BEYOND COPPA: WHAT YOU NEED TO KNOW ABOUT MARKETING TO CHILDREN

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1 BEYOND COPPA: WHAT YOU NEED TO KNOW ABOUT MARKETING TO CHILDREN AN OVERVIEW OF CURRENT AND PROPOSED RULES The public s focus on consumer privacy in the past few years has also brought with it a heightened awareness by marketers of the Children s Online Privacy Protection Act ( COPPA ). In addition, with the FTC s increasing scrutiny and corresponding enforcement actions, as well as their recent proposed updates to the regulations, the issue of marketing to children in the digital world has gotten substantial publicity. As the world becomes more digital, the lines between marketing and advertising are blurring. With the proliferation of demographic-specific websites, marketers have the unique opportunity to craft messages tailored to specific consumer segments, including young children, tweens, and teenagers. As such, it has become more critical that, in addition to COPPA, marketers understand how the FTC enforces the Truth In Advertising laws when it comes to children. GENERAL FTC GUIDELINES ON TRUTH IN ADVERTISTING According to the FTC publication Dot Com Disclosures, many of the general principles that apply to traditional advertising apply to online advertising, as well. Thus, the FTC prohibition on unfair or deceptive acts or practices also applies to digital marketing. According to the FTC there are three general principles marketers must follow.proposed RULE CHANGES During its review the FTC discussed potential changes to the cutoff age of 13, providing more detail around the terms website and online service as well as what constitutes actual knowledge but concluded that no changes were needed to the existing definitions. However, the FTC is proposing slight modifications to the definition of a site that is directed towards children. In particular, they would like to add music (current pop music for instance) and the use of child celebrities to the list of items that might indicate that a site is directed towards children. Thus, a celebrity news site featuring the latest gossip about young pop stars might be directed to children under the law even if it isn t clearly targeted to children East John Street Seattle, Washington catalysis.com

2 ADVERTISING MUST BE THRUTHFUL AND NON-DECEPTIVE According to the FTC, an advertisement is deemed to be deceptive if it contains or omits a statement that is material and is likely to mislead a consumer acting reasonably under the circumstances. In addition, the FTC will evaluate the advertisement in question from the perspective of the reasonable consumer. For example, if an online advertisement is targeted to children, the FTC will evaluate it from the perspective of the child. ADVERTISING MUST HAVE EVIDENCE TO BACK UP ITS CLAIM Before an advertiser can advertise a specific claim about its product, it must have a reasonable basis and objective evidence to support the claim. The extent of that evidence depends upon the claim being made. ADVERTISING CANNONT BE UNFAIR Finally, according to the FTC, an advertisement will be deemed unfair if it causes or is likely to cause substantial injury which the consumer could not reasonably avoid and it is not outweighed by the benefit to consumers. FTC INVESTIGATION When the FTC conducts an inquiry into an advertisement, they look at several factors. First, they look at the advertisement from the perspective of the reasonable consumer. Second, they ascertain the express and implied claims of the advertisement. Third, the FTC evaluates omissions from an advertisement and whether it affects a consumer s decision. Finally, the FTC looks into whether the deceptive claim is material in the sense that it influenced a consumer s decision to buy the product in question. In evaluating advertisements targeted to children, tweens, and teens, the FTC works with CARU (Children s Advertising Review Unit) of the Council of the Better Business Bureaus. The FTC and CARU both recognize that children are more vulnerable to various forms of advertisements. As such, advertisements are evaluated from the perspective of children, not adults. RULE OF CARU (CHILDREN S ADVERTISING REVIEW UNIT) The Children s Advertising Review Unit ( CARU ) of the Council of the Better Business Bureaus was founded in 1974 in an alliance with the major advertising trade associations. It is an independent self-regulatory agency charged with promoting responsible advertising to children under 12 in all forms of media ranging from television and print to websites(during the past six months, more than half of the CARU cases have involved websites). In addition, at first glance, it COPPA Proposed Updates December 8 th

3 may appear that CARU s purview is limited to obvious advertisements. However, CARU s definition of advertising is: National advertising shall include any paid commercial message, in any medium (including labeling), if: (a) it has the purpose of inducing a sale or other commercial transaction or persuading the audience of the value or usefulness of a company, product, or service; (b) it is disseminated nationally or to a substantial portion of the United States, or is test market advertising prepared for national campaigns; and (c) the content is controlled by the advertiser. This broad definition has allowed it to address advertisers who are disguising their advertising as online games, contests, etc. (see the Topps and Foopets cases below). Where advertising is found to be misleading or conflicts with CARU s Self- Regulatory Program for Children s Advertising, CARU seeks change through the voluntary cooperation of advertisers. CARUS ADVERTISING PRINCIPLES AND GUIDELINES A primary focus of CARU s principles is the recognition that children are especially vulnerable consumers due to their inexperience, immaturity, susceptibility to being misled or unduly influenced, and their lack of cognitive skills needed to evaluate the credibility of advertising. As such, their guidelines include a set of eight core principles for advertising to children that echo the more general Truth in Advertising laws. The most relevant principles for this discussion are the first four: 1. Special responsibilities when advertising to children, advertisers must take into account the vulnerability of children if they are the target of their advertising. 2. Not deceptive or unfair consistent with the three FTC principles listed above, but from the perspective of a child. 3. Adequate substantiation advertisers need to consider how claims will be reasonably interpreted by children and be able to provide objective evidence for those claims. 4. Reasonable expectations advertising should not create unreasonable expectations with children about product quality or performance. In addition to the core principles, CARU includes a non-exhaustive list of guidelines for advertising to children. The overriding message is that of avoiding deception or misconstruing benefits. In addition, CARU advises against exploiting children s imaginations or blurring the distinction between advertising and program/editorial content in ways that would be misleading to children. CARU further addresses the vulnerabilities of children in different areas such as Material Disclosures and Disclaimers, Endorsements, Premium Clubs, Kids Clubs, Sweepstakes, and Contests, Sales Pressure, and Unsafe and Inappropriate Advertising to Children. The overall thrust of CARU s guidelines centers on the vulnerabilities of children to deceptive, misleading, inaccurate, and unfair advertising due to their inexperience, immaturity, and susceptibility. For details of these sections, please see the full CARU guidelines. COPPA Proposed Updates December 8 th

