[Federal Register Volume 78, Number 12 (Thursday, January 17, 2013)]
[Rules and Regulations]
[Pages 3972-4014]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-31341]



[[Page 3971]]

Vol. 78

Thursday,

No. 12

January 17, 2013

Part II





Federal Trade Commission





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16 CFR Part 312





Children's Online Privacy Protection Rule; Final Rule

  Federal Register / Vol. 78 , No. 12 / Thursday, January 17, 2013 / 
Rules and Regulations  

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FEDERAL TRADE COMMISSION

16 CFR Part 312

RIN 3084-AB20


Children's Online Privacy Protection Rule

AGENCY: Federal Trade Commission (``FTC'' or ``Commission'').

ACTION: Final rule amendments.

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SUMMARY: The Commission amends the Children's Online Privacy Protection 
Rule (``COPPA Rule'' or ``Rule''), consistent with the requirements of 
the Children's Online Privacy Protection Act, to clarify the scope of 
the Rule and strengthen its protections for children's personal 
information, in light of changes in online technology since the Rule 
went into effect in April 2000. The final amended Rule includes 
modifications to the definitions of operator, personal information, and 
Web site or online service directed to children. The amended Rule also 
updates the requirements set forth in the notice, parental consent, 
confidentiality and security, and safe harbor provisions, and adds a 
new provision addressing data retention and deletion.

DATES: The amended Rule will become effective on July 1, 2013.

ADDRESSES: The complete public record of this proceeding will be 
available at www.ftc.gov. Requests for paper copies of this amended 
Rule and Statement of Basis and Purpose (``SBP'') should be sent to: 
Public Reference Branch, Federal Trade Commission, 600 Pennsylvania 
Avenue NW., Room 130, Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT: Phyllis H. Marcus or Mamie Kresses, 
Attorneys, Division of Advertising Practices, Bureau of Consumer 
Protection, Federal Trade Commission, 600 Pennsylvania Avenue NW., 
Washington, DC 20580, (202) 326-2854 or (202) 326-2070.

SUPPLEMENTARY INFORMATION: 

Statement of Basis and Purpose

I. Overview and Background

A. Overview

    This document states the basis and purpose for the Commission's 
decision to adopt certain amendments to the COPPA Rule that were 
proposed and published for public comment on September 27, 2011 (``2011 
NPRM''),\1\ and supplemental amendments that were proposed and 
published for public comment on August 6, 2012 (``2012 SNPRM'').\2\ 
After careful review and consideration of the entire rulemaking record, 
including public comments submitted by interested parties, and based 
upon its experience in enforcing and administering the Rule, the 
Commission has determined to adopt amendments to the COPPA Rule. These 
amendments to the final Rule will help to ensure that COPPA continues 
to meet its originally stated goals to minimize the collection of 
personal information from children and create a safer, more secure 
online experience for them, even as online technologies, and children's 
uses of such technologies, evolve.
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    \1\ 2011 NPRM, 76 FR 59804, available at http://ftc.gov/os/2011/09/110915coppa.pdf.
    \2\ 2012 SNPRM, 77 FR 46643, available at http://ftc.gov/os/2012/08/120801copparule.pdf.
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    The final Rule amendments modify the definitions of operator to 
make clear that the Rule covers an operator of a child-directed site or 
service where it integrates outside services, such as plug-ins or 
advertising networks, that collect personal information from its 
visitors; Web site or online service directed to children to clarify 
that the Rule covers a plug-in or ad network when it has actual 
knowledge that it is collecting personal information through a child-
directed Web site or online service; Web site or online service 
directed to children to allow a subset of child-directed sites and 
services to differentiate among users, and requiring such properties to 
provide notice and obtain parental consent only for users who self-
identify as under age 13; personal information to include geolocation 
information and persistent identifiers that can be used to recognize a 
user over time and across different Web sites or online services; and 
support for internal operations to expand the list of defined 
activities.
    The Rule amendments also streamline and clarify the direct notice 
requirements to ensure that key information is presented to parents in 
a succinct ``just-in-time'' notice; expand the non-exhaustive list of 
acceptable methods for obtaining prior verifiable parental consent; 
create three new exceptions to the Rule's notice and consent 
requirements; strengthen data security protections by requiring 
operators to take reasonable steps to release children's personal 
information only to service providers and third parties who are capable 
of maintaining the confidentiality, security, and integrity of such 
information; require reasonable data retention and deletion procedures; 
strengthen the Commission's oversight of self-regulatory safe harbor 
programs; and institute voluntary pre-approval mechanisms for new 
consent methods and for activities that support the internal operations 
of a Web site or online service.

B. Background

    The COPPA Rule, 16 CFR part 312, issued pursuant to the Children's 
Online Privacy Protection Act (``COPPA'' or ``COPPA statute''), 15 
U.S.C. 6501 et seq., became effective on April 21, 2000. The Rule 
imposes certain requirements on operators of Web sites or online 
services directed to children under 13 years of age, and on operators 
of other Web sites or online services that have actual knowledge that 
they are collecting personal information online from a child under 13 
years of age (collectively, ``operators''). Among other things, the 
Rule requires that operators provide notice to parents and obtain 
verifiable parental consent prior to collecting, using, or disclosing 
personal information from children under 13 years of age.\3\ The Rule 
also requires operators to keep secure the information they collect 
from children, and prohibits them from conditioning children's 
participation in activities on the collection of more personal 
information than is reasonably necessary to participate in such 
activities.\4\ The Rule contains a ``safe harbor'' provision enabling 
industry groups or others to submit to the Commission for approval 
self-regulatory guidelines that would implement the Rule's 
protections.\5\
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    \3\ See 16 CFR 312.3.
    \4\ See 16 CFR 312.7 and 312.8.
    \5\ See 16 CFR 312.10.
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    The Commission initiated review of the COPPA Rule in April 2010 
when it published a document in the Federal Register seeking public 
comment on whether the rapid-fire pace of technological changes to the 
online environment over the preceding five years warranted any changes 
to the Rule.\6\ The Commission's request for public comment examined 
each aspect of the COPPA Rule, posing 28 questions for the public's 
consideration.\7\ The Commission also held a public roundtable to 
discuss in detail several of the areas where public comment was 
sought.\8\
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    \6\ See Request for Public Comment on the Federal Trade 
Commission's Implementation of the Children's Online Privacy 
Protection Rule (``2010 FRN''), 75 FR 17089 (Apr. 5, 2010).
    \7\ Id.
    \8\ Information about the June 2010 public roundtable is located 
at http://www.ftc.gov/bcp/workshops/coppa/index.shtml.
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    The Commission received 70 comments from industry representatives, 
advocacy groups, academics, technologists, and

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individual members of the public in response to the April 5, 2010 
request for public comment.\9\ After reviewing the comments, the 
Commission issued the 2011 NPRM, which set forth several proposed 
changes to the COPPA Rule.\10\ The Commission received over 350 
comments in response to the 2011 NPRM.\11\ After reviewing these 
comments, and based upon its experience in enforcing and administering 
the Rule, in the 2012 SNPRM, the Commission sought additional public 
comment on a second set of proposed modifications to the Rule.
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    \9\ Public comments in response to the Commission's 2010 FRN are 
located at http://www.ftc.gov/os/comments/copparulerev2010/index.shtm. Comments cited herein to the Federal Register Notice are 
designated as such, and are identified by commenter name, comment 
number, and, where applicable, page number.
    \10\ See supra note 1.
    \11\ Public comments in response to the 2011 NPRM are located at 
http://www.ftc.gov/os/comments/copparulereview2011/. Comments cited 
herein to the 2011 NPRM are designated as such, and are identified 
by commenter name, comment number, and, where applicable, page 
number.
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    The 2012 SNPRM proposed modifying the definitions of both operator 
and Web site or online service directed to children to allocate and 
clarify the responsibilities under COPPA when independent entities or 
third parties, e.g., advertising networks or downloadable software kits 
(``plug-ins''), collect information from users through child-directed 
sites and services. In addition, the 2012 SNPRM proposed to further 
modify the definition of Web site or online service directed to 
children to permit Web sites or online services that are directed both 
to children and to a broader audience to comply with COPPA without 
treating all users as children. The Commission also proposed modifying 
the definition of screen or user name to cover only those situations 
where a screen or user name functions in the same manner as online 
contact information. Finally, the Commission proposed to further modify 
the revised definitions of support for internal operations and 
persistent identifiers. The Commission received 99 comments in response 
to the 2012 SNPRM.\12\ After reviewing these additional comments, the 
Commission now announces this final amended COPPA Rule.
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    \12\ Public comments in response to the 2012 SNPRM are available 
online at http://ftc.gov/os/comments/copparulereview2012/index.shtm. 
Comments cited herein to the SNPRM are designated as such, and are 
identified by commenter name, comment number, and, where applicable, 
page number.
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II. Modifications to the Rule

A. Section 312.2: Definitions

1. Definition of Collects or Collection
a. Collects or Collection, Paragraph (1)
    In the 2011 NPRM, the Commission proposed amending paragraph (1) to 
change the phrase ``requesting that children submit personal 
information online'' to ``requesting, prompting, or encouraging a child 
to submit personal information online.'' The proposal was to clarify 
that the Rule covers the online collection of personal information both 
when an operator requires it to participate in an online activity, and 
when an operator merely prompts or encourages a child to provide such 
information.\13\ The comments received divided roughly equally between 
support of and opposition to the proposed change to paragraph (1). 
Those in favor cited the increased clarity of the revised language as 
compared to the existing language.\14\
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    \13\ One commenter, Go Daddy, expressed concern that the 
definition of collects or collection is silent as to personal 
information acquired from children offline that is uploaded, stored, 
or distributed to third parties by operators. Go Daddy (comment 59, 
2011 NPRM), at 2. However, Congress limited the scope of COPPA to 
information that an operator collects online from a child; COPPA 
does not govern information collected by an operator offline. See 15 
U.S.C. 6501(8) (defining the personal information as ``individually 
identifiable information about an individual collected online * * 
*.''); 144 Cong. Rec. S11657 (Oct. 7, 1998) (Statement of Sen. 
Bryan) (``This is an online children's privacy bill, and its reach 
is limited to information collected online from a child.'').
    \14\ See Institute for Public Representation (comment 71, 2011 
NPRM), at 19; kidSAFE Seal Program (comment 81, 2011 NPRM), at 5; 
Alexandra Lang (comment 87, 2011 NPRM), at 1.
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    Several commenters opposed the revised language of paragraph (1). 
For example, the National Cable and Telecommunications Association 
(``NCTA'') expressed concern that the revised language suggests that 
``COPPA obligations are triggered even without the actual or intended 
collection of personal information.'' \15\ NCTA asked the Commission to 
clarify that ``prompting'' or ``encouraging'' does not trigger COPPA 
unless an operator actually collects personal information from a 
child.\16\
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    \15\ NCTA (comment 113, 2011 NPRM), at 17-18.
    \16\ Id.
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    The Rule defines collection as ``the gathering of any personal 
information from a child by any means,'' and the terms ``prompting'' 
and ``encouraging'' are merely exemplars of the means by which an 
operator gathers personal information from a child.\17\ This change to 
the definition of collects or collection is intended to clarify the 
longstanding Commission position that an operator that provides a field 
or open forum for a child to enter personal information will not be 
shielded from liability merely because entry of personal information is 
not mandatory to participate in the activity. It recognizes the reality 
that such an operator must have in place a system to provide notice to 
and obtain consent from parents to deal with the moment when the 
information is ``gathered.'' \18\ Otherwise, once the child posts the 
personal information, it will be too late to obtain parental consent.
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    \17\ See 16 CFR 312.2: ``Collects or collection means the 
gathering of any personal information from a child by any means, 
including but not limited to * * * ''
    \18\ Several other commenters raised concern that the language 
``prompting, or encouraging'' could make sites or services that post 
third-party ``Like'' or ``Tweet This'' buttons subject to COPPA. See 
Association for Competitive Technology (comment 5, 2011 NPRM), at 6; 
Direct Marketing Association (``DMA'') (comment 37, 2011 NPRM), at 
6; see also American Association of Advertising Agencies (comment 2, 
2011 NPRM), at 2-3; Interactive Advertising Bureau (``IAB'') 
(comment 73, 2011 NPRM), at 12. The collection of personal 
information by plug-ins on child-directed sites is addressed fully 
in the discussion regarding changes to the definition of operator. 
See Part II.A.4.a., infra.
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    After reviewing the comments, the Commission has decided to modify 
paragraph (1) of the definition of collects or collection as proposed 
in the 2011 NPRM.
b. Collects or Collection, Paragraph (2)
    Section 312.2(b) of the Rule defines ``collects or collection'' to 
cover enabling children to publicly post personal information (e.g., on 
social networking sites or on blogs), ``except where the operator 
deletes all individually identifiable information from postings by 
children before they are made public, and also deletes such information 
from the operator's records.'' \19\ This exception, often referred to 
as the ``100% deletion standard,'' was designed to enable sites and 
services to make interactive content available to children, without 
providing parental notice and obtaining consent, provided that all 
personal information was deleted prior to posting.\20\
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    \19\ Under the Rule, operators who offered services such as 
social networking, chat, and bulletin boards and who did not pre-
strip (i.e., completely delete) such information were deemed to have 
``disclosed'' personal information under COPPA's definition of 
disclosure. See 16 CFR 312.2.
    \20\ See P. Marcus, Remarks from COPPA's Exceptions to Parental 
Consent Panel at the Federal Trade Commission's Roundtable: 
Protecting Kids' Privacy Online 310 (June 2, 2010), available at 
http://www.ftc.gov/bcp/workshops/coppa/COPPARuleReview_Transcript.pdf.
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    The 2010 FRN sought comment on whether to change the 100% deletion 
standard, whether automated systems used to review and post child 
content could meet this standard, and whether

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the Commission had provided sufficient guidance on the deletion of 
personal information.\21\ In response, several commenters urged a new 
standard, arguing that the 100% deletion standard, while well-
intentioned, was an impediment to operators' implementation of 
sophisticated automated filtering technologies that may actually aid in 
the detection and removal of personal information.\22\
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    \21\ See 75 FR at 17090, Question 9.
    \22\ See Entertainment Software Association (``ESA'') (comment 
20, 2010 FRN), at 13-14; R. Newton (comment 46, 2010 FRN), at 4; 
Privo, Inc. (comment 50, 2010 FRN), at 5; B. Szoka (comment 59, 2010 
FRN), at 19; see also Wired Safety (comment 68, 2010 FRN), at 15.
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    In the 2011 NPRM, the Commission stated that the 100% deletion 
standard set an unrealistic hurdle to operators' implementation of 
automated filtering systems that could promote engaging and appropriate 
online content for children, while ensuring strong privacy protections 
by design. To address this, the Commission proposed replacing the 100% 
deletion standard with a ``reasonable measures'' standard. Under this 
approach, an operator would not be deemed to have collected personal 
information if it takes reasonable measures to delete all or virtually 
all personal information from a child's postings before they are made 
public, and also to delete such information from its records.''\23\
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    \23\ See 76 FR at 59808.
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    Although the Institute for Public Representation raised concerns 
about the effectiveness of automated filtering techniques,\24\ most 
comments were resoundingly in favor of the ``reasonable measures'' 
standard. For example, one commenter stated that the revised language 
would enable the use of automated procedures that could provide 
``increased consistency and more effective monitoring than human 
monitors,''\25\ while another noted that it would open the door to 
``cost-efficient and reliable means of monitoring children's 
communications.''\26\ Several commenters noted that the proposed 
reasonable measures standard would likely encourage the creation of 
more rich, interactive online content for children.\27\ Another 
commenter noted that the revised provision, by offering greater 
flexibility for technological solutions, should help minimize the 
burden of COPPA on children's free expression.\28\
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    \24\ See Institute for Public Representation (comment 71, 2011 
NPRM), at 19.
    \25\ See NCTA (comment 113, 2011 NPRM), at 8.
    \26\ DMA (comment 37, 2011 NPRM), at 7.
    \27\ See DMA id.; Institute for Public Representation (comment 
71, 2011 NPRM), at 3; kidSAFE Seal Program (comment 81, 2011 NPRM), 
at 5; NCTA (comment 113, 2011 NPRM), at 8; Toy Industry Association 
(comment 163, 2011 NPRM), at 8.
    \28\ See TechFreedom (comment 159, 2011 NPRM), at 6.
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    The Commission is persuaded that the 100% deletion standard should 
be replaced with a reasonable measures standard. The reasonable 
measures standard strikes the right balance in ensuring that operators 
have effective, comprehensive measures in place to prevent public 
online disclosure of children's personal information and ensure its 
deletion from their records, while also retaining the flexibility 
operators need to innovate and improve their mechanisms for detecting 
and deleting such information. Therefore, the final Rule amends 
paragraph (2) of the definition of collects or collection to adopt the 
reasonable measures standard proposed in the 2011 NPRM.
c. Collects or Collection, Paragraph (3)
    In the 2011 NPRM, the Commission proposed to modify paragraph (3) 
of the Rule's definition of collects or collection to clarify that it 
includes all means of passively collecting personal information from 
children online, irrespective of the technology used. The Commission 
sought to accomplish this by removing from the original definition the 
language ``or use of any identifying code linked to an individual, such 
as a cookie.''\29\
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    \29\ 76 FR at 59808.
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    The Commission received several comments supporting,\30\ and 
several comments opposing,\31\ this proposed change. Those opposing the 
change generally believed that this change somehow expanded the 
definition of personal information. As support for their argument, 
these commenters also referenced the Commission's proposal to include 
persistent identifiers within the definition of personal information.
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    \30\ Privacy Rights Clearinghouse indicated its belief that this 
change would give operators added incentive to notify parents of 
their information collection practices, particularly with regard to 
online tracking and behavioral advertising. See Privacy Rights 
Clearinghouse (comment 131, 2011 NPRM), at 2; see also Consumers 
Union (comment 29, 2011 NPRM), at 2; kidSAFE Seal Program (comment 
81, 2011 NPRM), at 6.
    \31\ See DMA (comment 37, 2011 NPRM), at 9-10; IAB (comment 73, 
2011 NPRM), at 12; NCTA (comment 113, 2011 NPRM), at 17-18; National 
Retail Federation (comment 114, 2011 NPRM), at 2-3; TechAmerica 
(comment 157, 2011 NPRM), at 5-6.
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    The Commission believes that paragraph (3), as proposed in the 2011 
NPRM, is sufficiently understandable. The paragraph does nothing to 
alter the fact that the Rule covers only the collection of personal 
information. Moreover, the final Rule's exception for the limited use 
of persistent identifiers to support internal operations--312.5(c)(7)--
clearly articulates the specific criteria under which an operator will 
be exempt from the Rule's notice and consent requirements in connection 
with the passive collection of a persistent identifier.\32\ 
Accordingly, the Commission adopts the definition of collects or 
collection as proposed in the 2011 NPRM.
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    \32\ See Part II.C.10.g., infra.
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2. Definition of Disclose or Disclosure
    In the 2011 NPRM, the Commission proposed making several minor 
modifications to Section 312.2 of the Rule's definition of disclosure, 
including broadening the title of the definition to disclose or 
disclosure to clarify that in every instance in which the Rule refers 
to instances where an operator ``disclose[s]'' information, the 
definition of disclosure shall apply.\33\ In addition, the Commission 
proposed moving the definitions of release of personal information and 
support for the internal operations of the Web site or online service 
contained within the definition of disclosure to make them stand-alone 
definitions within Section 312.2 of the Rule.\34\
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    \33\ See 2011 NPRM, 76 FR at 59809.
    \34\ The Commission intended this change to clarify what was 
meant by the terms release of personal information and support for 
the internal operations of the Web site or online service, where 
those terms are referenced elsewhere in the Rule and are not 
directly connected with the terms disclose or disclosure.
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    One commenter asked the Commission to modify paragraph (2) of the 
proposed definition by adding an opening clause linking it to the 
definition of collects or collection.\35\ While this commenter did not 
state its reasons for the proposed change, the Commission believes that 
the language of paragraph (2) is sufficiently clear so as not to 
warrant making the change suggested. Therefore, the Commission modifies 
the definition of disclosure or disclosure as proposed in the 2011 
NPRM.
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    \35\ See kidSAFE Seal Program (comment 81, 2011 NPRM), at 8 
(``[P]aragraph (b) under the definition of ``disclose or 
disclosure'' should have the following opening clause: Subject to 
paragraph (b) under the definition of ``collects or collection,'' 
making personal information collected by an operator from a child 
publicly available * * *.'').
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3. Definition of Online Contact Information
    Section 312.2 of the Rule defines online contact information as 
``an email address or any other substantially similar identifier that 
permits direct contact with a person online.'' The 2011 NPRM proposed 
clarifications to the definition to flag that the term broadly covers 
all identifiers that permit direct

