On May 19, 2022, the Federal Trade Commission (FTC or the “Commission”) including Commissioner Alvaro M. Bedoya in his first sitting since being sworn in to the Commission (see our post), held an open meeting to discuss two critical topics: (1) the Commission’s prioritization of the enforcement of Children’s Online Privacy Protection Act (COPPA) as it applies to the use of education technology (“ed tech”) and (2) a request for public comment on proposed amendments to the FTC’s Guide Concerning the Use of Endorsements in Advertising addressing the FTC’s focus on mitigating the posting of fake news and the suppression of negative reviews by businesses. The Commission unexpectedly voted unanimously on both counts.

On the COPPA front, companies that operate in the ed tech space (as service providers to schools or in other contexts) must pay particular attention to their compliance obligations because the FTC has indicated (through the below policy statement) that this will be an area of priority for the Commission. Similarly, companies in the advertising space should both review their current practices to ensure that they are in compliance with FTC guidelines, as well as be aware of future changes that may arise as a result of the proposed amendments to the endorsement rules.

Policy Statement on Education Technology as it Relates to COPPA

Under its rule-making authority charged by COPPA, the Commission voted affirmatively to support the Commission’s policy statement (the “Policy) which announces that the FTC will enforce substantive limitations on businesses’ collection, use and retention of children’s data as it pertains to education technology (“ed tech”).

The Problem. Concerns have been raised that companies’ collection practices have become more and more extensive and that children’s information may be used to target them. The Commission stated that at the time that COPPA was enacted to protect children’s privacy, the profusion of technology was not realized. As such, COPPA did not directly contemplate ed tech. The use of ed tech however has proliferated during the COVID-19 pandemic where children and parents must regularly engage with ed tech in order to join a digital classroom or participate in other educational activities, often on school-owned devices and school-controlled applications. Parents who are inherently uncomfortable with tracking their children may be coerced to do so as a condition of their child’s access to educational tools and various learning platforms.

The Policy. The Policy introduced by the Commission aims to put companies subject to COPPA, including service providers to schools and other business in the ed tech space that process information online about children under the age of 13, must comply with the following requirements:

1. Prohibition Against Mandatory Collection. Businesses subject to COPPA, including ed tech, will be prohibited from collecting more information than is reasonably necessary for the purpose collected. For example, if an ed tech provider does not require to email students as part of such provider’s application, such provider will be prohibited from conditioning access to the application on a student providing email.
2. Use Prohibitions. Businesses subject to COPPA, including ed tech, must only collect information to be used for the purpose for which it was collected. In other words, information collected by ed tech companies cannot be used for targeted advertising, marketing or other commercial purposes.
3. Retention. Businesses subject to COPPA, including ed tech, must only retain personal information longer than reasonably necessary. The Commission mentioned the FTC’s settlement with Weight Watchers and Kurbo in this matter alluding to the FTC’s penalties for tracking children’s data for longer than necessary (see our post).
4. Security. Businesses subject to COPPA, including ed tech, must have procedures in place to protect the confidentially, security and integrity.

Select Commissioner’s Comments. Commissioner Slaughter noted that while COPPA is seen as tool aimed to “put parents in the driver’s seat” that is not the only operative part of COPPA. Parents cannot be expected to drive every day to “micromanage” their children’s use of technology. She further noted that kids have a right to learn in privacy no matter what the parents do.

Commissioner Bedoya noted that the Policy is part of a systemic effort to use tools beyond notice and consent to promote privacy. He also noted that though some tracking is beneficial, privacy advances such as hash tagging, or other tools can be considered to de-identify students. He commented that “just as people innovate on tracking, people can innovate on privacy.”

Endorsement Guides Regarding the Use of Endorsements and Testimonials in Ads Without Deceiving Consumers.

In a separate vote, the Commission also voted unanimously to seek public comment on the FTC’s amendments to the Guides Concerning the Use of Endorsements and Testimonials in Advertising (the “Endorsement Guides”). The Endorsement Guides, setting out that endorsements should be honest and not misleading, were first issued in 1980 and last amended in 2009. Following a recent period of public comment and review of the Endorsement Guides, the FTC determined that the Endorsement Guides require updates. The FTC’s stance is that social media sites may not provide sufficient tools to support influencers in disclosing endorsements and that other businesses may be violating advertising rules when they hide negative reviews.

The FTC seeks to amend the Endorsement Guides in the following ways:

1. Updated Definitions.
   1. The amendment proposes to expand the term “endorser” to include groups such as virtual or digital influencers and those who generate fake endorsements or reviews.
   2. The amendment seeks to clarify that “clear and conspicuous” means something that is “difficult to miss and easily understandable” by ordinary persons.
2. New Section Addressing Consumer Reviews. A new section will address consumer reviews. This section will describe that advertiser should not misrepresent what consumers think by procuring, suppressing or presenting consumer reviews. For example, the FTC may view an advertiser that deletes, does not publish negative reviews or one that buys fake reviews as misleading.
3. Added Guidance to Define Material Connections. The amendment proposes added guidance regarding material connections between endorsers and advertisers. In the event that there is a material connection between the endorser and the advertiser, such connection must be clearly and conspicuously disclosed in the advertisement.
4. Endorsements and Children. The amendment will include a new section regarding endorsements and children. On October 19, 2022, the FTC will host a virtual. In the meeting, the FTC will bring together researchers, child development and legal experts, consumer advocates, and industry professionals to examine the techniques used to advertise to children and their capacity to grasp advertising and distinguish it from other content. Unless kids can differentiate and grasp the persuasive intent, they are at risk of deception; and
5. Liability of advertiser endorser, intermediary and platform. The amendment will clarify when and how advertisers, endorsers, intermediaries and platforms are liable for misleading endorsements. For example, endorsers may be liable for material connections whereas intermediaries may be liable for their roles in the event of deceptive advertising. Platforms may be liable for representation they make about built-in disclosure tools.

At the closing of the session, Commissioner Khan underscored that the three main principles of the updates to the Endorsement Guides will be to (1) expose influencers to liability (2) provide explicit guidance on reviews, specifically on fake reviews and (3) address the host of risks posed by child-directed endorsements.

We will continue to keep you posted of any notable updates on these topics.