Disney Subsidiary Agrees to $3 Million Settlement with FTC over Children’s Privacy Breach

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Disney must really be regretting its August 2010 purchase of social gaming company Playdom by now. Not only has Playdom already cost Disney an additional $34 million on top of its $534 million price tag (in the process becoming one of the main reasons behind Disney’s disappointing financial quarter, according to CFO Jay Rasulo earlier this week), but now the company has had to agree to pay $3 million to settle claims that it had collected and made public private information about children without their parents’ consent.

The company “illegally collected and made public” information including names, email addresses and locations of somewhere between 403,000 and 1,224,000 children with its May 2010 purchase of Acclaim Games, sharing the information through online games like My Diva Doll, Pony Stars and Dance Online, according to the Federal Trade Commission. Jon Leibowitz, chairman of the FTC, looks at this settlement as a warning to other companies:

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. It’s the law, it’s the right thing to do, and, as today’s settlement demonstrates, violating COPPA will not come cheap.

Playdom’s payout is being described as the largest penalty in the 11-year history of the Children’s Online Privacy Protection Rule. Also named in the complaint was former Playdom VP Howard Marks; it’s unknown whether Disney will be paying the full $3 million settlement or sharing the cost with Marks.

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