[[Page 3975]]

contact with a person online and to ensure consistency between the 
definition of online contact information and the use of that term 
within the definition of personal information.\36\ The proposed revised 
definition identified commonly used online identifiers, including email 
addresses, instant messaging (``IM'') user identifiers, voice over 
Internet protocol (``VOIP'') identifiers, and video chat user 
identifiers, while also clarifying that the list of identifiers was 
non-exhaustive and would encompass other substantially similar 
identifiers that permit direct contact with a person online.\37\ The 
Commission received few comments addressing this proposed change.
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    \36\ The Rule's definition of personal information included the 
sub-category ``an email address or other online contact information, 
including but not limited to an instant messaging user identifier, 
or a screen name that reveals an individual's email address.'' The 
2011 NPRM proposed replacing that sub-category of personal 
information with online contact information.
    \37\ 76 FR at 59810.
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    One commenter opposed the modification, asserting that IM, VOIP, 
and video chat user identifiers do not function in the same way as 
email addresses. The commenter's rationale for this argument was that 
not all IM identifiers reveal the IM system in use, which information 
is needed to directly contact a user.\38\ The Commission does not find 
this argument persuasive. While an IM address may not reveal the IM 
program provider in every instance, it very often does. Moreover, 
several IM programs allow users of different messenger programs to 
communicate across different messaging platforms. Like email, instant 
messaging is a communications tool that allows people to communicate 
one-to-one or in groups B sometimes in a faster, more real-time fashion 
than through email. The Commission finds, therefore, that IM 
identifiers provide a potent means to contact a child directly.
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    \38\ See DMA (comment 37, 2011 NPRM), at 11.
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    Another commenter asked the Commission to expand the definition of 
online contact information to include mobile phone numbers. The 
commenter noted that, given the Rule's coverage of mobile apps and web-
based text messaging programs, operators would benefit greatly from 
collecting a parent's mobile phone number (instead of an email address) 
in order to initiate contact for notice and consent.\39\ The Commission 
recognizes that including mobile phone numbers within the definition of 
online contact information could provide operators with a useful tool 
for initiating the parental notice process through either SMS text or a 
phone call. It also recognizes that there may be advantages to parents 
for an operator to initiate contact via SMS text B among them, that 
parents generally have their mobile phones with them and that SMS text 
is simple and convenient.\40\ However, the statute did not contemplate 
mobile phone numbers as a form of online contact information, and the 
Commission therefore has determined not to include mobile phone numbers 
within the definition.\41\ Thus, the final Rule adopts the definition 
of online contact information as proposed in the 2012 SNPRM.
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    \39\ kidSAFE Seal Program (comment 81, 2011 NPRM), at 7. 
Acknowledging the Commission's position that cell phone numbers are 
outside of the statutory definition of online contact information, 
kidSAFE advocates for a statutory change, if needed, to enable 
mobile app operators, in particular, to reach parents using contact 
information ``relevant to their ecosystem.''
    \40\ At the same time, the Commission believes it may be 
impractical to expect children to correctly distinguish between 
mobile and land-line phones when asked for their parents' mobile 
numbers.
    \41\ Moreover, given that the final Rule's definition of online 
contact information encompasses a broad, non-exhaustive list of 
online identifiers, operators will not be unduly burdened by the 
Commission's determination that cell phone numbers are not online 
contact information.
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4. Definitions of Operator and Web Site or Online Service Directed to 
Children
    In the 2012 SNPRM, the Commission proposed modifying the 
definitions of both operator and Web site or online service directed to 
children to allocate and clarify the responsibilities under COPPA when 
independent entities or third parties, e.g., advertising networks or 
downloadable plug-ins, collect information from users through child-
directed sites and services. Under the proposed revisions, the child-
directed content provider would be strictly liable for personal 
information collected by third parties through its site. The Commission 
reasoned that, although the child-directed site or service may not own, 
control, or have access to the personal information collected, such 
information is collected on its behalf due to the benefits it receives 
by adding more attractive content, functionality, or advertising 
revenue. The Commission also noted that the primary-content provider is 
in the best position to know that its site or service is directed to 
children, and is appropriately positioned to give notice and obtain 
consent.\42\ By contrast, if the Commission failed to impose 
obligations on the content providers, there would be no incentive for 
child-directed content providers to police their sites or services, and 
personal information would be collected from young children, thereby 
undermining congressional intent. The Commission also proposed imputing 
the child-directed nature of the content site to the entity collecting 
the personal information only if that entity knew or had reason to know 
that it was collecting personal information through a child-directed 
site.\43\
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    \42\ 2012 SNPRM, 77 FR at 46644. The Commission acknowledged 
that this decision reversed a previous policy choice to place the 
burden of notice and consent entirely upon the information 
collection entity.
    \43\ In so doing, the Commission noted that it believed it could 
hold the information collection entity strictly liable for such 
collection because, when operating on child-directed properties, 
that portion of an otherwise general audience service could be 
deemed directed to children. 2012 SNPRM, 77 FR at 46644-46645.
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    Most of the comments opposed the Commission's proposed 
modifications. Industry comments challenged the Commission's statutory 
authority for both changes and the breadth of the language, and warned 
of the potential for adverse consequences. In essence, many industry 
comments argued that the Commission may not apply COPPA where 
independent third parties collect personal information through child-
directed sites,\44\ and that even if the Commission had some authority, 
exercising it would be impractical because of the structure of the 
``online ecosystem.''\45\ Many privacy and children's advocates agreed 
with the 2012 SNPRM proposal to hold child-directed content providers 
strictly liable, but some expressed concern about holding plug-ins and 
advertising networks to a lesser standard.\46\
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    \44\ See, e.g., Facebook (comment 33, 2012 SNPRM), at 3-4.
    \45\ See Microsoft (comment 66, 2012 SNPRM), at 6; IAB (comment 
49, 2012 SNPRM), at 5; DMA (comment 28, 2012 SNPRM), at 5.
    \46\ See, e.g., Institute for Public Representation (comment 52, 
2012 SNPRM), at 20; Common Sense Media (comment 20, 2012 SNPRM), at 
6.
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    For the reasons discussed below, the Commission, with some 
modifications to the proposed Rule language, will retain the strict 
liability standard for child-directed content providers that allow 
other online services to collect personal information through their 
sites. The Commission will deem a plug-in or other service to be a 
covered co-operator only where it has actual knowledge that it is 
collecting information through a child-directed site.
a. Strict Liability for Child-Directed Content Sites: Definition of 
Operator
    Implementing strict liability as described above requires modifying 
the current definition of operator. The Rule, which mirrors the 
statutory language, defines operator in pertinent part, as

[[Page 3976]]

``any person who operates a Web site located on the Internet or an 
online service and who collects or maintains personal information from 
or about the users of or visitors to such Web site or online service, 
or on whose behalf such information is collected or maintained, where 
such Web site or online service is operated for commercial purposes, 
including any person offering products or services for sale through 
that Web site or online service, involving commerce * * *'' \47\
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    \47\ 15 U.S.C. 6501(2). The Rule's definition of operator 
reflects the statutory language. See 16 CFR 312.2.
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    In the 2012 SNPRM, the Commission proposed adding a proviso to that 
definition stating that personal information is collected or maintained 
on behalf of an operator where it is collected in the interest of, as a 
representative of, or for the benefit of, the operator.
    Industry, particularly online content publishers, including app 
developers, criticized this proposed change.\48\ Industry comments 
argued that the phrase ``on whose behalf'' in the statute applies only 
to agents and service providers,\49\ and that the Commission lacks the 
authority to interpret the phrase more broadly to include any 
incidental benefit that results when two parties enter a commercial 
transaction.\50\ Many commenters pointed to an operator's post-
collection responsibilities under COPPA, e.g., mandated data security 
and affording parents deletion rights, as evidence that Congress 
intended to cover only those entities that control or have access to 
the personal information.\51\
---------------------------------------------------------------------------

    \48\ See, e.g., Application Developers Alliance (comment 5, 2012 
SNPRM), at 3-4; Association of Competitive Technology (comment 7, 
2012 SNPRM), at 4-5; IAB (comment 49, 2012 SNPRM), at 5-6; Online 
Publishers Association (comment 72, 2012 SNPRM), at 10-11; Magazine 
Publishers of America (comment 61, 2012 SNPRM), at 3-5; The Walt 
Disney Co. (comment 96, 2012 SNPRM), at 4-5; S. Weiner (comment 97, 
2012 SNPRM), at 1-2; WiredSafety (comment 98, 2012 SNPRM), at 3.
    \49\ See DMA (comment 28, 2012 SNPRM), at 12; Internet Commerce 
Coalition (comment 53, 2012 SNPRM), at 5; TechAmerica (comment 87, 
2012 SNPRM), at 2-3.
    \50\ See, e.g., Gibson, Dunn & Crutcher (comment 39, 2012 
SNPRM), at 7-9; Facebook (comment 33, 2012 SNPRM), at 6 (entities 
acting primarily for their own benefit not considered to be acting 
on behalf of another party).
    \51\ See, e.g., Business Software Alliance (comment 12, 2012 
SNPRM), at 2-4; Internet Commerce Coalition (comment 53, 2012 
SNPRM), at 5; see also, e.g., IAB (comment 49, 2012 SNPRM), at 5; 
DMA (comment 28, 2012 SNPRM), at 6; Online Publishers Association 
(comment 72, 2012 SNPRM), at 10-11; The Walt Disney Co. (comment 96, 
2012 SNPRM), at 3-5.
---------------------------------------------------------------------------

    Commenters also raised a number of policy objections. Many argued 
that child-directed properties, particularly small app developers, 
would face unreasonable compliance costs and that the proposed 
revisions might choke off their monetization opportunities,\52\ thus 
decreasing the incentive for developers to create engaging and 
educational content for children.\53\ They also argued that a strict 
liability standard is impractical given the current online ecosystem, 
which does not rely on close working relationships and communication 
between content providers and third parties that help monetize that 
content.\54\ Some commenters urged the Commission to consider a safe 
harbor for content providers that exercise some form of due diligence 
regarding the information collection practices of plug-ins present on 
their site.\55\
---------------------------------------------------------------------------

    \52\ See Center for Democracy & Technology (``CDT'') (comment 
15, 2012 SNPRM), at 4-5; DMA (comment 28, 2012 SNPRM), at 5; Google 
(comment 41, 2012, SNPRM), at 3-4; Lynette Mattke (comment 63, 2012 
SNPRM).
    \53\ See Google (comment 41, 2012 SNPRM), at 3; Application 
Developers Alliance (comment 5, 2012 SNPRM), at 5; Association for 
Competitive Technology (comment 6, 2012 SNPRM), at 5; The Walt 
Disney Co. (comment 96, 2012 SNPRM), at 4; ConnectSafely (comment 
21, 2012 SNPRM), at 2.
    \54\ See Application Developers Alliance (comment 5, 2012 
SNPRM), at 3; Online Publishers Association (comment 72, 2012 
SNPRM), at 11; The Walt Disney Co. (comment 96, 2012 SNPRM), at 4; 
DMA (comment 28, 2012 SNPRM), at 4.
    \55\ See, e.g., Online Publishers Association (comment 72, 2012 
SNPRM), at 11 (publisher should be entitled to rely on third party's 
representations about its information practices); The Walt Disney 
Co. (comment 96, 2012 SNPRM), at 5 (operator of a site directed to 
children should be permitted to rely on the representations made by 
third parties regarding their personal information collection 
practices, as long as the operator has undertaken reasonable efforts 
to limit any unauthorized data collection); Internet Commerce 
Coalition (comment 53, 2012 SNPRM), at 6 (the Commission should 
state that operators whose sites or services are targeted to 
children should bind third party operators whom they know are 
collecting personal information through their sites or services to 
comply with COPPA with regard to that information collection).
---------------------------------------------------------------------------

    Privacy organizations generally supported imposing strict liability 
on content providers. They agreed with the Commission's statement in 
the 2012 SNPRM that the first-party content provider is in a position 
to control which plug-ins and software downloads it integrates into its 
site and that it benefits by allowing information collection by such 
third parties.\56\ They also noted how unreasonable it would be for 
parents to try to decipher which entity might actually be collecting 
data through the child-directed property.\57\
---------------------------------------------------------------------------

    \56\ See Institute for Public Representation (comment 52, 2012 
SNPRM), at 18-19; Common Sense Media (comment 20, 2012 SNPRM), at 4-
6; EPIC (comment 31, 2012 SNPRM), at 5-6; Catholic Bishops (comment 
92, 2012 SNPRM), at 3; CDT (comment 15, 2012 SNPRM), at 3.
    \57\ See Institute for Public Representation (comment 52, 2012 
SNPRM), at 19; Common Sense Media (comment 20, 2012 SNPRM), at 5.
---------------------------------------------------------------------------

    Finally, many commenters expressed concern that the language 
describing ``on whose behalf'' reaches so broadly as to cover not only 
child-directed content sites, but also marketplace platforms such as 
Apple's iTunes App Store and Google's Android market (now Google Play) 
if they offered child-directed apps on their platforms.\58\ These 
commenters urged the Commission to revise the language of the Rule to 
exclude such platforms.
---------------------------------------------------------------------------

    \58\ See CDT (comment 15, 2012 SNPRM), at 5; Apple (comment 4, 
2012 SNPRM), at 3-4; Assert ID (comment 6, 2012 SNPRM), at 5.
---------------------------------------------------------------------------

    After considering the comments, the Commission retains a strict 
liability standard for child-directed sites and services that allow 
other online services to collect personal information through their 
sites.\59\ The Commission disagrees with the views of commenters that 
this is contrary to Congressional intent or the Commission's statutory 
authority. The Commission does not believe Congress intended the 
loophole advocated by many in industry: Personal information being 
collected from children through child-directed properties with no one 
responsible for such collection.
---------------------------------------------------------------------------

    \59\ Although this issue is framed in terms of child-directed 
content providers integrating plug-ins or other online services into 
their sites because that is by far the most likely scenario, the 
same strict liability standard would apply to a general audience 
content provider that allows a plug-in to collect personal 
information from a specific user when the provider has actual 
knowledge the user is a child.
---------------------------------------------------------------------------

    Nor is the Commission persuaded by comments arguing that the phrase 
``on whose behalf'' must be read extremely narrowly, encompassing only 
an agency relationship. Case law supports a broader interpretation of 
that phrase.\60\ Even some commenters opposed to the Commission's 
interpretation have

[[Page 3977]]

acknowledged that the Commission's proposal is based on ``an accurate 
recognition that online content monetization is accomplished through a 
complex web of inter-related activities by many parties,'' and have 
noted that to act on behalf of another is to do what that person would 
ordinarily do herself if she could.\61\ That appears to be precisely 
the reason many first-party content providers integrate these services. 
As one commenter pointed out, content providers ``have chosen to devote 
their resources to develop great content, and to let partners help them 
monetize that content. In part, these app developers and publishers 
have made this choice because collecting and handling children's data 
internally would require them to take on liability risk and spend 
compliance resources that they do not have.'' \62\ Moreover, content-
providing sites and services often outsource the monetization of those 
sites ``to partners'' because they do not have the desire to handle it 
themselves.\63\
---------------------------------------------------------------------------

    \60\ National Organization for Marriage v. Daluz, 654 F.3d 115, 
121 (1st Cir. 2011) (statute requiring expenditure reports by 
independent PAC to the treasurer of the candidate ``on whose 
behalf'' the expenditure was made meant to the candidate who stands 
to benefit from the independent expenditure's advocacy); accord 
American Postal Workers Union v. United States Postal Serv., 595 F. 
Supp 1352 (D.D.C. 1984) (Postal Union's activities held to be ``on 
behalf of'' a political campaign where evidence showed union was 
highly politicized, with goal of electing a particular candidate); 
Sedwick Claims Mgmt. Servs. v. Barrett Business Servs., Inc., 2007 
WL 1053303 (D. Or. 2007) (noting that 9th Circuit has interpreted 
the phrase ``on behalf of'' to include both ``to the benefit of'' 
and in a representative capacity); United States v. Dish Network, 
LLC, 2010 U.S. Dist. LEXIS 8957, 10 (C.D. Ill. Feb. 3, 2010) 
(reiterating the court's previous opinion that the plain meaning of 
the phrases ``on whose behalf'' or ``on behalf of'' is an act by a 
representative of, or an act for the benefit of, another).
    \61\ Application Developers Alliance (comment 5, 2012 SNPRM), at 
2; see also Gibson, Dunn & Crutcher (comment 39, 2012 SNPRM), at 7.
    \62\ Application Developers Alliance (comment 5, 2012 SNPRM), at 
4.
    \63\ Id.; see also Association for Competitive Technology 
(comment 7, 2012 SNPRM), at 5; see generally DMA (comment 28, 2012 
SNPRM), at 5; Facebook (comment 33, 2012 SNPRM), at 3; Online 
Publishers Association (comment 72, 2012 SNPRM), at 11.
---------------------------------------------------------------------------

    In many cases, child-directed properties integrate plug-ins to 
enhance the functionality or content of their properties or gain 
greater publicity through social media in an effort to drive more 
traffic to their sites and services. Child-directed properties also may 
obtain direct compensation or increased revenue from advertising 
networks or other plug-ins. These benefits to child-directed properties 
are not merely incidental; as the comments point out, the benefits may 
be crucial to their continued viability.\64\
---------------------------------------------------------------------------

    \64\ Id.
---------------------------------------------------------------------------

    The Commission recognizes the potential burden that strict 
liability places on child-directed content providers, particularly 
small app developers. The Commission also appreciates the potential for 
discouraging dynamic child-directed content. Nevertheless, when it 
enacted COPPA, Congress imposed absolute requirements on child-directed 
sites and services regarding restrictions on the collection of personal 
information; those requirements cannot be avoided through outsourcing 
offerings to other operators in the online ecosystem. The Commission 
believes that the potential burden on child-directed sites discussed by 
the commenters in response to the 2012 SNPRM will be eased by the more 
limited definition of persistent identifiers, the more expansive 
definition of support for internal operations adopted in the Final 
Rule, and the newly-created exception to the Rule's notice and parental 
consent requirements that applies when an operator collects only a 
persistent identifier and only to support the operator's internal 
operations.\65\
---------------------------------------------------------------------------

    \65\ See Part II.A.5.b., infra (discussion of persistent 
identifiers and support of internal operations).
---------------------------------------------------------------------------

    The Commission considered including the ``due-diligence'' safe 
harbor for child-directed content providers that many of the comments 
proposed.\66\ Nevertheless, as many other comments pointed out, it 
cannot be the responsibility of parents to try to pierce the complex 
infrastructure of entities that may be collecting their children's 
personal information through any one site.\67\ For child-directed 
properties, one entity, at least, must be strictly responsible for 
providing parents notice and obtaining consent when personal 
information is collected through that site. The Commission believes 
that the primary-content site or service is in the best position to 
know which plug-ins it integrates into its site, and is also in the 
best position to give notice and obtain consent from parents.\68\ 
Although the Commission, in applying its prosecutorial discretion, will 
consider the level of due diligence a primary-content site exercises, 
the Commission will not provide a safe harbor from liability.
---------------------------------------------------------------------------

    \66\ The type of due diligence advocated ranged from essentially 
relying on a plug-in or advertising network's privacy policy to 
requiring an affirmative contract. See, e.g., The Walt Disney Co. 
(comment 96, 2012 SNPRM), at 5 (operator should be able to rely on 
third party's representations about its information collection 
practices, if operator makes reasonable efforts to limit 
unauthorized data collection); Gibson, Dunn & Crutcher (comment 39, 
2012 SNPRM), at 23-24 (provide a safe harbor for operators that 
certify they do not receive, own, or control any personal 
information collected by third parties; alternatively, grant a safe 
harbor for operators that also certify they do not receive a 
specific benefit from the collection, or that obtain third party's 
certification of COPPA compliance); Internet Commerce Coalition 
(comment 53, 2012 SNPRM), at 6-7 (provide a safe harbor for 
operators whose policies prohibit third party collection on their 
sites).
    \67\ See Common Sense Media (comment 20, 2012 SNPRM), at 4-5; 
EPIC (comment 31, 2012 SNPRM), at 6; Institute for Public 
Representation (comment 52, 2012 SNPRM), at 18-19.
    \68\ Some commenters, although not conceding the need to impose 
strict liability on any party, noted that if the burden needed to 
fall on either the primary content provider or the plug-in, it was 
better to place it on the party that controlled the child-directed 
nature of the content. See, e.g., CTIA (comment 24, 2012 SNPRM), at 
8-9; CDT (comment 15, 2012 SNPRM), at 4-5. Not surprisingly, 
industry members primarily in the business of providing content did 
not share this view. See, e.g., Association for Competitive 
Technology (comment 7, 2012 SNPRM), at 4-5; Business Software 
Alliance (comment 12, 2012 SNPRM), at 2-4; Entertainment Software 
Association (comment 32, 2102 SNPRM), at 9; Online Publishers 
Association (comment 72, 2012 SNPRM), at 10-11; The Walt Disney Co. 
(comment 96, 2012 SNPRM), at 6.
---------------------------------------------------------------------------

    When it issued the 2012 SNPRM, the Commission never intended the 
language describing ``on whose behalf'' to encompass platforms, such as 
Google Play or the App Store, when such stores merely offer the public 
access to someone else's child-directed content. In these instances, 
the Commission meant the language to cover only those entities that 
designed and controlled the content, i.e., the app developer or site 
owner. Accordingly, the Commission has revised the language proposed in 
the 2012 SNPRM to clarify that personal information will be deemed to 
be collected on behalf of an operator where it benefits by allowing 
another person to collect personal information directly from users of 
such operator's site or service, thereby limiting the provision's 
coverage to operators that design or control the child-directed 
content.\69\ Accordingly, the Final Rule shall state that personal 
information is collected or maintained on behalf of an operator when it 
is collected or maintained by an agent or service provider of the 
operator; or the operator benefits by allowing another person to 
collect personal information directly from users of such operator's Web 
site or online service.
---------------------------------------------------------------------------

    \69\ This clarification to the term ``on behalf of'' is intended 
only to address platforms in instances where they function as an 
conduit to someone else's content. Platforms may well wear multiple 
hats and are still responsible for complying with COPPA if they 
themselves collect personal information directly from children.
---------------------------------------------------------------------------

b. Operators Collecting Personal Information Through Child-Directed 
Sites and Online Services: Moving to an Actual Knowledge Standard
    In the 2012 SNPRM, the Commission proposed holding responsible as a 
co-operator any site or online service that ``knows or has reason to 
know'' it is collecting personal information through a host Web site or 
online service directed to children. Many commenters criticized this 
standard. Industry comments contended that such a standard is contrary 
to the statutory mandate that general audience services be liable only 
if they have actual knowledge they are collecting information from a 
child.\70\ They further

[[Page 3978]]

argued that the standard is vague because it is impossible to determine 
what type of notification would provide a ``reason to know.'' Thus, the 
commenters argued that the standard triggers a duty to inquire.\71\ In 
addition, commenters stated that even after inquiring, it might be 
impossible to determine which sites are truly directed to children 
(particularly in light of the Commission's revised definition of Web 
site directed to children to include those sites that are likely to 
attract a disproportionate percentage of children under 13).\72\ 
Conversely, many privacy advocates believed it is necessary to impose 
some duty of inquiry, or even strict liability, on the entity 
collecting the personal information.\73\
---------------------------------------------------------------------------