4 CARU AND PRIVACY The CARU guidelines also include a section that addresses online privacy of children. It specifically cites consistency with the Children s Online Privacy Protection Act ( COPPA ), so it will not be covered in detail in this paper. However, marketers should be aware that CARU reviews websites targeted to children to ensure compliance with COPPA and will make recommendations to website owners who don t appear to be compliant. Failure to respond to a CARU inquiry on COPPA can land you on the fast track to a discussion with the FTC (see recent cases below). EXAMPLES OF CARU ACTIONS The CARU website has a database of case reports and news releases on child advertising issues that come before them. These are just a few of the cases they have handled in the past year. TOPPS COMPANY In March of 2011, CARU recommended that Topps Company, Inc., modify the Ring Pops section of its Website to clearly disclose that games available to children on the site are advertising. CARU was concerned that children participating in the Ring Pops games would promote the sales of Ring Pops and that this section of the website should e denoted as advertising. Topps accepted the recommendation and modified the website to disclose to its audience that the content constituted advertising. FOOPETS.COM An excellent example of misleading advertising directed to children concerns the Foopets.com website. According to CARU s press release, dated April 6, 2011, the website allowed children to 'adopt the world s cutest online pet. To enter the adoption center, children were required to enter a username and password. There, they could name a pet of their choice, feed it, walk it, and play with it. Unfortunately, this adoption center was time limited to 30 minutes. The only way to enter the adoption center was to join ClubFoo. Clicking on the words ClubFoo brought visitors to a membership package page. Visitors who did not join ClubFoo received various pop-up messages telling them to do so. In the complaint filed with CARU, one pop-up message was alleged to have stated that the adopted virtual pet was subject to being adopted by someone else. CARU s concern was that there was a lack of clear disclosure that membership was required for the adoption of an online pet and whether there was undue sales pressure. The website operator agreed to the recommended changes to make the disclosure clearer and to eliminate the pop-up messages. COPPA Proposed Updates December 8 th

5 SPINMASTERGAMES.COM In this case, CARU made COPPA compliance recommendations to the owner of the site, SpinMaster Ltd., who had a user profile page on the children s section of their website. The site owner was asking the user for a birthdate and if the child indicated that they were younger than 13, the site would say that it needed to obtain consent from their parents through . However, they didn t prevent the child from simply changing their age, eliminating the need for parental consent. In addition, the website was also providing links to Facebook, Twitter, and YouTube, all sites that are not intended for use by children under 13. CARU recommended that the website owner provide more neutral language for the parental consent and that they track the user so they couldn t enter a different age to avoid the parental consent. In addition, they recommended that the site remove the links to social sites not intended for children. The company agreed to the recommendations and made the appropriate changes to their site. SEEWINTER.COM In this case, the children s portion of the website presented an opportunity to sign up for a newsletter and asked for the user s name, , street address, and phone number. They did not include a mechanism for screening children under 13 to obtain parental consent. In addition, the privacy policy for the site clearly states that they don t collect this type of information without parental consent. CARU was concerned about both the lack of parental consent and the failure of the website owner to follow its own privacy policy. The owners of Seewinter.com were contacted by CARU but failed to respond, so they have been referred to the FTC for further review. PROPOSED RULE CHANGES Under the proposed Rule, operators would be required to take reasonable measures to ensure the adequacy and compliance of the data handling practices of third parties to which they divulge children s personal information. In addition, COPPA would be updated to include a mandate to retain children s personal information only as long as is reasonably necessary and delete it in a way that prevents unauthorized access or exposure. TAKEWAYS Always remember that the FTC and CARU will evaluate advertisements from a child consumer s perspective. Never exploit children s imaginations by blurring the distinction between content and an advertisement. It can be particularly easy to blur those lines in the digital world through COPPA Proposed Updates December 8 th

6 games, educational content, etc., so marketers need to be especially cautious when it comes to websites. Stay away from claims that raise unreasonable expectations of product quality or performance. Remember that CARU is also monitoring websites for COPPA compliance and it is in your best interest to cooperate with them and remediate any issues before they get referred to the FTC. ABOUT CATALYSIS For nearly 20 years, Catalysis has specialized in the digital integration of award-winning marketing campaigns that drive connected, measurable results. Our clients include Microsoft, Moss Adams, Banner Mattress, Thunder Valley Casino, BabyLegs, and WineBid. For more information, contact or visit our website at The information contained in this publication is general and is for informational purposes only. Catalysis makes no warranties, express or implied, in this material Catalysis Corporation. All Rights Reserved COPPA Proposed Updates December 8 th