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USA: FTC announces proposed settlement with Kuuhubb following allegations of illegal collection of children's personal information

The Federal Trade Commission ('FTC') announced, on 1 July 2021, that it had entered into a proposed settlement with Toronto-based Kuuhubb Inc., along with its Finnish subsidiaries Kuu Hubb Oy and Recolor Oy, following a violation of the Children's Online Privacy Protection Act Rule ('the COPPA Rule'). In particular, the FTC noted that the operators of an online colouring book app will be required to notify parents and offer refunds to current underage subscribers to settle FTC allegations that they violated the COPPA Rule by collecting and disclosing personal information about children who used the app without notifying their parents and obtaining their consent. In addition, the FTC outlined that the COPPA Rule requires websites and apps to provide notice to parents and obtain verifiable parental consent before collecting personal information from children if the website or app or even a portion of the website or app is directed at children under 13. Samuel Levine, Acting Director of the FTC's Bureau of Consumer Protection noted that "[t]he law is clear: the personal information of children is off limits, and the FTC will continue to investigate companies like Recolor that break or bend the law," Levine futher noted that "[e]ven if only a portion of an app or website is directed to kids, companies cannot collect their personal information without parental consent, especially if their app or website offers social media features."

Under the proposed settlement, the companies must delete all the personal information they collected from children under 13 unless they obtain parental consent, and must offer current paid subscribers of the Recolor app a refund if they were under the age of 18 when they signed up for the app. Moreover, the FTC outlined that the companies also agreed to a $3 million monetary penalty, which will be suspended upon payment of $100,000 due to their inability to pay the full amount, however they will be required to pay the full amount if they have misrepresented their finances. Furthermore, the FTC noted that if they sell the app within a year following entry of the order, they must remit the net proceeds from the sale to the FTC, after the payment of debts and other related expenses.

Lastly, the FTC highlighted that the companies violated Sections 5(a), 5(m)(1)(A), 13(b), 16(a)(1), and 19 of the Federal Trade Commission Act of 1914, §§ 53(b), 56(a)(1), 57b of COPPA, and §§ 6502(c), 6505(d), and the COPPA Rule.

You can read the press release here and the proposed settlement here.

UPDATE (21 July 2021)

FTC and DOJ issue finalised order

The Department of Justice ('DOJ') announced, on 21 July 2021, together with the FTC, that they have issued the finalised order in relation to the agreed settlement with Kuuhubb Inc., along with its subsidiaries Kuu Hubb Oy and Recolor Oy.

You can read the press release here and the order here.

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