    \70\ See Business Software Alliance (comment 12, 2012 SNPRM), at 
4-5; Digital Advertising Alliance (comment 27, 2012 SNPRM), at 2; 
Google (comment 41, 2012 SNPRM), at 4; Internet Commerce Coalition 
(comment 53, 2012 SNPRM), at 7; Magazine Publishers of America 
(comment 61, 2012 SNPRM), at 8; Toy Industry Association (comment 
89, 2012 SNPRM), at 10-11; see also ACLU (comment 3, 2012 SNPRM), at 
2-3; TechAmerica (comment 87, 2012 SNPRM), at 3.
    \71\ See CDT (comment 15, 2012 SNPRM), at 2; CTIA (comment 24, 
2012 SNPRM), at 10; Entertainment Software Association (comment 32, 
2012 SNPRM), at 9; Marketing Research Association (comment 62, 2012 
SNPRM), at 2; Tangman (comment 85, 2012 SNPRM).
    \72\ See DMA (comment 28, 2012 SNPRM), at 9; Magazine Publishers 
of America (comment 61, 2012 SNPRM), at 8; Menessec (comment 65, 
2012 SNPRM); Privo (comment 76, 2012 SNPRM), at 8.
    \73\ See Common Sense Media (comment 20, 2012 SNPRM), at 6; 
Institute for Public Representation (comment 52, 2012 SNPRM), at 20-
22.
---------------------------------------------------------------------------

    After considering the comments, the Commission has decided that 
while it is appropriate to hold an entity liable under COPPA for 
collecting personal information on Web sites or online services 
directed to children, it is reasonable to hold such entity liable only 
where it has actual knowledge that it is collecting personal 
information directly from users of a child-directed site or service. In 
striking this balance by moving to an actual knowledge standard, the 
Commission recognizes that this is still contrary to the position 
advocated by many industry comments: That a plug-in or advertising 
network that collects personal information from users of both general 
audience and child-directed sites must be treated monolithically as a 
general audience service, liable only if it has actual knowledge that 
it is collecting personal information from a specific child.\74\ 
However, the COPPA statute also defines Web site or online service 
directed to children to include ``that portion of a commercial Web site 
or online service that is targeted to children.'' Where an operator of 
an otherwise general audience site or online service has actual 
knowledge it is collecting personal information directly from users of 
a child-directed site, and continues to collect that information, then, 
for purposes of the statute, it has effectively adopted that child-
directed content as its own and that portion of its service may 
appropriately be deemed to be directed to children.\75\
---------------------------------------------------------------------------

    \74\ See Digital Advertising Alliance (comment 27, 2012 SNPRM), 
at 2; DMA (comment 28, 2012 SNPRM), at 8-9; Entertainment Software 
Association (comment 32, 2012 SNPRM), at 13-14.
    \75\ Similarly, when a behavioral advertising network offers 
age-based advertising segments that target children under 13, that 
portion of its service becomes an online service directed to 
children. Contra DMA (comment 28, 2012 SNPRM), at 12. The Commission 
also believes that narrowing the definition of persistent 
identifiers and further revisions to the definition of Web site or 
online service directed to children ease (although not entirely 
eliminate) many of the concerns expressed in industry comments. See, 
e.g., CDT (comment 15, 2012 SNPRM), at 3; Digital Advertising 
Alliance (comment 27, 2012 SNPRM), at 2; Entertainment Software 
Association (comment 32, 2012 SNPRM), at 14 (combination of reason 
to know standard and expanded definition of persistent identifiers 
creates an unworkable result).
---------------------------------------------------------------------------

    Commenters urged that, whatever standard the Commission ultimately 
adopts, it provide guidance as to when a plug-in or advertising network 
would be deemed to have knowledge that it is collecting information 
through a child-directed site or service.\76\ Knowledge, by its very 
nature, is a highly fact-specific inquiry. The Commission believes that 
the actual knowledge standard it is adopting will likely be met in most 
cases when: (1) A child-directed content provider (who will be strictly 
liable for any collection) directly communicates the child-directed 
nature of its content to the other online service; or (2) a 
representative of the online service recognizes the child-directed 
nature of the content. The Commission does not rule out that an 
accumulation of other facts would be sufficient to establish actual 
knowledge, but those facts would need to be analyzed carefully on a 
case-by-case basis.
---------------------------------------------------------------------------

    \76\ See Microsoft (comment 66, 2012 SNPRM), at 2; TRUSTe 
(comment 90, 2012 SNPRM), at 4; see also Association for Competitive 
Technology (comment 7, 2012 SNPRM), at 3-4; Google (comment 41, 2012 
SNPRM), at 4; DMA (comment 28, 2012 SNPRM), at 7; Viacom (comment 
95, 2012 SNPRM), at 8-9.
---------------------------------------------------------------------------

5. Definition of Personal Information
a. Screen or User Names
    The Rule defines personal information as including ``a screen name 
that reveals an individual's email address.'' \77\ In the 2011 NPRM, 
the Commission proposed to modify this definition to include ``a screen 
or user name where such screen or user name is used for functions other 
than or in addition to support for the internal operations of the Web 
site or online service.'' \78\ The Commission intended this change to 
address scenarios in which a screen or user name could be used by a 
child as a single credential to access multiple online properties, 
thereby permitting him or her to be directly contacted online, 
regardless of whether the screen or user name contained an email 
address.\79\
---------------------------------------------------------------------------

    \77\ See 16 CFR 312.2 (paragraph (n), definition of personal 
information).
    \78\ 2011 NPRM, 76 FR at 59810.
    \79\ Id.
---------------------------------------------------------------------------

    Some commenters expressed concern that the Commission's screen-name 
proposal would unnecessarily inhibit functions that are important to 
the operation of child-directed Web sites and online services.\80\ In 
response to this concern, the 2012 SNPRM proposed covering screen names 
as personal information only in those instances in which a screen or 
user name rises to the level of online contact information. In such 
cases, the Commission reasoned, a screen or user name functions much 
like an email address, an instant messaging identifier, or ``any other 
substantially similar identifier that permits direct contact with a 
person online.'' \81\
---------------------------------------------------------------------------

    \80\ See DMA (comment 37, 2011 NPRM), at 15-16; ESA (comment 47, 
2011 NPRM), at 9; NCTA (comment 113, 2011 NPRM), at 12; Scholastic 
(comment 144, 2011 NPRM), at 12; A. Thierer (comment 162, 2011 
NPRM), at 6; TRUSTe (comment 164, 2011 NPRM), at 3; The Walt Disney 
Co. (comment 170, 2011 NPRM), at 21.
    \81\ See 2011 NPRM, 76 FR at 59810 (proposed definition of 
online contact information).
---------------------------------------------------------------------------

    The Commission received a number of comments in support of this 
change from industry associations and advocacy groups.\82\ Commenters 
recognized the change as providing operators with the flexibility to 
use screen or user names both for internal administrative purposes and 
across affiliated sites, services, or platforms without requiring prior 
parental notification or verifiable parental consent.\83\
---------------------------------------------------------------------------

    \82\ See Common Sense Media (comment 20, 2012 SNPRM), at 7; 
Information Technology Industry Council (comment 51, 2012 SNPRM), at 
2; Marketing Research Association (comment 62, 2012 SNPRM), at 3; 
Promotion Marketing Association (comment 77, 2012 SNPRM), at 8; 
TechAmerica (comment 87, 2012 SNPRM), at 5-6.
    \83\ See, e.g., Promotion Marketing Association, id.
---------------------------------------------------------------------------

    A number of commenters, however, despite clear language otherwise 
in the 2012 SNPRM, continued to express concern that the Commission's 
proposed revision would limit operators' use of anonymized screen names 
in place of children's real names in filtered chat, moderated 
interactive forums, or as log-in credentials providing users with 
seamless access to content across multiple platforms and devices.\84\ 
Some of these commenters

[[Page 3979]]

urged the Commission to refine the definition further, for example, by 
explicitly recognizing that the use of screen names for activities such 
as moderated chat will not be deemed as permitting ``direct contact'' 
with a child online and therefore will not require an operator using 
anonymous screen names to notify parents or obtain their consent.\85\ 
Others suggested a return to the Commission's original definition of 
screen or user names, i.e., only those that reveal an individual's 
online contact information (as newly defined).\86\ Yet others hoped to 
see the Commission carve out from the definition of screen or user name 
uses to support an operator's internal operations (such as using screen 
or user names to enable moderated or filtered chat and multiplayer game 
modes).\87\
---------------------------------------------------------------------------

    \84\ See DMA (comment 28, 2012 SNPRM), at 16; ESA (comment 32, 
2012 SNPRM), at 5; kidSAFE Seal Program (comment 56, 2012 SNPRM), at 
5; NCTA (comment 69, 2012 SNPRM), at 4-5; Online Publishers 
Association (comment 72, 2012 SNPRM), at 12; Toy Industry 
Association (comment 89, 2012 SNPRM), at 13; TRUSTe (comment 90, 
2012 SNPRM), at 5-6.
    \85\ See Online Publishers Association (comment 72, 2012 SNPRM), 
at 12; TRUSTe TRUSTe (comment 90, 2012 SNPRM), at 5-6.
    \86\ See kidSAFE Seal Program (comment 56, 2012 SNPRM), at 5.
    \87\ See ESA (comment 32, 2012 SNPRM), at 5.
---------------------------------------------------------------------------

    The Commission sees no need to qualify further the proposed 
description of screen or user name. The description identifies 
precisely the form of direct, private, user-to-user contact the 
Commission intends the Rule to cover--i.e., ``online contact [that] can 
now be achieved via several methods besides electronic mail.'' \88\ The 
Commission believes the description permits operators to use anonymous 
screen and user names in place of individually identifiable 
information, including use for content personalization, filtered chat, 
for public display on a Web site or online service, or for operator-to-
user communication via the screen or user name. Moreover, the 
definition does not reach single log-in identifiers that permit 
children to transition between devices or access related properties 
across multiple platforms. For these reasons, the Commission modifies 
the definition of personal information, as proposed in the 2012 SNPRM, 
to include ``a screen or user name where it functions in the same 
manner as online contact information, as defined in this Section.''
---------------------------------------------------------------------------

    \88\ See Common Sense Media (comment 20, 2012 SNPRM), at 7.
---------------------------------------------------------------------------

    b. Persistent Identifiers and Support for Internal Operations
    Persistent identifiers have long been covered by the COPPA Rule, 
but only where they are associated with individually identifiable 
information.\89\ In the 2011 NPRM, and again in the 2012 SNPRM, the 
Commission proposed broader Rule coverage of persistent identifiers.
---------------------------------------------------------------------------

    \89\ See 16 CFR 312.2 of the existing Rule (paragraph (f), 
definition of personal information).
---------------------------------------------------------------------------

    First, in the 2011 NPRM, the Commission proposed covering 
persistent identifiers in two scenarios--(1) where they are used for 
functions other than or in addition to support for the internal 
operations of the Web site or online service, and (2) where they link 
the activities of a child across different Web sites or online 
services.\90\ After receiving numerous comments on the proposed 
inclusion of persistent identifiers within the definition of personal 
information,\91\ the Commission refined its proposal in the 2012 SNPRM.
---------------------------------------------------------------------------

    \90\ See 2011 NPRM, 76 FR at 59812 (proposed definition of 
personal information, paragraphs (g) and (h)).
    \91\ Those comments are discussed in the 2012 SNPRM, 77 FR at 
46647.
---------------------------------------------------------------------------

    In the Commission's refined proposal in the 2012 SNPRM, the 
definition of personal information would include a persistent 
identifier ``that can be used to recognize a user over time, or across 
different Web sites or online services, where such persistent 
identifier is used for functions other than or in addition to support 
for the internal operations of the Web site or online service.'' \92\ 
The Commission also proposed to set forth with greater specificity the 
types of permissible activities that would constitute support for 
internal operations.\93\ The proposed revision to this latter 
definition was intended to accomplish three goals: (1) To incorporate 
into the Rule text many of the types of activities--user 
authentication, maintaining user preferences, serving contextual 
advertisements,\94\ and protecting against fraud or theft--that the 
Commission initially discussed as permissible in the 2011 NPRM; (2) to 
specifically permit the collection of persistent identifiers for 
functions related to site maintenance and analysis, and to perform 
network communications that many commenters viewed as crucial to their 
ongoing operations;\95\ and (3) to make clear that none of the 
information collected may be used or disclosed to contact a specific 
individual, including through the use of behavioral advertising.\96\
---------------------------------------------------------------------------

    \92\ Id.
    \93\ The proposed definition of support for internal operations 
was published at 77 FR 46648.
    \94\ Contextual advertising is ``the delivery of advertisements 
based upon a consumer's current visit to a Web page or a single 
search query, without the collection and retention of data about the 
consumer's online activities over time.'' See Preliminary FTC Staff 
Report, ``Protecting Consumer Privacy in an Era of Rapid Change: A 
Proposed Framework for Businesses and Policymakers,'' (Dec. 2010), 
at 55 n.134, available at http://ftc.gov/os/2010/12/101201privacyreport.pdf. Such advertising is more transparent and 
presents fewer privacy concerns as compared to the aggregation and 
use of data across sites and over time for marketing purposes. See 
id.
    \95\ For example, the term ``personalize the content on the Web 
site or online service'' was intended to permit operators to 
maintain user-driven preferences, such as game scores, or character 
choices in virtual worlds.
    \96\ Id.
---------------------------------------------------------------------------

    Most of the commenters who responded to the 2012 SNPRM opposed the 
Commission's refinement. Many continued to argue, as they had done in 
response to the 2011 NPRM, that because persistent identifiers only 
permit contact with a device, not a specific individual, the Commission 
was exceeding its statutory authority by defining them as personal 
information.\97\ Others argued strenuously for the benefits to 
children, parents, operators, and commerce of collecting anonymous 
information on, and delivering advertisements to, unknown or unnamed 
users.\98\ Some commenters maintained that, to comply with COPPA's 
notice and consent requirements in the context of persistent 
identifiers, sites would be forced to collect more personal information 
on their users, contrary to COPPA's goals of data minimization.\99\
---------------------------------------------------------------------------

    \97\ 15 U.S.C. 6501(8)(F) defines personal information to 
include ``any other identifier that the Commission determines 
permits the physical or online contacting of a specific 
individual.'' See, e.g., Gibson Dunn & Crutcher (comment 39, 2012 
SNPRM), at 20 (``This expansion of the definition of `personal 
information' is inconsistent with the text of COPPA, which limits 
`personal information' to categories of information that by 
themselves can be used to identify and contact a specific 
individual. Every category of information that COPPA enumerates--
name, physical address, email address, telephone number, and Social 
Security number--as well as the catch-all for `any other identifier 
that the Commission determines permits the physical or online 
contacting of a specific individual,' 15 U.S.C. Sec.  6501(8)(A)-
(F)--is information that makes it possible to identify and contact a 
specific individual''); see also Business Software Alliance (comment 
12, 2012 SNPRM), at 5-6; CTIA (comment 24, 2012 SNPRM), at 14-17; 
Chappell (comment 18, 2012 SNPRM), at 1; DMA (comment 28, 2012 
SNPRM), at 10; Facebook (comment 33, 2012 SNPRM), at 9; Information 
Technology Industry Council (comment 51, 2012 SNPRM), at 2; Internet 
Commerce Coalition (comment 53, 2012 SNPRM), at 11-13; Microsoft 
(comment 66, 2012 SNPRM), at 3; NetChoice (comment 70, 2012 SNPRM), 
at 7; TechFreedom (comment 88, 2012 SNPRM), at 5-6.
    \98\ See Application Developers Alliance (comment 5, 2012 
SNPRM), at 6; Business Software Alliance (comment 12, 2012 SNPRM), 
at 6); Information Technology and Innovation Foundation (comment 50, 
2012 SNPRM), at 6-7; NetChoice (comment 70, 2012 SNPRM), at 6.
    \99\ Facebook (comment 33, 2012 SNPRM), at 9-10; Google (comment 
41, 2012 SNPRM), at 5; J. Holmes (comment 47, 2012 SNPRM).
---------------------------------------------------------------------------

    Because the proposed definition of persistent identifiers ran hand-
in-hand with the proposed carve-out for

[[Page 3980]]

permissible activities, most commenters also opined on the proposed 
scope of the definition of support for internal operations.\100\ 
Unsurprisingly, these commenters urged the Commission to broaden the 
definition either to make the list of permissible activities non-
exhaustive,\101\ or to clarify that activities such as ensuring legal 
and regulatory compliance, intellectual property protection, payment 
and delivery functions, spam protection, statistical reporting, 
optimization, frequency capping, de-bugging, market research, and 
advertising and marketing more generally would not require parental 
notification and consent on COPPA-covered sites or services.\102\ Other 
commenters expressed confusion about which entities operating on or 
through a property could take advantage of the support for internal 
operations exemption.\103\ Children's advocacy groups, by contrast, 
expressed fear that the proposed definition was already ``so broad that 
it could exempt the collection of many persistent identifiers used to 
facilitate targeted marketing.''\104\
---------------------------------------------------------------------------

    \100\ Association for Competitive Technology (comment 7, 2012 
SNPRM), at 5; Business Software Alliance (comment 12, 2012 SNPRM), 
at 6-7; CTIA (comment 24, 2012 SNPRM), at 17-18; DMA (comment 28, 
2012 SNPRM), at 10-12; Internet Commerce Coalition (comment 53, 2012 
SNPRM), at 12; Microsoft (comment 66, 2012 SNPRM), at 3-5; NetChoice 
(comment 70, 2012 SNPRM), at 8-9.
    \101\ See DMA (comment 28, 2012 SNPRM), at 11 (warning that an 
exhaustive list is likely to have unintended consequences if 
companies are not afforded flexibility as technologies evolve); 
Digital Advertising Alliance (comment 27, 2012 SNPRM), at 3; 
Internet Commerce Coalition (comment 53, 2012 SNPRM), at 3-4, 12 
(``[T]he definition of `support for the internal operations' of a 
Web site is too narrow. * * * This list of `exempt' collections is 
incomplete and risks quickly becoming outmoded.''); Magazine 
Publishers of America (comment 61, 2012 SNPRM), at 11; Online 
Publishers Association (comment 72, 2012 SNPRM), at 8; Promotion 
Marketing Association (comment 77, 2012 SNPRM), at 7; Computer and 
Communications Industry Association (comment 27, 2011 NPRM), at 4 
(the exceptions are narrow and ``immobile short of another 
rulemaking'').
    \102\ See, e.g., Association for Competitive Technology (comment 
7, 2012 SNPRM), at 5; IAB (comment 49, 2012 SNPRM), at 4; 
TechFreedom (comment 88, 2012 SNPRM), at 11; Toy Industry 
Association (comment 89, 2012 SNPRM), at 15; Viacom Inc. (comment 
95, 2012 SNPRM), at 13.
    \103\ CDT (comment 15, 2012 SNPRM), at 6-7; Google (comment 41, 
2012 SNPRM), at 5; Toy Industry Association (comment 89, 2012 
SNPRM), at 14.
    \104\ Institute for Public Representation (comment 52, 2012 
SNPRM), at 13.
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    Several commenters supported the Commission's premise that the 
collection of certain persistent identifiers permits the physical or 
online contacting of a specific individual, but asked the Commission to 
take a different tack to regulating such identifiers. Rather than cover 
all persistent identifiers and then carve out permissible uses, these 
commenters suggested a simpler approach: the Commission should apply 
the Rule only to those persistent identifiers used for the purposes of 
contacting a specific child, including through online behavioral 
advertising.\105\
---------------------------------------------------------------------------

    \105\ See CDT (comment 15, 2012 SNPRM), at 6 (``We do, however, 
agree with the Commission that behavioral targeting of children 
using unique identifiers should trigger COPPA compliance 
obligations''); Internet Commerce Coalition (comment 53, 2012 
SNPRM), at 12; see also AT&T (comment 8, 2011 NPRM), at 7; Future of 
Privacy Forum (comment 55, 2011 NPRM), at 2; WiredTrust (comment 
177, 2011 NPRM), at 9; Visa Inc. (comment 168, 2011 NPRM), at 2.
---------------------------------------------------------------------------

    The Commission continues to believe that persistent identifiers 
permit the online contacting of a specific individual. As the 
Commission stated in the 2011 NPRM, it is not persuaded by arguments 
that persistent identifiers only permit the contacting of a 
device.\106\ This interpretation ignores the reality that, at any given 
moment, a specific individual is using that device. Indeed, the whole 
premise underlying behavioral advertising is to serve an advertisement 
based on the perceived preferences of the individual user.\107\
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    \106\ See 2011 NPRM, 76 FR at 59811.
    \107\ See J. Bowman, ``Real-time Bidding--How It Works and How 
To Use It,'' Warc Exclusive (Feb. 2011), available at http://www.improvedigital.com/en/wp-content/uploads/2011/09/Warc-RTB-Feb11.pdf (``With real-time bidding, advertisers can decide to put a 
specific ad in front of a specific individual web user on a given 
site, bid for that impression and--if they win the bid--serve the 
ad, all in the time it takes for a page to load on the target 
consumer's computer.''); L. Fisher, ``eMarketer's Guide to the 
Digital Advertising Ecosystem: Mapping the Display Advertising 
Purchase Paths and Ad Serving Process'' (Oct. 2012), available at 
http://www.emarketer.com/Corporate/reports (media buyers can deliver 
personalized, impression-by-impression, ads based on what is known 
about individual viewer attributes, behaviors, and site context).
---------------------------------------------------------------------------

