint.

A French company, Feerik Ltd., took over operation of Pony Stars and My Diva Doll, a move that allowed children who had previously registered to continue playing games and accessing their accounts. Feerik agreed to shut down both online virtual worlds in November and transferred the individual data back to Playdom.

dawn.chmielewski@latimes.com

alex.pham@latimes.com

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