The FTC has achieved a new record in its actions for violations of the Children’s Online Privacy Protection Act (COPPA). On May 12, 2011, the FTC announced that it entered into a settlement with Playdom, Inc., a Disney subsidiary, which is a major provider of virtual world game websites. The settlement imposes a $3 million dollar civil penalty, and is the largest civil penalty ever imposed under COPPA.

The FTC claims that Playdom’s websites illegally collected and disclosed personal information from hundreds of thousands of children under age 13 without their parents’ prior consent. The FTC’s COPPA Rule requires that website operators notify parents and obtain their consent before they collect, use, or disclose children’s personal information. The Rule also requires that website operators post a privacy policy that is clear, understandable, and complete. The FTC alleged that Playdom failed to meet these requirements.

The FTC complaint alleges that the defendants collected children’s ages and email addresses during registration and then enabled children to publicly post their full names, email addresses, instant messenger IDs, and location, among other information, on personal profile pages and in online community forums. The FTC further charged that Playdom violated the FTC Act because Playdom’s privacy policy misrepresented that it would prohibit children under 13 from posting personal information online.

This action emphasizes the importance of reviewing personal information that a website collects and uses and confirming that such collection and use conforms with the law and the website’s privacy policy.