    Nor is the Commission swayed by arguments noting that multiple 
individuals could be using the same device. Multiple people often share 
the same phone number, the same home address, and the same email 
address, yet Congress still classified these, standing alone, as 
``individually identifiable information about an individual.'' \108\ 
For these reasons, and the reasons stated in the 2011 NPRM, the 
Commission will retain persistent identifiers within the definition of 
personal information.
---------------------------------------------------------------------------

    \108\ 15 U.S.C. 6501(8).
---------------------------------------------------------------------------

    However, the Commission recognizes that persistent identifiers are 
also used for a host of functions that have little or nothing to do 
with contacting a specific individual, and that these uses are 
fundamental to the smooth functioning of the Internet, the quality of 
the site or service, and the individual user's experience. It was for 
these reasons that the Commission proposed to expand the definition of 
support for internal operations in the 2012 SNPRM.
    The Commission has determined to retain the approach suggested in 
the 2011 NPRM and refined in the 2012 SNPRM, with certain revisions. 
First, the final Rule modifies the proposed definition of persistent 
identifier to cover ``a persistent identifier that can be used to 
recognize a user over time and across different Web sites or online 
services.'' This modification takes into account concerns several 
commenters raised that using a persistent identifier within a site or 
service over time serves an important function in conducting site 
performance assessments and supporting intra-site preferences.\109\ 
However, in this context, not every Web site or service with a 
tangential relationship will be exempt--the term ``different'' means 
either sites or services that are unrelated to each other, or sites or 
services where the affiliate relationship is not clear to the 
user.\110\
---------------------------------------------------------------------------

    \109\ See Toy Industry Association (comment 89, 2012 SNPRM), at 
14; see also ESA (comment 32, 2012 SNPRM), at 8; NetChoice (comment 
70, 2012 SNPRM), at 7-8.
    \110\ This interpretation of affiliate relationships is 
consistent with prior Commission articulations. See FTC Report, 
Protecting Consumer Privacy in an Era of Rapid Change (March 2012), 
at 41-42, available at http://ftc.gov/os/2012/03/120326privacyreport.pdf (``The Commission maintains the view that 
affiliates are third parties, and a consumer choice mechanism is 
necessary unless the affiliate relationship is clear to 
consumers''); see also kidSAFE Seal Program (comment 56, 2012 
SNPRM), at 5 (asking the Commission to clarify what is meant by the 
phrase `` `across different Web sites or online services' in the 
context of persistent identifiers'').
---------------------------------------------------------------------------

    Second, the Commission has determined that the carve-out for use of 
a persistent identifier to provide support for the internal operations 
of a Web site or online service is better articulated as a separate 
exception to the Rule's requirements. For this reason, it has amended 
Section 312.5(c) (``Exceptions to prior parental consent'') to add a 
new exception providing that where an operator collects only a 
persistent identifier for the sole purpose of providing support for its 
internal operations, the operator will have no notice or consent 
obligations under the Rule. This is a change in organization, rather 
than a substantive change, from the Commission's earlier proposals.
    In addition, in response to the arguments made in a number of 
comments, the Commission has further modified the 2012 SNPRM proposed 
definition of support for internal operations to add frequency capping 
of advertising and legal or regulatory compliance to the permissible 
uses

[[Page 3981]]

enumerated therein.\111\ The Commission declines to add certain other 
language proposed by commenters, such as intellectual property 
protection, payment and delivery functions, spam protection, 
optimization, statistical reporting, or de-bugging, because it believes 
that these functions are sufficiently covered by the definitional 
language permitting activities that ``maintain or analyze'' the 
functions of the Web site or service, or protect the ``security or 
integrity'' of the site or service. Under this revised definition, most 
of the activities that commenters cite to as important to permitting 
the smooth and optimal operation of Web sites and online services will 
be exempt from COPPA coverage.
---------------------------------------------------------------------------

    \111\ See, e.g., Digital Advertising Alliance (comment 27, 2012 
SNPRM), at 3; DMA (comment 28, 2012 SNPRM), at 11; IAB (comment 73, 
2011 NPRM), at 10-11; Magazine Publishers of America (comment 61, 
2012 SNPRM), at 11; Microsoft (comment 66, 2012 SNPRM), at 5; Online 
Publishers Association (comment 123, 2011 NPRM), at 4-5; Viacom Inc. 
(comment 95, 2012 SNPRM), at 14.
---------------------------------------------------------------------------

    The Commission also is cognizant that future technical innovation 
may result in additional activities that Web sites or online services 
find necessary to support their internal operations. Therefore, the 
Commission has created a voluntary process--new Section 312.12(b)--
whereby parties may request Commission approval of additional 
activities to be included within the definition of support for internal 
operations. Any such request will be placed on the public record for 
notice and comment, and the Commission will act on it within 120 days.
    The final amended language makes clear that operators may only 
engage in activities ``necessary'' to support the covered functions. 
The Commission agrees with commenter EPIC that ``[t]he presence of the 
word `necessary' [in the statute] * * * indicates that the use of 
persistent identifiers is to be limited to the above activities, and 
that these activities are to be narrowly construed.'' \112\ Moreover, 
operators may not use persistent identifiers that fall within the 
Rule's definition of personal information for any purposes other than 
those listed within the definition of support for internal operations. 
Accordingly, the Rule will require operators to obtain parental consent 
for the collection of persistent identifiers where used to track 
children over time and across sites or services. Without parental 
consent, operators may not gather persistent identifiers for the 
purpose of behaviorally targeting advertising to a specific child. They 
also may not use persistent identifiers to amass a profile on an 
individual child user based on the collection of such identifiers over 
time and across different Web sites in order to make decisions or draw 
insights about that child, whether that information is used at the time 
of collection or later.\113\
---------------------------------------------------------------------------

    \112\ See EPIC (comment 31, 2012 SNPRM), at 9. The Commission 
disagrees with the contention by certain commenters that the word 
``necessary'' is confusing and unduly restrictive. See Online 
Publishers Association (comment 72, 2012 SNPRM), at 9. In this 
context, the term means that an operator may collect a covered 
persistent identifier if it uses it for the purposes listed in the 
definition of support for internal operations. The operator need not 
demonstrate that collection of the identifier was the only means to 
perform the activity.
    \113\ 144 Cong. Rec. S8482 (Statement of Sen. Bryan (1998)).
---------------------------------------------------------------------------

    Several commenters sought clarification of whether a party's status 
as a first party or a third party would affect its ability to rely upon 
the support for internal operations definition.\114\ To the extent that 
a child-directed content site or service engages service providers to 
perform functions encompassed by the definition of support for internal 
operations, those functions will be covered as support for the content-
provider's internal operations. If a third party collecting persistent 
identifiers is deemed an operator under the Rule (e.g., because it has 
actual knowledge it is collecting personal information from users of a 
child-directed site or service, or it has actual knowledge it is 
collecting personal information from a child through a general audience 
site or service), that operator may rely on the Rule's support for 
internal operations definition when it uses persistent identifier 
information for functions that fall within it.
---------------------------------------------------------------------------

    \114\ See, e.g., Association for Competitive Technology (comment 
7, 2012 SNPRM), at 5; IAB (comment 73, 2011 NPRM), at 11.
---------------------------------------------------------------------------

c. Photographs, Videos, and Audio Files
    The Rule's existing definition of personal information includes 
photographs only when they are combined with ``other information such 
that the combination permits physical or online contacting.'' Given the 
prevalence and popularity of posting photos, videos, and audio files 
online, in the 2011 NPRM, the Commission reevaluated the privacy and 
safety implications of such practices as they pertain to children. The 
Commission determined that the inherently personal nature of 
photographs, and the fact that they may contain information such as 
embedded geolocation data, or can be paired with facial recognition 
technology, makes them identifiers that ``permit the physical or online 
contacting of a specific individual.'' \115\ The Commission found the 
same risks attendant with the online uploading of video and audio 
files.\116\ Accordingly, the Commission proposed creating a new 
category within the definition of personal information covering a 
photograph, video, or audio file where such file contains a child's 
image or voice.
---------------------------------------------------------------------------

    \115\ See 2011 NPRM, 76 FR at 59813.
    \116\ Id.
---------------------------------------------------------------------------

    Some commenters supported this proposal. For example, the Institute 
for Public Representation, on behalf of a group of children's privacy 
advocates, stated that ``[b]ecause photographs, videos, and audio files 
can convey large amounts of information about children that can make 
them more vulnerable to behavioral advertising, and possibly put their 
personal safety at risk as well, these types of information should be 
included in the definition of personal information.''\117\
---------------------------------------------------------------------------

    \117\ Institute for Public Representation (comment 71, 2011 
NPRM), at 33; Privacy Rights Clearinghouse (comment 131, 2011 NPRM), 
at 2.
---------------------------------------------------------------------------

    Several commenters criticized the Commission's proposal, claiming 
that the effect would limit children's participation in online 
activities involving ``user-generated content.'' \118\ Several 
commenters issued blanket statements that photos, videos, and audio 
files, in and of themselves, do not permit operators to locate or 
contact a child.\119\ Other commenters stated that the Commission's 
proposal is premature, arguing that facial recognition technologies are 
only in their nascent stages.\120\ Finally, several commenters argued 
that the Commission should narrow the scope of its proposal, exempting 
from coverage photos, videos, or audio files that have been prescreened 
to remove any metadata or other individually identifiable 
information.\121\ Others asked the Commission to carve out from 
coverage photos or videos where used to

[[Page 3982]]

support internal operations of a site or service.\122\ Commenter 
WiredSafety urged the Commission to adopt a standard that would permit 
operators to blur images of children before uploading them, thereby 
reducing the risks of exposure.\123\
---------------------------------------------------------------------------

    \118\ See DMA (comment 37, 2011 NPRM), at 17; Promotion 
Marketing Association (comment 133, 2011 NPRM), at 12; NCTA (comment 
113, 2011 NPRM), at 16. Certain commenters interpreted the 
Commission's proposal as inapplicable to user-generated content, but 
applicable to an operator's own use of children's images or voices. 
See CTIA (comment 32, 2011 NPRM), at 12; National Retail Federation 
(comment 114, 2011 NPRM), at 4; F. Page (comment 124, 2011 NPRM).
    \119\ See American Association of Advertising Agencies (comment 
2, 2011 NPRM), at 4; Internet Commerce Coalition (comment 74, 2011 
NPRM), at 5; Promotion Marketing Association (comment 133, 2011 
NPRM), at 12; see also DMA (comment 37, 2011 NPRM), at 17.
    \120\ See Intel Corp. (comment 72, 2011 NPRM), at 6-7; Motion 
Picture Association of America (``MPAA'') (comment 109, 2011 NPRM), 
at 13.
    \121\ See Privo (comment 76, 2012 SNPRM), at 7; DMA (comment 37, 
2011 NPRM), at 17-18; Promotion Marketing Association (comment 133, 
2011 NPRM), at 12; WiredSafety (comment 177, 2011 NPRM), at 10.
    \122\ ESA (comment 47, 2011 NPRM), at 14 n.21; kidSAFE Seal 
Program (comment 81, 2011 NPRM), at 11.
    \123\ See WiredSafety (comment 177, 2011 NPRM), at 10 (``the 
risk of using a preteen's clear image in still photos or in video 
formats is obvious''); see also Intel (comment 72, 2011 NPRM), at 7 
(``we propose limiting the Commission's new definition to `a 
photograph, video or audio file where such file contains a child's 
image or voice which may reasonably allow identification of the 
child' ''). The Commission believes that operators who choose to 
blur photographic images of children prior to posting such images 
would not be in violation of the Rule.
---------------------------------------------------------------------------

    The Commission does not dispute that uploading photos, videos, and 
audio files can be entertaining for children. Yet, it is precisely the 
very personal nature of children's photographic images, videos, and 
voice recordings that leads the Commission to determine that such files 
meet the standard for ``personal information'' set forth by Congress in 
the COPPA statute. That is, in and of themselves, such files ``permit 
the physical or online contacting of a specific individual.'' \124\ As 
the Privacy Rights Clearinghouse stated, ``[a]s facial recognition 
advances, photos and videos have the potential to be analyzed and used 
to target and potentially identify individuals.'' \125\ Given these 
risks, the Commission continues to believe it is entirely appropriate 
to require operators who offer young children the opportunity to upload 
photos, videos, or audio files containing children's images or voices 
to obtain parental consent beforehand.\126\ Therefore, the Commission 
adopts the modification of the definition of personal information 
regarding photos, videos, and audio files as proposed in the 2011 NPRM, 
without qualification.
---------------------------------------------------------------------------

    \124\ 15 U.S.C. 6501(8)(F) (italics added).
    \125\ Privacy Rights Clearinghouse (comment 131, 2011 NPRM), at 
2; see also TRUSTe (comment 164, 2011 NPRM), at 7 (``biometrics such 
as those provided in a photo, video or audio recording are personal 
information and greater protections need to be provided'').
    \126\ The Commission notes that this amendment would not apply 
to uploading photos or videos on general audience sites such as 
Facebook or YouTube, absent actual knowledge that the person 
uploading such files is a child.
---------------------------------------------------------------------------

d. Geolocation Information
    In the 2011 NPRM, the Commission stated that, in its view, existing 
paragraph (b) of the definition of personal information already covered 
any geolocation information that provides precise enough information to 
identify the name of a street and city or town.\127\ However, because 
geolocation information can be presented in a variety of formats (e.g., 
coordinates or a map), and in some instances can be more precise than 
street name and name of city or town, the Commission proposed making 
geolocation information a stand-alone category within the definition of 
personal information.\128\
---------------------------------------------------------------------------

    \127\ 76 FR at 59813.
    \128\ Id. Adding new paragraph (10) to the definition of 
personal information in 16 CFR 312.2.
---------------------------------------------------------------------------

    Similar to the comments raised in response to the 2010 FRN, a 
number of commenters opposed this change. These commenters argued that 
anonymous, technical geolocation information, without the addition of 
any other identifier, was insufficient to contact an individual 
child.\129\ The Internet Commerce Coalition stated that in identifying 
geolocation information ``sufficient to identify a street name and name 
of city or town'' as personal information, the Commission has missed 
the key to what makes an address ``personal,'' namely the street 
number.\130\ Accordingly, such commenters asked the Commission to 
clarify that geolocation information will only be deemed personal 
information if, when combined with some other information or 
identifier, it would permit contacting an individual.\131\
---------------------------------------------------------------------------

    \129\ See AT&T (comment 8, 2011 NPRM), at 5; see also American 
Association of Advertising Agencies (comment 2, 2011 NPRM), at 4; 
CTIA (comment 32, 2011 NPRM), at 9; DMA (comment 37, 2011 NPRM), at 
17; Promotion Marketing Association (comment 133, 2011 NPRM), at 13; 
Software & Information Industry Association (``SIIA'') (comment 150, 
2011 NPRM), at 8; Verizon (comment 167, 2011 NPRM), at 6.
    \130\ See Internet Commerce Coalition (comment 74, 2011 NPRM), 
at 5; see also AT&T (comment 8, 2011 NPRM), at 5-6.
    \131\ See, e.g., CTIA (comment 32, 2011 NPRM), at 9; Future of 
Privacy Forum (comment 55, 2011 NPRM), at 5; Verizon (comment 167, 
2011 NPRM), at 6 (``Consistent with Congressional intent, 
geolocation information should be treated as personal information 
only when the data is tied to a specific individual.'').
---------------------------------------------------------------------------

    These commenters overlook that the COPPA statute does not require 
the submission of a street number to make address information 
``personal.'' Nor is it limited to home address, primary residence, or 
even a static address. Rather, Congress chose to use the words ``or 
other physical address, including street name and name of city or 
town.'' \132\ This word choice not only permits the inclusion of 
precise mobile (i.e., moving) location information, it may very well 
mandate it.\133\ As commenter Consumers Union stated, ``[s]ince a 
child's physical address is already considered personal information 
under COPPA, geolocation data, which provides precise information about 
a child's whereabouts at a specific point in time, must also 
necessarily be covered.'' \134\
---------------------------------------------------------------------------

    \132\ 15 U.S.C. 6501(8)(B).
    \133\ For this reason, the Commission finds those comments 
focusing on the potential to capture a large geographic area to be 
inapposite. See IAB (comment 73, 2011 NPRM), at 6 (``without an 
address or other additional data to identify a household or 
individual, a street name and city could encompass a large 
geographic area and as many as 1,000 households. For example, 
Sepulveda Boulevard, in the Los Angeles area, is over 40 miles 
long'').
    \134\ See Consumers Union (comment 29, 2011 NPRM), at 3; see 
also EPIC (comment 41, 2011 NPRM), at 8-9 (``As with IP addresses 
and user names, geolocation information can be used to track a 
particular device, which is usually linked to a particular 
individual.'').
---------------------------------------------------------------------------

    In addition, the Commission disagrees with those commenters who 
state that geolocation information, standing alone, does not permit the 
physical or online contacting of an individual within the meaning of 
COPPA.\135\ Just as with persistent identifiers, the Commission rejects 
the notion that precise geolocation information allows only contact 
with a specific device, not the individual using the device. By that 
same flawed reasoning, a home or mobile telephone number would also 
only permit contact with a device.
---------------------------------------------------------------------------

    \135\ See American Association of Advertising Agencies (comment 
2, 2011 NPRM), at 4; AT&T (comment 8, 2011 NPRM), at 6; DMA (comment 
37, 2011 NPRM), at 17; Promotion Marketing Association (comment 133, 
2011 NPRM), at 13; Verizon (comment 167, 2011 NPRM), at 6.
---------------------------------------------------------------------------

    Several commenters asked the Commission to refine the Rule's 
coverage of geolocation so that it targets particular uses. Commenter 
CTIA, citing photo-sharing services as an example, asked that 
geolocation information embedded in metadata (as often is the case with 
digital photographs) be excluded from the Rule's coverage.\136\ Arguing 
that there should be a legal difference between using geolocation 
information for convenience or to protect a child's safety and to 
market to a child, commenter kidSAFE Seal Program suggested that 
geolocation data only be considered ``personal information'' when it is 
being used for marketing purposes.\137\ Finally, commenter TRUSTe asked 
that the Commission amend the definition to cover ``precise geolocation 
data that can be used to identify a child's actual physical location at 
a given point in time.''\138\
---------------------------------------------------------------------------

    \136\ CTIA (comment 32, 2011 NPRM), at 9.
    \137\ kidSAFE Seal Program (comment 81, 2011 NPRM), at 11.
    \138\ TRUSTe (comment 164, 2011 NPRM), at 3.
---------------------------------------------------------------------------

    The Commission sees no basis for making the suggested revisions. 
With respect to excluding geolocation

[[Page 3983]]

information in metadata, the Commission notes that in the 2011 NPRM, it 
specifically cited such geolocation metadata as one of the bases for 
including photographs of children within the definition of personal 
information.\139\ With respect to the comment from kidSAFE Seal 
Program, the statute does not distinguish between information collected 
for marketing as opposed to convenience; therefore, the Commission 
finds no basis for making such a distinction for geolocation 
information. Finally, the Commission sees little to no practical 
distinction between ``geolocation data that can be used to identify a 
child's actual physical location at a given point in time'' and 
geolocation information ``sufficient to identify street name and name 
of a city or town,'' and it prefers to adhere to the statutory 
language. Accordingly, the Commission modifies the definition of 
personal information as proposed in the 2011 NPRM, and covered 
operators will be required to notify parents and obtain their consent 
prior to collecting geolocation information from children.
---------------------------------------------------------------------------

    \139\ See 76 FR at 59813 n.87.
---------------------------------------------------------------------------

6. Definition of Release of Personal Information
    In the 2011 NPRM, the Commission proposed to define the term 
release of personal information separately from the definition of 
disclosure, since the term applied to provisions of the Rule that did 
not solely relate to disclosures.\140\ The Commission also proposed 
technical changes to clarify that the term ``release of personal 
information'' addresses business-to-business uses of personal 
information, not public disclosures, of personal information.\141\ The 
Commission received little comment on this issue and therefore adopts 
the proposed changes.
---------------------------------------------------------------------------

    \140\ See 2011 NPRM, 76 FR at 59804, 59809. The Commission 
originally proposed to define release of personal information as 
``the sharing, selling, renting, or any other means of providing 
personal information to any third party.'' The Commission's revised 
definition removes the phrase ``or any other means of providing 
personal information'' to avoid confusion and overlap with the 
second prong of the definition of disclosure governing an operator 
making personal information collected from a child publicly 
available, e.g., through a social network, a chat room, or a message 
board. See 16 CFR 312.2 (definition of disclosure).
    \141\ Id.
---------------------------------------------------------------------------

7. Definition of Web Site or Online Service Directed to Children
    In the 2012 SNPRM, the Commission proposed revising the definition 
of Web site or online service directed to children to allow a subset of 
sites falling within that category an option not to treat all users as 
children. The proposed revision was sparked by a comment from The Walt 
Disney Company that urged the Commission to recognize that sites and 
services directed to children fall along a continuum and that those 
sites targeted to both children and others should be permitted to 
differentiate among users. Noting that Disney's suggestion in large 
measure reflected the prosecutorial discretion already applied by the 
Commission in enforcing COPPA, the Commission proposed revisions to 
implement this concept. The Commission received numerous comments on 
this proposal. Although many commenters expressed support for the 
concept, the proposed implementing language was criticized.
    Paragraphs (a) and (b) of the SNPRM's proposed revisions sought to 
define the subset of sites directed to children that would still be 
required to treat all users as children: those that knowingly target 
children under 13 as their primary audience, and those that, based on 
the overall content of the site, are likely to attract children under 
13 as their primary audience. Paragraph (c) sought to describe those 
child-directed sites that would be permitted to age-screen to 
differentiate among users--namely those sites that, based on overall 
content, are likely to draw a disproportionate number of child users.
    Although most commenters concurred that operators intentionally 
targeting children as their primary audience should be covered as Web 
sites directed to children,\142\ some worried about the precise 
contours of the term ``primary audience'' and sought guidance as to 
percentage thresholds.\143\ Some commenters also opposed any 
interpretation of COPPA that required child-directed Web sites to 
presume all users are children.\144\
---------------------------------------------------------------------------

    \142\ See ACLU (comment 3, 2012 SNPRM), at 3; Online Publishers 
Association (comment 72, 2012 SNPRM), at 4.
    \143\ See DMA (comment 28, 2012 SNPRM), at 13-14; Institute for 
Public Representation (comment 52, 2012 SNPRM), at 25-27; Privo 
(comment 76, 2012 SNPRM), at 3; TechFreedom (comment 88, 2012 
SNPRM), at 3; Toy Industry Association (comment 89, 2012 SNPRM), at 
12; WiredTrust and WiredSafety (comment 98, 2012 SNPRM), at 3-4.
    \144\ See Facebook (comment 33, 2012 SNPRM), at 10; Viacom Inc. 
(comment 95, 2012 SNPRM), at 5.
---------------------------------------------------------------------------

    Many commenters argued that the Commission exceeded its authority 
by defining Web site or online service directed to children based on 
criteria other than the sites' intent to target children. These 
commenters argued that Congress, by defining Web sites directed to 
children as those ``targeted'' to children, was imposing a subjective 
intent requirement.\145\ The Commission disagrees. The Commission 
believes that if Congress had wanted to require subjective intent on 
the part of an operator before its site or service could be deemed 
directed to children, it would have done so explicitly.\146\ Intent 
cannot be the only scenario envisioned by Congress whereby a site would 
be deemed directed to children.\147\ Certainly, a Web site or online 
service that has the attributes, look, and feel of a property targeted 
to children under 13 will be deemed to be a site or service directed to 
children, even if the operator were to claim that was not its intent.
---------------------------------------------------------------------------

    \145\ See, e.g., Online Publishers Association (comment 72, 2012 
SNPRM), at 4 (``The plain meaning of `targeted' in this context 
requires a deliberate selection of an audience of children.'').
    \146\ See 15 U.S.C. 6501(10)(A) (``The term `Web site or online 
service directed to children' means--(i) a commercial Web site or 
online service that is targeted to children; or (ii) that portion of 
a commercial Web site or online service that is targeted to 
children.'').
    \147\ See ACLU (comment 3, 2012 SNPRM), at 4 (``paragraphs (a) 
and (b) of the proposed definition are largely noncontroversial'').
---------------------------------------------------------------------------

    Paragraph (c) sought to describe those child-directed sites that 
would be permitted to age-screen to differentiate among users, namely 
those sites that, based on overall content, are likely to draw a 
disproportionate number of child users. While a handful of comments 
supported this definition,\148\ for the most part, it was criticized by 
a spectrum of interests. On one side were advocates such Common Sense 
Media, EPIC, and the Institute for Public Representation. These 
advocates argued that recognizing a category of sites and services 
directed to mixed-audiences, targeted both to young children and 
others, would undercut the other revisions the Commission has proposed, 
thereby lessening privacy protections for children.\149\ Such advocates 
also argued that the proposed category might create incentives, or 
loopholes, for operators that currently provide child-directed Web 
sites or services to claim their online properties are covered by 
paragraph (c) of the definition and become exempt from COPPA by age-
gating.\150\
---------------------------------------------------------------------------

    \148\ See, e.g., U.S. Conference of Catholic Bishops (comment 
92, 2012 SNPRM), at 4.
    \149\ Institute for Public Representation (comment 52, 2012 
SNPRM), at (i).
    \150\ Common Sense Media (comment 20, 2012 SNPRM), at 9; EPIC 
(comment 31, 2012 SNPRM), at 4-5; Institute for Public 
Representation, supra note 149, at 27-28.
---------------------------------------------------------------------------

    On the other side were a number of commenters who feared that the 
proposal would significantly expand the range of Web sites and online 
services that fall within the ambit of COPPA's coverage, including both 
teen-oriented and general-audience sites and services that incidentally 
appeal to children as well as adults. Much of this fear appears

[[Page 3984]]

to have been driven by the specific language the Commission proposed; 
that is, sites or services that, based on their overall content, were 
``likely to attract an audience that includes a disproportionately 
large percentage of children under age 13 as compared to the percentage 
of such children in the general population.'' Some argued that the use 
of the term ``disproportionate'' is vague,\151\ potentially 
unconstitutional,\152\ unduly expansive,\153\ or otherwise constitutes 
an unlawful shift from the statute's actual knowledge standard for 
general audience sites to one of constructive knowledge.\154\ Many 
worried that the Commission's proposal would lead to widespread age-
screening, or more intensive age-verification, across the entire body 
of Web sites and online services located on the Internet.\155\ Other 
commenters suggested that the Commission implement this approach 
through a safe harbor, not by revising a definition.\156\
---------------------------------------------------------------------------

    \151\ See, e.g., P. Aftab (comment 1, 2012 SNPRM), at 6-7; NCTA 
(comment 69, 2012 SNPRM), at 14; Marketing Research Association 
(comment 62, 2012 SNPRM), at 2; NetChoice (comment 70, 2012 SNPRM), 
at 4-5; SIIA (comment 84, 2012 SNPRM), at 10.
    \152\ See, e.g., CDT (comment 15, 2012 SNPRM), at 7-10; Family 
Online Safety Institute (comment 34, 2012 SNPRM), at 3; Internet 
Commerce Coalition (comment 53, 2012 SNPRM), at 9; T. Mumford 
(comment 68, 2012 SNPRM); Online Publishers Association (comment 72, 
2012 SNPRM), at 6; Viacom (comment 95, 2012 SNPRM), at 5.
    \153\ See, e.g., DMA (comment 28, 2012 SNPRM), at 14; Magazine 
Publishers of America (comment 61, 2012 SNPRM), at 6-7.
    \154\ See CDT (comment 15, 2012 SNPRM), at 7.
    \155\ See ACLU (comment 3, 2012 SNPRM), at 5; DMA (comment 28, 
2012 SNPRM), at 14-15; Magazine Publishers of America (comment 61, 
2012 SNPRM), at 8; Toy Industry Association (comment 89, 2012 
SNPRM), at 7, 11.
    \156\ Entertainment Software Association (comment 32, 2012 
SNPRM), at 2; Online Publishers Association (comment 72, 2012 
SNPRM), at 7-8; Viacom Inc. (comment 95, 2012 SNPRM), at 6.
---------------------------------------------------------------------------

    The comments reflect a misunderstanding of the purpose and effect 
of the change proposed in the 2012 SNPRM. The Commission did not intend 
to expand the reach of the Rule to additional sites and services, but 
rather to create a new compliance option for a subset of Web sites and 
online services already considered directed to children under the 
Rule's totality of the circumstances standard.
    To make clear that it will look to the totality of the 
circumstances to determine whether a site or service is directed to 
children (whether as its primary audience or otherwise), the Commission 
has revised and reordered the definition of Web site or online service 
directed to children as follows. Paragraph (1) of the definition 
contains the original Rule language setting forth several factors the 
Commission will consider in determining whether a site or service is 
directed to children. In addition, paragraph (1) amends this list of 
criteria to add musical content, the presence of child celebrities, and 
celebrities who appeal to children, as the Commission originally 
proposed in the 2011 NPRM.\157\ Although some commenters expressed 
concern that these additional factors might capture general audience 
sites,\158\ produce inconsistent results,\159\ or be overly broad 
(since musicians and celebrities often appeal both to adults and 
children),\160\ the Commission believes that these concerns are 
unfounded. The Commission reiterates that these factors are some among 
many that the Commission will consider in assessing whether a site or 
service is directed to children, and that no single factor will 
predominate over another in this assessment.
---------------------------------------------------------------------------

    \157\ 2011 NPRM, 76 FR at 59814.
    \158\ See DMA (comment 37, 2011 NPRM), at 18-19; MPAA (comment 
109, 2011 NPRM), at 19.
    \159\ See Verizon (comment 167, 2011 NPRM), at 10.
    \160\ See SIIA (comment 150, 2011 NPRM), at 9.
---------------------------------------------------------------------------

    Paragraph (2) of the definition sets forth the actual knowledge 
standard for plug-ins or ad networks, as discussed in Part II.A.4.b 
herein, whereby a plug-in, ad network, or other property is covered as 
a Web site or online service directed to children under the Rule when 
it has actual knowledge that it is collecting personal information 
directly from users of a child-directed Web site or online service.
    The Commission amends paragraph (3) of the definition to clarify 
when a child-directed site would be permitted to age-screen to 
differentiate among users. This paragraph codifies the Commission's 
intention to first apply its ``totality of the circumstances'' standard 
to determine whether any Web site or online service falling under 
paragraph (3) is directed to children. The Commission then will assess 
whether children under age 13 are the primary audience for the site or 
service. Paragraph (3) codifies that a site or service that is directed 
to children, but that does not target children as its primary audience, 
may use an age screen in order to apply all of COPPA's protections only 
to visitors who self-identify as under age 13. As the Commission stated 
in the 2012 SNPRM, at that point, the operator will be deemed to have 
actual knowledge that such users are under 13 and must obtain 
appropriate parental consent before collecting any personal information 
from them and must also comply with all other aspects of the Rule.\161\
---------------------------------------------------------------------------

    \161\ See 2012 SNPRM, 77 FR at 46646.
---------------------------------------------------------------------------

    The Commission retains its longstanding position that child-
directed sites or services whose primary target audience is children 
must continue to presume all users are children and to provide COPPA 
protections accordingly.\162\ Some commenters contend that the 
Commission should permit this presumption to be rebutted, even on sites 
primarily targeting children, by the use of a simple age screen that 
distinguishes child users from other users.\163\ Although the 
Commission is now permitting this on sites or services that target 
children only as a secondary audience or to a lesser degree, the 
Commission believes adopting this standard for all child-directed sites 
would virtually nullify the statutory distinction between ``actual 
knowledge'' sites and those directed to children, creating a de facto 
actual knowledge standard for all operators.\164\
---------------------------------------------------------------------------

    \162\ The Commission intends the word ``primary'' to have its 
common meaning, i.e., something that stands first in rank, 
importance, or value. This must be determined by the totality of the 
circumstances and not through a precise audience threshold cut-off. 
See definition of ``primary.'' Merriam-Webster.com (2012), available 
at http://www.merriam-webster.com (last accessed Nov. 5, 2012).
    \163\ P. Aftab (comment 1, 2012 SNPRM), at 5; Facebook (comment 
33, 2012 SNPRM), at 12-13; Future of Privacy Forum (comment 37, 2012 
SNPRM), at 8.
    \164\ See DMA (comment 28, 2012 SNPRM), at 8 (an operator's 
choice of content serves as a proxy for knowledge that its users are 
primarily children under 13).
---------------------------------------------------------------------------

    Finally, paragraph (4) of the definition restates the statutory 
proviso that a site or service will not be deemed to be child-directed 
where it simply links to a child-directed property.

B. Section 312.4: Notice

1. Direct Notice to a Parent
    In the 2011 NPRM, the Commission proposed refining the Rule 
requirements for the direct notice to ensure a more effective ``just-
in-time'' message to parents about an operator's information 
practices.\165\ As such, the Commission proposed to reorganize and 
standardize the direct notice requirement to set forth the precise 
items of information that must be disclosed in each type of direct 
notice the Rule requires. The proposed revised language of Sec.  312.4 
specified, in each instance where the Rule requires direct notice, the 
precise information that operators must provide to parents regarding 
the items of personal information the operator already has obtained 
from the child (generally, the

[[Page 3985]]

parent's online contact information either alone or together with the 
child's online contact information); the purpose of the notification; 
action that the parent must or may take; and what use, if any, the 
operator will make of the personal information collected. The proposed 
revisions also were intended to make clear that each form of direct 
notice must provide a hyperlink to the operator's online notice of 
information practices.\166\
---------------------------------------------------------------------------

    \165\ See 2011 NPRM, 76 FR at 59816.
    \166\ Id.
---------------------------------------------------------------------------

    In general, commenters supported the Commission's proposed changes 
as providing greater clarity and simplicity to otherwise difficult-to-
understand statements.\167\ These changes were viewed as especially 
important in an era of children's intense engagement with mobile 
applications accessed through a third-party app store and where an 
online notice might not be as readily accessible.\168\ Only one 
commenter objected to the concept of placing greater emphasis on the 
direct, rather than the online, notice, stating that the changes would 
unduly necessitate lengthy direct notices and would prove overwhelming 
for parents and challenging to implement in the mobile 
environment.\169\
---------------------------------------------------------------------------

    \167\ See EPIC (comment 41, 2011 NPRM), at 9; Institute for 
Public Representation (comment 71, 2011 NPRM), at 40-41; kidSAFE 
Seal Program (comment 81, 2011 NPRM), at 12; NCTA (comment 113, 2011 
NPRM), at 22.
    \168\ AssertID (comment 6, 2012 SNPRM), at 2.
    \169\ IAB (comment 73, 2011 NPRM), at 13.
---------------------------------------------------------------------------

    The Commission also proposed adding a paragraph setting out the 
contours of a new direct notice in situations where an operator 
voluntarily chooses to collect a parent's online contact information 
from a child in order to provide parental notice about a child's 
participation in a Web site or online service that does not otherwise 
collect, use, or disclose children's personal information. The 
Commission's proposal for a voluntary direct notice in situations where 
an operator does not otherwise collect, use, or disclose personal 
information from a child garnered very little attention. Only one 
commenter sought clarification of the specific language the Commission 
proposed.\170\
---------------------------------------------------------------------------

    \170\ N. Savitt (comment 142, 2011 NPRM), at 2.
---------------------------------------------------------------------------

    Several commenters urged the Commission to use the occasion of the 
Rule review to develop a model COPPA direct notice form that operators 
voluntarily could adopt,\171\ to mandate that such notifications be 
optimized for the particular devices on which they are displayed,\172\ 
or to implement a Web site rating system.\173\ The Commission believes 
that these suggestions are better suited as ``best practices'' \174\ 
rather than as additions to the text of the Rule.
---------------------------------------------------------------------------

    \171\ H. Valetk (comment 166, 2011 NPRM), at 3.
    \172\ TRUSTe (comment 164, 2011 NPRM), at 10.
    \173\ Lifelock (comment 93, 2011 NPRM), at 1.
    \174\ For example, to be considered by the various Commission-
approved COPPA safe harbor programs.
---------------------------------------------------------------------------

    The Commission has determined to retain in the final Rule the 
modifications proposed in the 2011 NPRM. However, the Commission has 
reorganized the paragraphs to provide a better flow and guidance for 
operators, and has clarified that the voluntary direct notice provision 
described above is, indeed, voluntary for operators who choose to use 
it.\175\
---------------------------------------------------------------------------

    \175\ N. Savitt (comment 142, 2011 NPRM), at 2.
---------------------------------------------------------------------------

2. Notice on the Web Site or Online Service
    In the 2011 NPRM, the Commission proposed several changes to the 
Rule's online notice requirement. First, the Commission proposed 
requiring all operators collecting, using, or disclosing information on 
a Web site or online service to provide contact information, including, 
at a minimum, the operator's name, physical address, telephone number, 
and email address.\176\ This proposal marked a change from the existing 
Rule's proviso that such operators could designate one operator to 
serve as the point of contact.
---------------------------------------------------------------------------

    \176\ Id.
---------------------------------------------------------------------------

    With the exception of the Institute for Public Representation,\177\ 
commenters who spoke to the issue opposed mandating that the online 
notice list all operators. Some objected to the sheer volume of 
potentially confusing information this would present to parents,\178\ 
and stated that the proposal provided no additional consumer benefit to 
parents, given that the existing Rule implies that the single operator 
designee should be prepared to ``respond to all inquiries from parents 
concerning the operators' privacy policies and use of children's 
information.'' \179\ Some also spoke to the burden on the primary 
operator of having to maintain a current list of all applicable 
operators' contact information,\180\ and expressed confusion as to 
which operators needed to be listed.\181\
---------------------------------------------------------------------------

    \177\ Institute for Public Representation (comment 71, 2011 
NPRM), at 38-39.
    \178\ See Facebook (comment 50, 2011 NPRM), at 9; NCTA (comment 
113, 2011 NPRM), at 22; Toy Industry Association (comment 89, 2012 
SNPRM), at 6.
    \179\ IAB (comment 73, 2011 NPRM), at 12.
    \180\ DMA (comment 37, 2011 NPRM), at 20.
    \181\ kidSAFE Seal Program (comment 81, 2011 NPRM), at 12 
(``Would this rule apply to one-time joint sponsors of a promotion 
who co-collect information on a Web site?'').
---------------------------------------------------------------------------

    The Commission believes that a requirement for the primary operator 
to provide specific, current, contact information for every operator 
that collects information on or through its Web site or service has the 
potential to confuse parents, for whom such online notices are intended 
to be accessible and useful. After considering the comments, the 
Commission has determined to retain the Rule's ``single operator 
designee'' proviso; that is, an operator will be required to list all 
operators collecting or maintaining personal information from children 
through the Web site or online service, but need only list the contact 
information for the one operator who will be responsible for responding 
to parents' inquiries.
    In the 2011 NPRM, the Commission also proposed eliminating the 
Rule's current lengthy--yet potentially under-inclusive--recitation of 
an operator's information collection, use, and disclosure practices in 
favor of a simple statement of: (1) What information the operator 
collects from children, including whether the Web site or online 
service enables a child to make personal information publicly 
available; (2) how the operator uses such information; and (3) the 
operator's disclosure practices for such information.\182\ As a part of 
this revision, the Commission proposed removing the required statement 
that the operator may not condition a child's participation in an 
activity on the child's disclosing more personal information than is 
reasonably necessary to participate in such activity.\183\ This 
proposal was opposed by the Institute for Public Representation, which 
views the statement as a way to educate parents as to whether or not 
the operator actually complies with data minimization principles.\184\ 
This organization also asked the Commission to require operators to 
disclose information to parents on how the data they collect is secured 
from potential breaches.\185\ The Commission has considered this input 
but nevertheless adopts both of these changes in the final Rule.
---------------------------------------------------------------------------

    \182\ 76 FR at 59815.
    \183\ Id.
    \184\ Institute for Public Representation (comment 71, 2011 
NPRM), at 40.
    \185\ Id.
---------------------------------------------------------------------------

    The Commission sees great value for parents of streamlined online 
notices and continues to believe that the removal of extraneous 
information from such notices will further this goal.\186\

[[Page 3986]]

Accordingly, the Commission modifies the Rule as proposed in the 2011 
NPRM to remove an operator's recitation in its online notice that it 
will not condition a child's participation on the provision of more 
information than is necessary. Again, however, the substantive 
requirement of Sec.  312.7 remains in place.\187\ In addition, and 
again in the interest of streamlining the online notices, the 
Commission declines to require operators to explain the measures they 
take to protect children's data. Nevertheless, the Rule's enhanced 
provisions on confidentiality and data security will help protect data 
collected from children online.
---------------------------------------------------------------------------

    \186\ See 2011 NPRM, 76 FR at 59815 (``In the Commission's 
experience, this blanket statement, often parroted verbatim in 
operators' privacy policies, detracts from the key information of 
operators' actual information practices, and yields little value to 
a parent trying to determine whether to permit a child's 
participation.'').
    \187\ Id.
---------------------------------------------------------------------------

    Finally, focusing on the part of the Commission's proposal that 
would require operators of general audience sites or services that have 
separate children's areas to post links to their notices of children's 
information practices on the home or landing page or screen of the 
children's area, the Toy Industry Association asked the Commission to 
forgo mandating links in any location where mobile apps can be 
purchased or downloaded because, in their view, changing commercial 
relationships may make it difficult to frequently update privacy 
policies in apps marketplaces.\188\ The final amended Rule does not 
mandate the posting of such information at the point of purchase but 
rather on the app's home or landing screen. However, the Commission 
does see a substantial benefit in providing greater transparency about 
the data practices and interactive features of child-directed apps at 
the point of purchase and encourages it as a best practice.\189\
---------------------------------------------------------------------------

    \188\ Toy Industry Association (Comment 163, 2011 NPRM), at 4.
    \189\ FTC Staff Report, ``Mobile Apps for Kids: Disclosures 
Still Not Making the Grade'' (Dec. 2012), at 7 (``Mobile Apps for 
Kids II Report''), available at http://www.ftc.gov/os/2012/12/121210mobilekidsappreport.pdf (noting that ``information provided 
prior to download is most useful in parents' decision-making since, 
once an app is downloaded, the parent already may have paid for the 
app and the app already may be collecting and disclosing the child's 
information to third parties'').
---------------------------------------------------------------------------

C. Section 312.5: Parental Consent

    A central element of COPPA is its requirement that operators 
seeking to collect, use, or disclose personal information from children 
first obtain verifiable parental consent.\190\ ``Verifiable parental 
consent'' is defined in the statute as ``any reasonable effort (taking 
into consideration available technology), including a request for 
authorization for future collection, use, and disclosure, described in 
the notice.'' \191\ Accordingly, the Rule requires that operators must 
make reasonable efforts to obtain verifiable parental consent, taking 
into consideration available technology. Any method to obtain 
verifiable parental consent must be reasonably calculated in light of 
available technology to ensure that the person providing consent is the 
child's parent. Sec.  312.5(b)(1).
---------------------------------------------------------------------------

    \190\ Paragraph (a) of Sec.  312.5 states that an operator is 
required to obtain verifiable parental consent before any 
collection, use, and/or disclosure of personal information from 
children, including consent to any material change in the 
collection, use, and/or disclosure practices to which the parent has 
previously consented. An operator must give the parent the option to 
consent to the collection and use of the child's personal 
information without consenting to disclosure of his or her personal 
information to third parties.
    \191\ 15 U.S.C. 6501(9).
---------------------------------------------------------------------------

    The Rule sets forth a non-exhaustive list of methods that meet the 
standard of verifiable parental consent.\192\ Specifically, paragraph 
(b)(2) states that methods to obtain verifiable parental consent that 
satisfy the requirements of the paragraph include: Providing a consent 
form to be signed by the parent and returned to the operator by postal 
mail or facsimile; requiring a parent to use a credit card in 
connection with a transaction; having a parent call a toll-free 
telephone number staffed by trained personnel; using a digital 
certificate that uses public key technology; and using email 
accompanied by a PIN or password obtained through one of the 
verification methods listed in the paragraph.\193\
---------------------------------------------------------------------------

    \192\ See 16 CFR 312.5(b).
    \193\ Paragraph (b)(2) also sets out the sliding scale ``email 
plus'' method for obtaining parental consent in the instance where 
an operator collects a child's personal information only for 
internal use. The Commission's determination to retain the email 
plus method is discussed in Part II.C.7, infra.
---------------------------------------------------------------------------

    Participants at the Commission's June 2, 2010 COPPA roundtable 
\194\ and commenters to the 2010 FRN generally agreed that, while no 
one method provides complete certainty that the operator has reached 
and obtained consent from a parent, the methods listed in the Rule 
continue to have utility for operators and should be retained.\195\
---------------------------------------------------------------------------

    \194\ See Federal Trade Commission's Roundtable: Protecting 
Kids' Privacy Online at 195, 208-71 (June 2, 2010), available at 
http://www.ftc.gov/bcp/workshops/coppa/COPPARuleReview_Transcript.pdf.
    \195\ See DMA (comment 17, 2010 FRN), at 10, 12; Microsoft 
(comment 39, 2010 FRN), at 7; Toy Industry Association, Inc. 
(comment 63, 2010 FRN), at 3; WiredSafety.org. (comment 68, 2010 
FRN), at 18.
---------------------------------------------------------------------------

    A number of commenters urged the Commission to expand the list of 
acceptable mechanisms to incorporate newer technologies, or to 
otherwise modernize or simplify the Rule's mechanisms for parental 
consent.\196\ Suggested methods of obtaining parental consent included 
sending a text message to the parent's mobile phone number,\197\ 
offering online payment services other than credit cards,\198\ offering 
parental controls in gaming consoles,\199\ offering a centralized 
parental consent mechanism or parental opt-in list,\200\ and permitting 
electronic signatures.\201\
---------------------------------------------------------------------------

    \196\ See, e.g., BOKU (comment 5, 2010 FRN); DMA (comment 17, 
2010 FRN), at 11-12; EchoSign, Inc. (comment 18, 2010 FRN); ESA 
(comment 20, 2010 FRN), at 7-9; Facebook (comment 22, 2010 FRN), at 
2; J. Hiller (comment 27, 2010 FRN), at 447-50; M. Hoal (comment 30, 
2010 FRN); Microsoft (comment 39, 2010 FRN), at 4; MPAA (comment 42, 
2010 FRN), at 12; RelyID (comment 53, 2010 FRN), at 3; TRUSTe 
(comment 64, 2010 FRN), at 3; H. Valetk (comment 66, 2010 FRN), at 
6; WiredSafety.org (comment 68, 2010 FRN), at 7; S. Wittlief 
(comment 69, 2010 FRN).
    \197\ See BOKU (comment 5, 2010 FRN); ESA (comment 20, 2010 
FRN), at 11-12; TRUSTe (comment 64, 2010 FRN), at 3; H. Valetk 
(comment 66, 2010 FRN), at 6-7.
    \198\ See WiredSafety.org (comment 68, 2010 FRN), at 24 (noting 
that operators are considering employing online financial accounts, 
such as iTunes, for parental consent).
    \199\ See ESA (comment 20, 2010 FRN), at 9-10; Microsoft 
(comment 39, 2010 FRN), at 7.
    \200\ See ESA (comment 20, 2010 FRN), at 12; Janine Hiller 
(comment at 27, 2010 FRN), at 447.
    \201\ See DMA (comment 17, 2010 FRN), at 12; EchoSign (comment 
18, 2010 FRN); ESA (comment 20, 2010 FRN), at 10; Toy Industry 
Association (comment 63, 2010 FRN), at 11.
---------------------------------------------------------------------------

    In the 2011 NPRM, the Commission announced its determination that 
the record was sufficient to justify certain proposed mechanisms, but 
insufficient to adopt others. The 2011 NPRM proposed several 
significant changes to the mechanisms of verifiable parental consent 
set forth in paragraph (b) of Sec.  312.5, including: Adding several 
newly recognized mechanisms for parental consent; eliminating the 
sliding scale approach to parental consent; and adding two new 
processes for evaluation and pre-clearance of parental consent 
mechanisms.
1. Electronic Scans and Video Verification
    In the 2011 NPRM, the Commission proposed including electronically 
scanned versions of signed parental consent forms and the use of video 
verification methods among the Rule's non-exhaustive list of acceptable 
consent mechanisms. The proposal received support from several 
commenters, including Yahoo!, the DMA, kidSAFE Seal Program, the

[[Page 3987]]

NCTA, and Facebook.\202\ Other commenters expressed reservations about 
whether these new methods would offer practical, economical, or 
scalable solutions for operators.\203\
---------------------------------------------------------------------------

    \202\ See Yahoo! (comment 80, 2011 NPRM), at 4; DMA (comment 37, 
2011 NPRM), at 23; kidSAFE Seal Program (comment 81, 2011 NPRM), at 
16; NCTA (comment 113, 2011 NPRM), at 9; Facebook (comment 50, 2011 
NPRM), at 8-9.
    \203\ See K. Dennis (comment 34, 2011 NPRM), at 2; A. Thierer 
(comment 162, 2011 NPRM), at 9; R. Newton (comment 118, 2011 NPRM).
---------------------------------------------------------------------------

    As stated in the 2011 NPRM, the Commission finds that electronic 
scans and video conferencing are functionally equivalent to the written 
and oral methods of parental consent originally recognized by the 
Commission in 1999. It does not find the concerns of some commenters, 
that operators are not likely to widely adopt these methods, a 
sufficient reason to exclude them from the Rule. The list of consent 
mechanisms is not exhaustive and operators remain free to choose the 
ones most appropriate to their individual business models. Therefore, 
Section 312.5(b) of the final Rule includes electronic scans of signed 
consent forms and video-conferencing as acceptable methods for 
verifiable parental consent.
2. Government-Issued Identification
    The Commission also proposed in the 2011 NPRM to allow operators to 
collect a form of government-issued identification--such as a driver's 
license, or a segment of the parent's Social Security number--from the 
parent, and to verify the parent's identity by checking this 
identification against databases of such information, provided that the 
parent's identification is deleted from the operator's records promptly 
after such verification is complete. Some operators already use this 
method of obtaining parental consent, and it is one of several 
available verification methods offered by the COPPA safe harbor program 
Privo.\204\ In the NPRM, the Commission stated its recognition that 
information such as Social Security number, driver's license number, or 
another record of government-issued identification is sensitive 
data.\205\ In permitting operators to use government-issued 
identification as an approved method of parental verification, the 
Commission emphasized the importance of limiting the collection of such 
identification information to only those segments of information needed 
to verify the data.\206\ For example, the Commission noted that the 
last four digits of a person's Social Security number are commonly used 
by verification services to confirm a person's identity.\207\ The 
Commission also stated its belief that the requirement that operators 
immediately delete parents' government-issued identification 
information upon completion of the verification process provides 
further protection against operators' unnecessary retention, use, or 
potential compromise of such information. Commenters in favor of adding 
this mechanism pointed out that using available technology to check a 
driver's license number or partial Social Security number reasonably 
ensures that the person providing consent is the parent.\208\
---------------------------------------------------------------------------

    \204\ See application of Privo, Inc. to become a Commission-
approved COPPA safe harbor program (Mar. 2004), available at http://www.ftc.gov/os/2004/04/privoapp.pdf, at 25.
    \205\ The COPPA statute itself lists Social Security number 
among the items considered to be personal information. See 16 CFR 
312.2. In other contexts, driver's licenses and social security 
numbers, among other things, have traditionally been considered by 
Commission staff to be personal, or sensitive, as well. See FTC 
Staff Report, ``Self-Regulatory Principles for Online Behavioral 
Advertising'' (Feb. 2009), at 20 n.47, 42, 44, available at http://www.ftc.gov/os/2009/02/P085400behavadreport.pdf.
    \206\ The use of a driver's license to verify a parent, while 
not specifically enumerated in the Final Rule as an approved method 
of parental consent, was addressed in the Statement of Basis and 
Purpose in connection with a discussion of the methods to verify the 
identity of parents who seek access to their children's personal 
information under Sec.  312.6(a)(3) of the Rule. See 1999 Statement 
of Basis and Purpose, 64 FR at 59905. There, the Commission 
concluded that the use of a driver's license was an acceptable 
method of parental verification.
    \207\ See, e.g., Privo, Inc., ``Request for Safe Harbor Approval 
by the Federal Trade Commission for Privo, Inc.'s Privacy Assurance 
Program under Section 312.10 of the Children's Online Privacy 
Protection Rule,'' 25 (Mar. 3, 2004), available at http://www.ftc.gov/os/2004/04/privoapp.pdf.
    \208\ For instance, Facebook commented that this mechanism 
achieves the delicate balance of making it easy for the parent to 
provide consent, while making it difficult for the child to pose as 
the parent; when combined with responsible data disposal practices, 
this method also protects the parent's information against 
unauthorized use or disclosure. See Facebook (comment 50, 2011 
NPRM), at 9; see also kidSAFE Seal Program (comment 81, 2011 NPRM), 
at 16.
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    Other commenters expressed concern that allowing operators to 
collect sensitive government identification information from parents 
raises serious privacy implications.\209\ Many commenters opined that 
the serious risks to parents' privacy outweighed the benefits of the 
proposal.\210\ Some further argued that normalizing the use of this 
sensitive data for such a purpose would diminish users' alertness 
against identity theft schemes and other potentially nefarious 
uses.\211\
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    \209\ Intel and the Marketing Research Association cautioned the 
Commission to avoid sending mixed messages about using such 
sensitive information while at the same time advising operators to 
adhere to principles of data minimization. Intel (comment 72, 2011 
NPRM), at 7; Marketing Research Association (comment 97, 2011 NPRM), 
at 3.
    \210\ See Institute for Public Representation (comment 71, 2011 
NPRM), at 42; see also TechFreedom (comment 159, 2011 NPRM), at 8 
(requiring users to go through an age verification process would 
lead to a loss of personal privacy); New York Intellectual Property 
Law Association (comment 117, 2011 NPRM), at 3 (parents' privacy 
rights should not needlessly be put at risk in order to protect 
their children's privacy).
    \211\ See CDT (comment 17, 2011 NPRM), at 9; A. Thierer (comment 
162, 2011 NPRM), at 8.
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    As the federal agency at the forefront of improving privacy 
protections for consumers, the Commission is sensitive to the privacy 
concerns raised by the comments. The Commission is also aware that both 
operators and parents benefit from having a choice of several 
acceptable methods for verifiable parental consent. Moreover, the 
Commission is not compelling any operator to use this method. The 
Commission believes that, on balance, government-issued ID provides a 
reliable and simple means of verifying that the person providing 
consent is likely to be the parent, and that the requirement that 
operators delete such data immediately upon verification substantially 
minimizes the privacy risk associated with that collection. Therefore, 
the Commission adopts this method among the Rule's non-exhaustive list 
of acceptable consent methods.\212\
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    \212\ kidSAFE Seal Program asked the Commission to consider 
whether operators can retain parents' verification information as 
proof that the verification occurred. See kidSAFE Seal Program 
(comment 81, 2011 NPRM), at 16. With regard to credit card 
information or government-issued identifiers, the Commission would 
consider whether an operator had retained a sufficiently truncated 
portion of the data as to make it recognizable to the parent but 
unusable for any other purpose.
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3. Credit Cards
    The 2011 NPRM also proposed including the term ``monetary'' to 
modify ``transaction'' in connection with use of a credit card to 
verify parental consent. This added language was intended to make clear 
the Commission's long-standing position that the Rule limits use of a 
credit card as a method of parental consent to situations involving 
actual monetary transactions.\213\ The Commission received one comment 
specifically addressing this proposed language; EPIC supported the 
change as correctly limiting the circumstances under which

[[Page 3988]]

credit cards can be used as verification. The final Rule incorporates 
this change, stating ``credit card in connection with a monetary 
transaction.'' \214\
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    \213\ See 71 FR at 13247, 13253, 13254 (Mar. 15, 2006) 
(requirement that the credit card be used in connection with a 
transaction provides extra reliability because parents obtain a 
transaction record, which is notice of the purported consent, and 
can withdraw consent if improperly given); Fed. Trade Comm'n, 
Frequently Asked Questions about the Children's Online Privacy 
Protection Rule, Question 33, available at http://www.ftc.gov/privacy/coppafaqs.shtm#consent.
    \214\ But see Part II.C.4., infra. Several comments note that 
some alternative payment systems, such as the use of a username and 
password in the iTunes store, afford equal notice and protections to 
parents for both paid and unpaid transactions by providing the 
primary account holder with a separate, contemporaneous notification 
of each discrete transaction.
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4. Alternative Online Payment Systems
    At the outset of the Rule review, the Commission sought comment on 
whether to consider modifying the Rule to include alternative online 
payment systems, in addition to credit cards, as an acceptable means of 
verifying parental consent in connection with a monetary transaction. 
The Commission stated in the 2011 NPRM that, at such time, the record 
was insufficient to support a proposal to permit the use of alternative 
online payment systems for this purpose. The NPRM also indicated that 
the Commission was mindful of the potential for children's easy access 
to, and use of, alternative forms of payments (such as gift cards, 
debit cards, and online accounts). Thus, the Commission welcomed 
further discussion of the risks and benefits of using electronic 
payment methods as a consent mechanism.
    Several commenters to the 2011 NPRM asked the Commission to 
reconsider its position that online payment systems are not yet 
reliable enough to provide verifiable parental consent, arguing that 
certain online payment options can meet the same stringent criteria as 
credit cards.\215\ In particular, Scholastic stressed the importance to 
operators, particularly in the context of digital apps and other 
downloadable content, of providing customers the flexibility to use 
various convenient electronic payment methods. Scholastic urged the 
Commission to amend the Rule to provide that payment methods other than 
credit cards, such as debit cards and electronic payment systems, can 
satisfy the Rule's consent mechanism requirements if they provide 
separate notification of each discrete monetary transaction to the 
primary account holder.\216\
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    \215\ See, e.g., Association for Competitive Technology (comment 
5, 2011 NPRM), at 7; DMA (comment 37, 2011 NPRM), at 23; eBay 
(comment 40, 2011 NPRM), at 3-4; kidSAFE (comment 81, 2011 NPRM), at 
16; Scholastic (comment 144, 2011 NPRM), at 9-10.
    \216\ Other commenters similarly urged that the Rule permit the 
use of alternate payment systems, where such systems are tied to a 
valid credit card account, require the user to enter a password, and 
provide the primary account holder with clear notification of each 
transaction through email confirmation. See Association for 
Competitive Technology (comment 5, 2011 NPRM), at 7; kidSAFE 
(comment 81, 2011 NPRM), at 16; see also eBay (comment 40, 2011 
NPRM), at 3-4 (indicating its interest in leveraging PayPal business 
model to implement a youth account program directly linking 
children's accounts to verified parent accounts).
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    The Commission, upon review of all of the relevant comments, is 
persuaded that it should allow the use of other payment systems, in 
addition to credit cards, provided that any such payment system can 
meet the same stringent criteria as a credit card. As Scholastic 
articulated in its comment, the Rule should allow operators to use any 
electronic or online payment system as an acceptable means of obtaining 
verifiable parental consent in connection with a monetary transaction 
where (just as with a credit card) the payment system is used in 
conjunction with a direct notice meeting the requirements of Sec.  
312.4(c) and the operator provides notification of each discrete 
monetary transaction to the primary account holder. Accordingly, Sec.  
312.5(b)(2) of the final Rule includes the following language 
``requiring a parent, in connection with a monetary transaction, to use 
a credit card, debit card, or other online payment system that provides 
notification of each discrete transaction to the primary account 
holder.''
5. Electronic or Digital Signatures
    In response to the 2010 FRN, several commenters recommended that 
the Commission accept electronic or digital signatures as a form of 
verifiable consent.\217\ In the 2011 NPRM, the Commission concluded 
that the term ``electronic signature'' has many meanings, ranging from 
``an electronic sound, symbol, or process, attached to or logically 
associated with a contract or other record and executed or adopted by a 
person with the intent to sign the record,'' \218\ to an electronic 
image of the stylized script associated with a person. The Commission 
determined that electronic signatures, without more indicia of 
reliability, were problematic in the context of COPPA's verifiable 
parental consent requirement.\219\ The NPRM welcomed further comment on 
how to enhance the reliability of these convenient methods.
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    \217\ See DMA (comment 17, 2010 FRN), at 12; EchoSign (comment 
18, 2010 FRN); ESA (comment 20, 2010 FRN), at 10; Toy Industry 
Association (comment 63, 2010 FRN), at 11. For instance, the ESA 
proposed that the Commission incorporate a ``sign and send'' method, 
given that numerous commonly available devices allow users to input 
data by touching or writing on the device's screen.
    \218\ See Electronic Signatures in Global and National Commerce 
Act, 15 U.S.C. 7006(5).
    \219\ See 2011 NPRM at 59818. (The Commission indicated several 
concerns about allowing electronic signatures, including that, given 
the proliferation of mobile devices among children and the ease with 
which children could sign and return an on-screen consent, such 
mechanisms may not ``ensure that the person providing consent is the 
child's parent.'' The Commission also noted that, although the law 
recognizes electronic signatures for the assertion that an 
individual signed a document, they do not necessarily confirm the 
underlying identity of the individual signing the document).
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    In commenting on the 2011 NPRM, several commenters asked the FTC to 
reconsider the utility of electronic signatures in the online 
world.\220\ The Commission has determined not to include electronic or 
digital signatures within the non-exhaustive list of acceptable consent 
mechanisms provided for in Sec.  312.5, given the great variability in 
the reliability of mechanisms that may fall under this description. For 
instance, the Commission believes that simple digital signatures, which 
only entail the use of a finger or stylus to complete a consent form, 
provide too easy a means for children to bypass a site or service's 
parental consent process, and thus do not meet the statutory standard 
of ``reasonably calculated, in light of available technology, to ensure 
that the person providing consent is the child's parent.'' \221\ 
However, the Rule would not prohibit an operator's acceptance of a 
digitally signed consent form where the signature provides other 
indicia of reliability that the signor is an adult, such as an icon, 
certificate, or seal of authenticity that accompanies the signature. At 
the same time, the Commission does not seek to limit or proscribe other 
types of digital signatures that may also meet the statutory standard. 
For these reasons, digital or electronic signatures are not included 
within the Rule's non-

[[Page 3989]]

exhaustive list of parental consent mechanisms.
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    \220\ See, e.g., DMA (comment 37, 2011 NPRM), at 23 (Congress 
passed ESIGN Act over a decade ago and consumers prefer completing 
transactions online with digital signatures over using cumbersome 
offline processes); ESA (comment 47, 2011 NPRM), at 22-23 
(electronic sign-and-send method meets the statutory standard of 
``reasonably calculated, in light of available technology, to ensure 
that the person providing consent is the child's parent,'' while 
accommodating parents' use of tablet, mobile device, and small-
screen technologies lacking computer peripherals such as printers or 
scanners); TechFreedom (comment 159, 2011 NPRM), at 8 (urging 
Commission to promote development of solutions such as electronic 
signatures now, rather than wait for next Rule revision).
    \221\ While the Commission recognizes that some children also 
may circumvent the Rule's parental notice and consent mechanisms by 
signing and sending parental consent forms through mail, fax, or 
electronic scan, it believes these methods clearly are not as simple 
for the child as using a computer or handheld device to instantly 
pen and send a signature.
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6. Platform Methods of Parental Consent
    In response to the 2010 FRN, several commenters asked the 
Commission to consider whether, and in what circumstances, parental 
control features in game consoles, and presumably other devices, could 
be used to provide notice to parents and obtain verified consent under 
COPPA.\222\ In the 2011 NPRM, the Commission acknowledged that parental 
control features can offer parents a great deal of control over a 
child's user experience and can serve as a complement to COPPA's 
parental consent requirements. However, the Commission concluded that, 
at that time, it did not appear that any such systems were adequately 
designed to comply with COPPA, and that the record was insufficient for 
it to determine whether a hypothetical parental consent mechanism would 
meet COPPA's verifiable parental consent standard. The Commission, in 
the 2011 NPRM, encouraged continued exploration of the concept of using 
parental controls in gaming consoles and other devices to notify 
parents and obtain their prior verifiable consent.\223\
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    \222\ See ESA (comment 20, 2010 FRN), at 4; Microsoft (comment 
39, 2010 FRN), at 7.
    \223\ 2011 NPRM, 76 FR 59818 (Sept. 27, 2011), available at 
http://ftc.gov/os/2011/09/110915coppa.pdf.
---------------------------------------------------------------------------

    In response to both the 2011 NPRM and the 2012 SNPRM, numerous 
stakeholders, including several platform providers, Web site and app 
developers, and child and privacy advocates, asked the Commission to 
consider modifications to the Rule to make clear that operators can 
choose to use a common mechanism--administered by a platform, gaming 
console, device manufacturer, COPPA safe harbor program,\224\ or other 
entity--for the purpose of providing notice and obtaining parental 
consent for multiple operators simultaneously.\225\
    Commenters offered a variety of proposals. For instance, several 
commenters envisioned that platform providers could provide a general 
notice and obtain consent to collect personal information for those 
purposes specified in the general notice, and that app developers 
wanting to collect or use information in ways differing from the 
general notice would need to independently provide a second separate 
notice to parents and obtain their consent.\226\ Facebook proposed that 
operators may also use such common consent mechanisms to meet other 
COPPA obligations, such as providing parental access to children's data 
collected by operators.\227\ The Walt Disney Company proposed two 
possible mechanisms: a `` `Kids Privacy Portal'--through which parents 
can express privacy preferences in one place for multiple online 
activities,'' or a joint agreement between the platform operator and 
application providers ``that determines how data will be collected and 
used, and how parents exercise control.'' \228\ The Entertainment 
Software Association (``ESA'') proposed a similar program for video 
game platforms whereby consoles or hand-held device makers could 
leverage their existing parental controls technologies.\229\
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    \224\ The Commission notes that Privo, Inc., one of the approved 
COPPA safe harbors, offers the option to its members to have Privo 
administer notice and consent programs for member operators.
    \225\ See, e.g., P. Aftab (comment 1, 2012 SNPRM), at 7; 
Association for Competitive Technology (comment 5, 2011 NPRM), at 7-
8 and (comment 7, 2012 SNPRM), at 8; Computer and Communications 
Industry Association (``CCIA'') (comment 27, 2011 NPRM), at 7-8; CDT 
(comment 15, 2012 SNPRM), at 5-6; Connect Safely (comment 21, 2012 
SNPRM), at 3; ESA (comment 47, 2011 NPRM), at 21-26; Facebook 
(comment 33, 2012 SNPRM), at 18-20; Future of Privacy Forum (comment 
55, 2011 NPRM), at 5-6 and (comment 37, 2012 SNPRM), at 3-6; 
Microsoft (comment 107, 2011 NPRM), at 13-15 and (comment 66, 2012 
SNPRM), at 6; Novachi, Inc. (comment 119, 2011 NPRM); SIIA (comment 
150, 2011 NPRM), at 10-12; TechFreedom (comment159, 2011 NPRM), at 7 
and (comment 88, 2012 SNPRM), at 13; The Walt Disney Co. (comment 
170, 2011 NPRM), at 17-19.
    \226\ See, e.g., Association for Competitive Technology (comment 
5, 2011 NPRM), at 7-8 and (comment 7, 2012 SNPRM), at 8; CCIA 
(comment 27, 2011 NPRM), at 7-8; Facebook (comment 33, 2012 SNPRM), 
at 18-20; Future of Privacy Forum (comment 55, 2011 NPRM), at 5-6 
and (comment 37, 2011 SNPRM), at 3-6; Microsoft (comment 107, 2011 
NPRM), at 13-15 and (comment 66, 2012 SNPRM), at 13; SIIA (comment 
150, 2011 NPRM), at 10-12. Future of Privacy Forum's 2012 comment 
included proposed Rule language. See also NetChoice (comment 70, 
2012 SNPRM), at 12 (proposing Rule language to clarify that COPPA 
allows for the use of common consent mechanisms).
    \227\ Facebook (comment 33, 2012 SNPRM), at 18-19.
    \228\ The Walt Disney Co. (comment 170, 2011 NPRM), at 18.
    \229\ ESA contemplates that the platforms would provide a notice 
``that makes it clear that the child's personal information will be 
disclosed to third-party game publishers and application providers 
who may collect, use, and disclose such information through the 
console or handheld in order to provide a joint or related 
service,'' and that parental consent ``might be effective across any 
of the console or handheld maker's related video game platforms and 
Web sites clearly referenced in the console or handheld maker's 
privacy policy.'' ESA (comment 47, 2011 NPRM), at 26. Other 
proposals for common consent mechanisms included outsourcing the 
process to identity management services, which operators could 
access through open technology standards. See Novachi (comment 119, 
2011 NPRM). CDT acknowledged the potential utility of platform-based 
outsourcing notice and consent, provided that the Commission 
required additional safeguards for common consent mechanisms, 
including parental controls for the ongoing management of consent. 
CDT (comment 15, 2012 SNPRM), at 5-6.
---------------------------------------------------------------------------

    Commenters cited several potential benefits of common consent 
mechanisms, including: (1) Encouraging the development of interactive 
content for children by easing the burden individualized notice and 
consent places on operators, especially in the context of mobile apps 
\230\; (2) focusing parental attention on one streamlined notice rather 
than on multiple, confusing, notices \231\; and (3) promoting privacy 
by eliminating the need for each of these other operators to separately 
collect online contact information from the child in order to obtain 
parental consent.\232\ The Center for Democracy and Technology 
acknowledges that, while not all parents may want to delegate to 
platforms the authority to get consent on behalf of individual 
operators, ``others may want to empower their kids to share and obtain 
information through certain applications without being forced to sign 
off on every interaction with a new web service.'' \233\
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    \230\ See, e.g., CCIA (comment 27, 2011 NPRM), at 7-8 (stating 
that platform-based consent programs would ``promote COPPA's goals'' 
by encouraging developers ``who do not have the resources to 
independently acquire verifiable parental consent'' to create 
content and services for children; see also ConnectSafely.org 
(comment 21, 2012 SNPRM), at 3; P. Aftab (comment 1, 2012 SNPRM), at 
7; Tech Freedom (comment 159, 2011 NPRM), at 7.
    \231\ For example, Microsoft stated that common consent 
mechanisms ``would benefit parents because requiring each third 
party separately to obtain parental consent could be confusing, 
overwhelming, and costly for parents.'' Microsoft (comment 66, 2012 
SNPRM), at 6.
    \232\ Microsoft, id.; see also CCIA (comment 27, 2011 NPRM), at 
8; Facebook (comment 33, 2012 SNPRM), at 19 (``A rule that enables 
operators to leverage a common platform for notice and consent would 
substantially advance the Commission's goal of ensuring that parents 
receive clear, understandable, and manageable information; it would 
also minimize the practical and economic costs to parents as a 
result of multiple consent requests.''); TechAmerica (comment 87, 
2012 SNPRM), at 8.
    \233\ CDT (comment 15, 2012 SNPRM), at 6.
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    The Commission believes that common consent mechanisms, such as a 
platform, gaming console, or a COPPA safe harbor program, hold 
potential for the efficient administration of notice and consent for 
multiple operators. A well-designed common mechanism could benefit 
operators (especially smaller ones) and parents alike if it offers a 
proper means for providing notice and obtaining verifiable parental 
consent, as well as ongoing controls for parents to manage their 
children's accounts.\234\ The Commission believes

[[Page 3990]]

that such methods could greatly simplify operators' and parents' 
abilities to protect children's privacy.
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    \234\ Under the system proposed by the Future of Privacy Forum, 
parents would be apprised of a common set of information practices 
to which they could consent on an aggregate basis, then would 
receive individualized notices for additional practices that go 
beyond those outlined in the common notice. The platform would also 
ensure that parents have access to easy mechanisms through which to 
retract their consent to the child's use of any particular site or 
service. Future of Privacy Forum (comment 37, 2012 SNPRM), at 4-6.
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    Despite the potential benefits, the Commission declines, at this 
time, to adopt a specific provision for the following reasons. First, 
even without an express reference in the Rule to such a process, 
nothing forecloses operators from using a common consent mechanism so 
long as it meets the Rule's basic notice and consent requirements.\235\ 
Second, the Commission did not specifically seek comment on this 
precise issue; nor has it proposed any language in either the NPRM or 
the SNPRM to address this point. Accordingly, the Commission is 
reluctant to adopt specific language without the benefit of notice and 
comment on such language to explore all potential legal and practical 
challenges of using a common consent mechanism.\236\ Finally, the 
Commission believes that parties interested in using a common consent 
mechanism have the option to participate in the voluntary Commission 
approval process set forth in Section 312.5(3) of the final Rule.\237\ 
That process would enable the Commission to evaluate, and other 
interested parties to publicly comment upon, such proposals in an 
effort to bring to market sound and practical solutions that will serve 
a broad base of operators.
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    \235\ As noted in note 219, supra, one such common consent 
mechanism is currently provided by an approved COPPA safe harbor, 
and there may be others already in operation as well.
    \236\ The Commission would want to explore further the 
difficulties of making sure the notice accurately reflects each 
individual operator's information practices; how to provide parents 
with a means to access the operator's privacy policy with regard to 
information collected from children; and giving parents controls 
sufficient to refuse to permit an operator's further use or future 
collection of their child's personal information, and to direct the 
operator to delete the child's personal information and or disable 
the child's account with that operator.
    \237\ See Part II.C.8., infra.
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7. The Sliding Scale (``Email Plus'') Method
    In conducting the Rule review, the Commission sought comment on 
whether the sliding scale set forth in Sec.  312.5(b)(2) remains a 
viable approach to verifiable parental consent.\238\ Under the sliding 
scale, an operator, when collecting personal information only for its 
internal use, may obtain verifiable parental consent through an email 
from the parent, so long as the email is coupled with an additional 
step.\239\ Such an additional step has included obtaining a postal 
address or telephone number from the parent and confirming the parent's 
consent by letter or telephone call, or sending a delayed confirmatory 
email to the parent after receiving consent.\240\ The purpose of the 
additional step is to provide greater assurance that the person 
providing consent is, in fact, the parent. This consent method is often 
called ``email plus.'' \241\
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    \238\ See 2010 Rule Review, supra note 6, at 17091.
    \239\ The sliding scale approach was adopted in the Rule in 
response to comments that stated that internal uses of information, 
such as marketing to children, presented less risk than external 
disclosures of the information to third parties or through public 
postings. See 1999 Statement of Basis and Purpose, 64 FR at 59901. 
Other internal uses of children's personal information may include 
sweepstakes, prize promotions, child-directed fan clubs, birthday 
clubs, and the provision of coupons.
    \240\ The Commission notes that, assuming an operator has 
obtained a parent's mobile phone number from the parent in response 
to the first email, confirmation of a parent's consent may done via 
an SMS or MMS text to the parent.
    \241\ By contrast, for uses of personal information that involve 
disclosing the information to the public or third parties, the Rule 
requires operators to use more reliable methods of obtaining 
verifiable parental consent, including but not limited to those 
identified in Sec.  312.5(b)(1).
---------------------------------------------------------------------------

    In adopting the sliding scale approach in 1999, the Commission 
recognized that the email plus method was not as reliable as the other 
enumerated methods of verifiable parental consent.\242\ However, it 
believed that this lower cost option was acceptable as a temporary 
option, in place until the Commission determined that more reliable 
(and affordable) consent methods had adequately developed.\243\ In 
2006, the Commission extended use of the sliding scale indefinitely, 
stating that the agency would continue to monitor technological 
developments and modify the Rule should an acceptable electronic 
consent technology develop.\244\
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    \242\ 64 FR at 59902 (``[E]mail alone does not satisfy the COPPA 
because it is easily subject to circumvention by children.'').
    \243\ See id. at 59901 (``The Commission believes it is 
appropriate to balance the costs imposed by a method against the 
risks associated with the intended uses of the information 
collected. Weighing all of these factors in light of the record, the 
Commission is persuaded that temporary use of a ``sliding scale'' is 
an appropriate way to implement the requirements of the COPPA until 
secure electronic methods become more available and affordable.'').
    \244\ See 71 FR at 13247, 13255, 13254 (Mar. 15, 2006).
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    Email plus has enjoyed wide appeal among operators, who credit its 
simplicity.\245\ The Commission sought comment in response to the 2010 
FRN and at the June 2010 public roundtable on whether to retain email 
plus in the final Rule. Numerous commenters to the 2010 FRN, including 
associations who represent operators, supported the continued retention 
of this method as a low-cost means to obtain parents' consent.\246\ At 
the same time, several commenters, including safe harbor programs and 
proponents of new parental consent mechanisms, challenged the method's 
reliability, given that operators have no real way of determining 
whether the email address a child provides is that of the parent, and 
there is no requirement that the parent's email response to the 
operator contain any additional information providing assurance that it 
is from a parent.\247\
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    \245\ See WiredSafety.org (comment 68, 2010 FRN), at 21 (``We 
all assumed [email plus] would be phased out once digital signatures 
became broadly used. But when new authentication models and 
technologies failed to gain in parental adoption, it was continued 
and is in broad use for one reason--it's simple.'').
    \246\ See R. Newton, Remarks from Emerging Parental Verification 
Access and Methods Panel at the Federal Trade Commission's 
Roundtable: Protecting Kids' Privacy Online at 211-13 (June 2, 
2010), available at http://www.ftc.gov/bcp/workshops/coppa/COPPARuleReview_Transcript.pdf; DMA (comment 17, 2010 FRN), at 10; 
IAB (comment 34, 2010 FRN), at 2; R. Newton (comment 46, 2010 FRN), 
at 3; PMA (comment 51, 2010 FRN), at 4-5; Toy Industry Association, 
Inc. (comment 63, 2010 FRN), at 8.
    \247\ See Privo, Inc. (comment 50, 2010 FRN), at 5 (``the 
presentation of a verified email is much less reliable if there is 
virtually no proofing or analyzing that goes on to determine who the 
email belongs to''); RelyId (comment 53, 2010 FRN), at 3 (``The 
email plus mechanism does not obtain verifiable parental consent at 
all. It simply does not ensure that a parent `authorizes' anything 
required by the COPPA statute. The main problem with this approach 
is that the child can create an email address to act as the supposed 
parent's email address, send the email from that address, and 
receive the confirmatory email at that address.''); see also D. 
Tayloe and P. Spaeth, Remarks from Federal Trade Commission's 
Roundtable: Protecting Kids' Privacy Online, at 215-17 (email plus 
is very unreliable).
---------------------------------------------------------------------------

    In the 2011 NPRM, the Commission proposed eliminating email plus as 
a means of obtaining parental consent. The Commission considered 
whether operators' continued reliance on email plus may have inhibited 
the development of more reliable methods of obtaining verifiable 
parental consent. The Commission also made clear that, although 
internal uses may pose a lower risk of misuse of children's personal 
information than the sharing or public disclosure of such information, 
all collections of children's information merit strong verifiable 
parental consent.
    Several commenters supported the Commission's proposal to eliminate 
email plus. These commenters opined that children can easily circumvent 
email plus and thus, that it is not

[[Page 3991]]

sufficiently effective to meet the statutory requirement of being 
reasonably calculated to ensure that it is the parent providing 
consent.\248\ Some of these commenters also echoed the Commission's 
concern that operators' continued reliance on email plus is a 
disincentive to innovation.\249\
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    \248\ See K. Dennis, AssertID (comment 34, 2011 NPRM), at 2; 
AssertID (comment 6, 2012 SNPRM), at 1; TRUSTe (comment 164, 2011 
NPRM), at 11; EPIC (comment 41, 2011 NPRM), at 9; Institute for 
Public Representation (comment 71, 2011 NPRM), at 41; S. Leff, 
WhooGoo (comment 60, 2012 SNPRM).
    \249\ See AssertID, supra note 248; Institute for Public 
Representation, supra note 248.
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    A majority of the comments, however, strongly urged the Commission 
to retain email plus.\250\ Several commenters indicated that email plus 
remains a widely used and valuable tool for communicating with parents 
and obtaining consent. These commenters maintained that email plus is 
easy for companies and parents to use, easy to understand, effective, 
and affordable.\251\ In addition, several commenters expressed concern 
that other approved methods for obtaining consent would impose 
significant burdens on operators and parents.\252\ Commenters also 
questioned whether other methods for verifiable parental consent are 
any more reliable than email plus.\253\ Finally, several commenters 
challenged the FTC's assumption that eliminating email plus would spur 
further innovation in parental consent mechanisms.\254\
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    \250\ See, e.g., American Association of Advertising Agencies 
(comment 2, 2011 NPRM); Association of Educational Publishers 
(comment 7, 2011 NPRM); ATT (comment 8, 2011 NPRM); d. boyd (comment 
13, 2011 NPRM); DMA (comment 37, 2011 NPRM); ESA (comment 47, 2011 
NPRM); Internet Commerce Coalition (comment 74, 2011 NPRM); kidSAFE 
Seal Program (comment 81, 2011 NPRM); Magazine Publishers of America 
(comment 61, 2012 SNPRM); Marketing Research Association (comment 
97, 2011 NPRM); R. Newton (comment 118, 2011 NPRM); N. Savitt 
(comment 142, 2011 NPRM); Scholastic (comment 144, 2011 NPRM).
    \251\ See, e.g., Association of Educational Publishers (comment 
7, 2011 NPRM), at 1 (email plus is effective way to balance parental 
involvement with children's freedom to pursue educational 
experiences online); Scholastic (comment 144, 2011 NPRM), at 3 
(email plus strikes a balance between the ease of getting consent 
and low safety risk to children from internal use of their data); 
Toy Industry Association (comment 163, 2011 NPRM), at 4-5 (similar 
cost-effective and efficient technologies to replace this method 
have not yet been developed); NCTA (comment 113, 2011 NPRM), at 20 
(termination of email plus will have negative consequences and leave 
operators with no viable alternative); Privo (comment 132, 2011 
NPRM), at 2 (email plus is a reasonable approach that can be 
understood by all constituents); d. boyd (comment 13, 2011 NPRM), at 
5-6 (email plus imposes fewer burdens on families, particular low-
income and immigrant families, than other available mechanisms); DMA 
(comment 37, 2011 NPRM), at 21 (elimination of email plus would 
create economic challenges in a difficult economic time).
    \252\ See Association for Competitive Technology (comment 7, 
2012 SNPRM), at 6 (FTC should not remove easy to understand email 
plus without finding ways to make parental consent simpler); Toy 
Industry Association (comment 89, 2012 SNPRM), at 15 (the 
alternatives to email plus are not likely to be useful, effective, 
or cost-effective); see also American Association of Advertising 
Agencies (comment 2, 2011 NPRM), at 2 (this could result in a major 
reduction in parental consents obtained, solely due to 
burdensomeness of process); Association of Educational Publishers 
(comment 7, 2011 NPRM), at 2 (methods such as print, fax, or scan 
impede timely access to online resources; requiring credit cards or 
identification imposes barriers that may alienate parents; and other 
mechanisms impose financial costs on operators that may result in 
less free content); ESA (comment 47, 2011 NPRM), at 17-18 (requiring 
other methods of consent will make it harder to offer children 
robust content; no public benefit in requiring operators to make the 
costly changeover to other mechanisms); Scholastic (comment 144, 
2011 NPRM), at 5-6 (credit card use is not an option for Scholastic, 
which offers free services; existing options are cumbersome and slow 
for parents and operators, and newly proposed options are less 
privacy protective, affordable, or accessible than email plus); 
TechFreedom (comment 159, 2011 NPRM), at 7-8 (making parental 
consent more difficult to obtain would disproportionately burden 
smaller players in the market and retard new entry); Wired Trust 
(comment 177, 2011 NPRM), at 5 (eliminating email plus will likely 
result in reduction in innovative and valuable online features for 
children).
    \253\ See d. boyd (comment 13, 2011 NPRM), at 6 (no data to 
suggest that children are evading email plus more than other consent 
mechanisms); Scholastic (comment 144, 2011 NPRM), at 8 (no evidence 
that proposed methods are significantly more reliable); see also 
kidSAFE Seal Program (comment 81, 2011 NPRM), at 13-14 (the 
Commission has not shown any harm to children due to use of email 
plus); SIIA (comment 150, 2011 NPRM), at 12-13 (proposing that only 
a small percentage of children are likely to falsify parental 
consent).
    \254\ See, e.g., ACT (comment 7, 2012 SNPRM), at 6; Internet 
Commerce Coalition (comment 74, 2011 NPRM), at 5; Marketing Research 
Association (comment 97, 2011 NPRM), at 3; A. Thierer (comment 162, 
2011 NPRM), at 7; WiredTrust (comment 177, 2011 NPRM), at 5.
---------------------------------------------------------------------------

    The Commission is persuaded by the weight of the comments that 
email plus, although imperfect, remains a valued and cost-effective 
consent mechanism for certain operators. Accordingly, the final Rule 
retains email plus as an acceptable consent method for operators 
collecting personal information only for internal use. Nevertheless, 
the Commission continues to believe that email plus is less reliable 
than other methods of consent, and is concerned that, twelve years 
after COPPA became effective, so many operators rely upon what was 
supposed to be a temporary option. The Commission is also concerned 
about perpetuating for much longer a distinction between internal and 
external uses of personal information that the COPPA statute does not 
make. Thus, the Commission strongly encourages industry to innovate to 
create additional useful mechanisms as quickly as possible.
8. Voluntary Process for Commission Approval of Parental Consent 
Mechanisms
    Under the Rule, methods to obtain verifiable parental consent 
``must be reasonably calculated, in light of available technology, to 
ensure that the person providing consent is the child's parent.'' \255\ 
The Rule thus provides operators with the opportunity to craft consent 
mechanisms that meet this standard but otherwise are not enumerated in 
paragraph (b)(2) of Sec.  312.5. Nevertheless, the recent Rule review 
process revealed that, whether out of concern for potential liability, 
ease of implementation, or lack of technological developments, 
operators have been reluctant to utilize consent methods other than 
those specifically set forth in the Rule.\256\ As a result, little 
technical innovation in the area of parental consent has occurred.
---------------------------------------------------------------------------

    \255\ See 16 CFR 312.5(b)(1).
    \256\ The June 2, 2010 Roundtable and the public comments 
reflect a tension between operators' desire for new methods of 
parental verification and their hesitation to adopt consent 
mechanisms other than those specifically enumerated in the Rule. See 
Remarks from Federal Trade Commission's Roundtable: Protecting Kids' 
Privacy Online at 226-27 (June 2, 2010), available at http://www.ftc.gov/bcp/workshops/coppa/COPPARuleReview_Transcript.pdf; CDT 
(comment 8, 2010 FRN), at 3 (``innovation in developing procedures 
to obtain parental consent has been limited as Web sites choose to 
use the methods suggested by the FTC out of fear that a more 
innovative method could lead to liability'').
---------------------------------------------------------------------------

    To encourage the development of new consent mechanisms, and to 
provide transparency regarding consent mechanisms that may be proposed, 
the Commission in the 2011 NPRM proposed establishing a process in the 
Rule through which parties may, on a voluntary basis, seek Commission 
approval of a particular consent mechanism. Applicants who seek such 
approval would be required to present a detailed description of the 
proposed parental consent mechanism, together with an analysis of how 
the mechanism meets the requirements of Sec.  312.5(b)(1) of the Rule. 
The Commission would publish the application in the Federal Register 
for public comment, and approve or deny the applicant's request in 
writing within 180 days of its filing.
    The NPRM stated the Commission's belief that this new approval 
process, aided by public input, would allow the Commission to give 
careful consideration, on a case-by-case basis, to new forms of 
obtaining consent as they develop in the marketplace. The Commission 
also noted that the new process would increase transparency by 
publicizing approvals or rejections of particular consent mechanisms, 
and

[[Page 3992]]

should encourage operators who may previously have been tentative about 
exploring technological advancements to come forward and share them 
with the Commission and the public.
    The Commission received several comments expressing support for the 
concept of a voluntary Commission approval process for new consent 
mechanisms.\257\ At the same time, several commenters that supported 
the concept also opined that the 180-day approval period was too 
lengthy and would likely to discourage use of the program.\258\ 
Commenters also expressed concerns that applications for approval would 
be subject to public comment.\259\ One commenter asked the Commission 
instead to consider publicly releasing a letter explaining the 
Commission's decision to approve or disapprove a mechanism and thereby 
signaling what is an acceptable consent mechanism, without causing 
undue delay or risking the disclosure of proprietary information.\260\
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    \257\ See CCIA (comment 27, 2011 NPRM), at 6 (voluntary approval 
mechanism is an ``excellent step'' to encourage innovation, provide 
assurance to potential operators, and ensure parents' 
participation); Yahoo! (comment 180, 2011 NPRM), at 4 (streamlined 
approval process for new mechanisms is critical to encouraging 
innovation); see also Consumers Union (comment 29, 2011 NPRM), at 5; 
FOSI (comment 51, 2011 NPRM), at 7; kidSAFE Seal Program (comment 
81, 2011 NPRM), at 16.
    \258\ See, e.g., CCIA (comment 27, 2011 NPRM), at 6 (process 
must be completed more quickly in order to be useful to industry); 
Facebook (comment 50, 2011 NPRM), at 14 (Commission's extensive 
experience with COPPA should enable its more expeditious approval or 
disapproval of new mechanisms).
    \259\ See, e.g., CCIA (comment 27, 2011 NPRM), at 6 (while 
public comment is important, the Commission should consider ``an 
alternate private track'' for consent mechanisms involving 
proprietary technology or a competitive advantage); Facebook 
(comment 50, 2011 NPRM), at 15 (public comment requirement could 
negatively affect economic incentives for innovation where rival 
operators might be able to copy the mechanism).
    \260\ Facebook (comment 50, 2011 NPRM), at 15.
---------------------------------------------------------------------------

    One commenter opposed to the voluntary approval process asserted 
that it would be ultra vires to the COPPA statute and would create a de 
facto requirement for FTC approval of any new consent mechanisms, 
thereby discouraging operators from developing or using new means not 
formally approved by the Commission.\261\ The Commission does not 
believe that offering operators the opportunity to apply for a 
voluntary approval process will either de facto create an additional 
COPPA requirement or chill innovation. This is just one more option 
available to operators.
---------------------------------------------------------------------------

    \261\ DMA (comment 37, 2011 NPRM), at 24.
---------------------------------------------------------------------------

    The Commission also is persuaded by the comments requesting that it 
shorten the 180-day approval period. Accordingly, the final Rule's 
provision for Commission approval of parental consent mechanisms 
provides that the Commission shall issue a written determination within 
120 days of the filing of the request. The Commission anticipates that 
some commenters will find that this time period also is longer than 
desired; however, it sets a reasonable time frame in which to solicit 
public comment and carefully determine whether a consent mechanism is 
sufficiently well-designed to fulfill the Rule's requirements.
    The Commission has determined not to alter the requirement that the 
proposed mechanisms undergo public review and comment. This is an 
important component of the approval process. Moreover, just as the 
Commission has done for COPPA safe harbor applicants, it would permit 
those entities that voluntarily seek approval of consent mechanisms to 
seek confidential treatment for those portions of their applications 
that they believe warrant trade secret protection. In the event an 
applicant is not comfortable with the Commission's determination as to 
which materials will be placed on the public record, it will be free to 
withdraw the proposal from the approval process.
    Accordingly, the Commission has amended the Rule to institute this 
voluntary approval process. For ease of organization, the Commission 
has created a new section--312.12 (``Voluntary Commission Approval 
Processes'')--to encompass both this approval process and the process 
for approval of additional activities under the support for internal 
operations definition.
9. Safe Harbor Approval of Parental Consent Mechanisms
    Several commenters urged the Commission to permit Commission-
approved safe harbor programs to serve as laboratories for developing 
new consent mechanisms.\262\ The Commission stated its agreement in the 
2011 NPRM that establishing such a system may aid the pace of 
development in this area. The Commission also stated that, given the 
measures proposed to strengthen Commission oversight of safe harbor 
programs, allowing safe harbors to approve new consent mechanisms would 
not result in the loosening of COPPA's standards for parental consent. 
Thus, the 2011 NPRM included a proposed Rule provision stating that 
operators participating in a Commission-approved safe harbor program 
may use any parental consent mechanism deemed by the safe harbor 
program to meet the general consent standard set forth in Sec.  
312.5(b)(1). Although one commenter expressed concern that this would 
lead to a ``race to the bottom'' by safe harbor programs,\263\ most of 
the comments were favorable.\264\ Moreover, the Commission believes its 
added oversight will prevent any ``race to the bottom'' efforts. 
Accordingly, the Commission adopts this provision unchanged from its 
September 2011 proposal.
---------------------------------------------------------------------------

    \262\ See MPAA (comment 42, 2010 FRN), at 12; Rebecca Newton 
(comment 46, 2010 FRN), at 2; Privo (comment 50, 2010 FRN), at 2; 
PMA (comment 51, 2010 FRN), at 5; B. Szoka (comment 59, 2010 FRN), 
Szoka Responses to Questions for the Record, at 56; TRUSTe (comment 
64, 2010 FRN), at 3; see also generally WiredSafety.org (comment 68, 
2010 FRN), at 31-32.
    \263\ CommonSense Media (comment 26, 2011 NPRM), at 16 (raising 
concern that safe harbor providers may ``race to the bottom'' to 
offer operators low-cost consent programs with low standards of 
verifiable consent, unless the Commission requires safe harbors to 
publicly disclose their approvals and report them to the FTC).
    \264\ See, e.g., eBay (comment 40, 2011 NPRM), at 4; kidSAFE 
Seal Program (comment 81, 2011 NPRM), at 16; TRUSTe (comment 164, 
2011 NPRM), at 11 (noting cost benefit to operators to get early 
review of mechanism at design or wireframe stage).
---------------------------------------------------------------------------

10. Exceptions to Prior Parental Consent
    The COPPA Act and the Rule address five fact patterns under which 
an operator may collect limited pieces of personal information from 
children prior to, or sometimes without, obtaining parental 
consent.\265\ These exceptions permit operators to communicate with the 
child to initiate the parental consent process, respond to the child 
once or multiple times, and protect the safety of the child or the 
integrity of the Web site.\266\ The 2011 NPRM proposed minor changes to 
the Rule to add one new exception.
---------------------------------------------------------------------------

    \265\ See 15 U.S.C. 6502(b)(2); 16 CFR 312.5(c).
    \266\ The Act and Rule currently permit the collection of 
limited personal information for the purposes of: (1) Obtaining 
verified parental consent; (2) providing parents with a right to 
opt-out of an operator's use of a child's email address for multiple 
contacts of the child; and (3) to protect a child's safety on a Web 
site or online service. See 15 U.S.C. 6502(b)(2); 16 CFR 
312.5(c)(1)-(5).
---------------------------------------------------------------------------

a. Section 312.5(c)(1)
    The Rule's first exception, Sec.  312.5(c)(1), permits an operator 
to collect ``the name or online contact information of a parent or 
child'' to be used for the sole purpose of obtaining parental consent. 
In view of the limited purpose of the exception--to reach the parent to 
initiate the consent process--the Commission proposed in the 2011 NPRM 
to limit the information

[[Page 3993]]

collection under this exception to the parent's online contact 
information only. However, as one commenter pointed out,\267\ the COPPA 
statute expressly provides that, under this exception, an operator can 
collect ``the name or online contact information of a parent or 
child.'' \268\
---------------------------------------------------------------------------

    \267\ N. Savitt (comment 142, 2011 NPRM), at 2; see also kidSAFE 
Seal Program (comment 81, 2011 NPRM), at 17 (this exception should 
also allow the collection of a child's online contact information to 
enable the operator to notify the child that the parent has 
consented).
    \268\ 15 U.S.C. 6502(b)(2)(B).
---------------------------------------------------------------------------

    Accordingly, the Commission retains Sec.  312.5(c)(1) allowing for 
the collection of the name or online contact information of the parent 
or child in order to initiate the notice and consent process.\269\
---------------------------------------------------------------------------

    \269\ See Part II.B.1., supra (discussing the parallel 
correction to Sec.  312.4(c)(1) (direct notice to a parent required 
under Sec.  312.5(c)(1)).
---------------------------------------------------------------------------

b. Section 312.5(c)(2)
    The 2011 NPRM proposed adding one additional exception to parental 
consent in order to give operators the option to collect a parent's 
online contact information for the purpose of providing notice to, or 
updating, the parent about a child's participation in a Web site or 
online service that does not otherwise collect, use, or disclose 
children's personal information.\270\ The proposed exception, numbered 
312.5(c)(2), provided that the parent's online contact information may 
not be used for any other purpose, disclosed, or combined with any 
other information collected from the child. The Commission indicated 
its belief that collecting a parent's online contact information for 
the limited purpose of notifying the parent of a child's online 
activities in a site or service that does not otherwise collect 
personal information is reasonable and should be encouraged.
---------------------------------------------------------------------------

    \270\ At least a few online virtual worlds directed to very 
young children already follow this practice. Because the Rule did 
not include such an exception, these operators technically were in 
violation of COPPA.
---------------------------------------------------------------------------

    The few comments addressing this proposed additional exception 
generally supported it.\271\ Certain commenters recommended minor 
clarifications, such as adding language to indicate that the notice is 
voluntary and that operators can link a parent's email address to the 
child's account.\272\ Upon consideration of the commenters' 
suggestions, the Commission has made minor changes to the language of 
this exception to clarify that its use is voluntary and that operators 
can use the exception to provide notice and subsequent updates to 
parents. The Commission did not find that clarification is needed to 
enable operators to link the parent's email to the child's account. 
Therefore, Sec.  312.5(c)(2) of the final Rule permits the collection 
of a parent's online contact information to provide voluntary notice 
to, and subsequently update the parent about, the child's participation 
in a Web site or online service that does not otherwise collect, use, 
or disclose children's personal information, where the parent's contact 
information is not used or disclosed for any other purpose.\273\
---------------------------------------------------------------------------

    \271\ See, e.g., DMA (comment 37, 2011 NPRM), at 26; kidSAFE 
Seal Program (comment 81, 2011 NPRM), at 17-18; N. Savitt (comment 
142, 2011 NPRM), at 2.
    \272\ See N. Savitt (comment 142, 2011 NPRM), at 2 (proposing 
that the exception clearly indicate that providing such notice is 
optional); kidSAFE (comment 81, 2011 NPRM), at 18 (seeking 
clarification that parent's online contact information is linkable 
to child's account for updating purposes).
    \273\ Section 312.4(c)(2) of the final Rule sets out the direct 
notice requirements under this exception. See Part II.B.1., supra.
---------------------------------------------------------------------------

c. Section 312.5(c)(3) (One-Time Use Exception)
    Section 312.5(c)(2) of the Rule provides that an operator is not 
required to provide notice to a parent or obtain consent where the 
operator has collected online contact information from a child for the 
sole purpose of responding on a one-time basis to a child's request, 
and then deletes the information. The 2011 NPRM proposed a minor change 
to the language of the one-time use exception, stating that the 
exception would apply where the operator collected a child's online 
contact information for such purpose. One commenter pointed out that 
the Rule language, ``online contact information from a child,'' is 
taken directly from the COPPA statute. The commenter also expressed 
concern that the Commission's proposed change to the language may 
prevent operators from offering several popular one-time use activities 
under this exception.\274\ In proposing this minor change, the 
Commission did not intend to further constrict the permissible uses of 
online contact information under the one-time-use exception (such as 
notifications regarding a contest or sweepstakes, homework help, 
birthday messages, forward-to-a-friend emails, or other similar 
communications). The Commission is persuaded, therefore, to retain the 
existing language in Sec.  312.5(c)(3) permitting the collection of 
online contact information from a child.
---------------------------------------------------------------------------

    \274\ See Promotion Marketing Association (comment 133, 2011 
NPRM), at 5-6.
---------------------------------------------------------------------------

d. Section 312.5(c)(4) (Multiple Use Exception)
    The Rule provides that an operator may notify a parent via email or 
postal address that it has collected a child's online contact 
information to contact a child multiple times (for instance, to provide 
the child with a newsletter or other periodic communication).\275\ The 
2011 NPRM proposed revising the multiple contacts exception to allow 
for the collection of a child's and a parent's online contact 
information; and to strike the collection of postal address on the 
basis that it is now outmoded for this use. Although one commenter 
argued that postal address continues to provide a reasonable means of 
contacting the parent,\276\ the Commission believes that the revised 
provision provides operators with a sufficient and practical means of 
contacting a parent in connection with the multiple use exception. The 
Commission also notes that the collection of postal address for the 
purpose of providing notice to a parent is not specifically provided 
for in the COPPA statute \277\ or elsewhere in the Rule's notice 
requirements. Therefore, the language of Sec.  312.5(4), as proposed in 
the 2011 NPRM, is hereby adopted in the final Rule.
---------------------------------------------------------------------------

    \275\ Under this exception, the Rule requires the operator only 
to provide the parent the opportunity to opt-out of granting 
consent, rather than requiring it to obtain opt-in consent.
    \276\ See DMA (comment 37, 2011 NPRM), at 25-26.
    \277\ See 15 U.S.C. 6502(b)(2)(C) (statute requires operator to 
``use reasonable efforts to provide a parent notice'').
---------------------------------------------------------------------------

e. Section 312.5(c)(5) (Child Safety Exception)
    The 2011 NPRM proposed minor changes to the language of the child 
safety exception to state the purpose of the exception up-front, and to 
make clear that the operator can collect both the child's and the 
parent's online contact information where it is necessary to protect 
the safety of the child and where the information is not used for any 
other purpose. The Commission received one comment recommending that 
the Rule also allow for the collection of the parent's name, which the 
commenter believes may aid in contacting the parent, if necessary.\278\ 
The Commission recognizes that the circumstances under which the child-
safety exception becomes important may vary significantly. As such, the 
Commission is persuaded to further modify this exception to allow for 
collection of the parent's name, given that the exception is available 
only

[[Page 3994]]

where necessary to protect the safety of a child and where such 
information is not used or disclosed for any purpose unrelated to the 
child's safety. Section 312.5(c)(5) of the final Rule therefore 
provides that an operator can collect a child's and a parent's name and 
online contact information, to protect the safety of a child, where 
such information is not used or disclosed for any purpose unrelated to 
the child's safety.
---------------------------------------------------------------------------

    \278\ kidSAFE Seal Program (comment 81, 2011 NPRM), at 18.
---------------------------------------------------------------------------

f. Section 312.5(c)(6) (Security of the Site or Service Exception)
    The final Rule incorporates the language of the Rule, with only 
minor, non-substantive changes to sentence structure.
g. Section 312.5(c)(7) (Persistent Identifier Used To Support Internal 
Operations Exception)
    As described in Section II.C.5.b. above, the final Rule creates an 
exception for the collection of a persistent identifier, and no other 
personal information, where used solely to provide support for the 
internal operations of the Web site or online service. Where these 
criteria are met, the operator will have no notice or consent 
obligations under this exception.
h. Section 312.5(c)(8) (Operator Covered Under Paragraph (2) of 
Definition of Web Site or Online Service Directed to Children Collects 
a Persistent Identifier From a Previously Registered User)
    Paragraph (2) of the definition of Web site or online service 
directed to children sets forth the actual knowledge standard for plug-
ins under the Rule. The Commission is providing for a new, narrow, 
exception to the Rule's notice and consent requirements for such an 
operator where it collects a persistent identifier, and no other 
personal information, from a user who affirmatively interacts with the 
operator and whose previous registration with that operator indicates 
that such user is not a child. The Commission has determined that, in 
this limited circumstance where an operator has already age-screened a 
user on its own Web site or online service, and such user has self-
identified as being over the age of 12, the burden of requiring that 
operator to assume that this same user is a child outweighs any benefit 
that might come from providing notice and obtaining consent before 
collecting the persistent identifier in this instance. This exception 
only applies if the user affirmatively interacts with the operator's 
online service (e.g., by clicking on a plug-in), and does not apply if 
the online service otherwise passively collects personal information 
from the user while he or she is on another site or service.

D. Section 312.8: Confidentiality, Security, and Integrity of Personal 
Information Collected From Children

    In the 2011 NPRM, the Commission proposed amending Sec.  312.8 to 
strengthen the provision requiring operators to maintain the 
confidentiality, security, and integrity of personal information 
collected from children. Specifically, the Commission proposed adding a 
requirement that operators take reasonable measures to ensure that any 
service provider or third party to whom they release children's 
personal information has in place reasonable procedures to protect the 
confidentiality, security, and integrity of such personal 
information.\279\
---------------------------------------------------------------------------

    \279\ See 2011 NPRM, 76 FR at 59821. The Rule was silent on the 
data security obligations of third parties. However, the online 
notice provision in the Rule required operators to state in their 
privacy policies whether they disclose personal information to third 
parties, and if so, whether those third parties have agreed to 
maintain the confidentiality, security, and integrity of the 
personal information they obtain from the operator. See Sec.  
312.4(b)(2)(iv) of the Rule.
---------------------------------------------------------------------------

    The Commission received a number of comments in support of its 
proposal. EPIC asserted, ``[third-party data collectors] are the 
``least cost avoiders'' and can more efficiently protect the data in 
their possession than could the data subjects who have transferred 
control over their personal information.'' \280\ The CDT found the 
proposal to be a ``sensible requirement that third-party operators put 
in place reasonable security procedures.'' \281\ And the Privacy Rights 
Clearinghouse stated, ``the proposed revision * * * would enhance 
consumer trust and reduce the likelihood that data will be mishandled 
when disclosed to an outside party.'' \282\
---------------------------------------------------------------------------

    \280\ EPIC (comment 41, 2011 NPRM), at 10-11; see also H. Valetk 
(comment 166, 2011 NPRM), at 2.
    \281\ CDT (comment 17, 2011 NPRM), at 2.
    \282\ Privacy Rights Clearinghouse (comment 131, 2011 NPRM), at 
2.
---------------------------------------------------------------------------

    Several commenters opposed the Commission's proposal outright, 
finding it to be unduly onerous on small businesses \283\ or ultra 
vires to the statute.\284\ The Commission finds this opposition 
unpersuasive. The requirement that operators take reasonable care to 
release children's personal information only to entities that will keep 
it secure flows directly from the statutory requirement that covered 
operators ``establish and maintain reasonable procedures to protect the 
confidentiality, security, and integrity of personal information 
collected from children.'' \285\
---------------------------------------------------------------------------

    \283\ Marketing Research Association (comment 97, 2011 NPRM), at 
4.
    \284\ DMA (comment 37, 2011 NPRM), at 26.
    \285\ 15 U.S.C. 6502(b)(1)(D).
---------------------------------------------------------------------------

    Several commenters asked the Commission to consider narrowing the 
proposal so that it applies only to third parties with whom the 
operator has a contractual relationship, rather than to all third 
parties, given the breadth of the Rule's definition of third 
party.\286\ These concerns are obviated by the Commission's proposal in 
the 2011 NPRM to narrow the definition of release to include only 
business-to-business disclosures, and not the sort of open-to-the-
public disclosures that worry the commenters.\287\
---------------------------------------------------------------------------

    \286\ See Facebook (comment 50, 2011 NPRM), at 15-16 (``The 
current definition of third party in Section 312.1 sweeps so broadly 
that it also encompasses other users who can view content or receive 
communications from the child--including, for example, the child's 
relatives or classmates. Under the proposed amendment, operators 
would be obligated to take reasonable measures to ensure that these 
relatives and classmates have `reasonable procedures' in place to 
protect the child's personal information''); CDT (comment 17, 2011 
NPRM), at 2 (``consistent with the Commission's goal of addressing 
business-to-business data sharing, the Commission should make it 
clear that these additional data security requirements apply only to 
other FTC-regulated entities with which the operator has a 
contractual relationship'').
    \287\ See 2011 NPRM, 76 FR at 59809.
---------------------------------------------------------------------------

    Other commenters expressed concern with the Commission's use of the 
words ``reasonable measures'' and ``ensure'' in the proposed revised 
language, stating that such phrases are too subjective to be workable 
and set an impossible-to-reach standard.\288\ Requiring operators to 
use ``reasonable measures'' both to establish their own data protection 
programs and to evaluate the programs of others has long been the 
standard the Commission employs in the context of its data security 
actions, and provides companies with the flexibility necessary to 
effectuate strong data privacy programs.\289\ Importantly, the

[[Page 3995]]

reasonable measures standard is the one set by Congress for operators' 
confidentiality, security, and integrity measures in the COPPA 
statute.\290\
---------------------------------------------------------------------------

    \288\ IAB (comment 73, 2011 NPRM), at 14 (``The IAB is concerned 
that these requirements, if finalized, would create a risk of 
liability to companies based on highly subjective standards and on 
third party activities ''); MPAA (comment 109, 2011 NPRM), at 16-17 
(``the proposed requirement that operators take measures sufficient 
to ensure compliance by vendors and other third parties might be 
misapplied to make operators the effective guarantors of those 
measures. As a practical matter, no business is in a position to 
exercise the same degree of control over another, independent 
business as it can exercise over its own operations.'').
    \289\ See, e.g., In the Matter of Compete, Inc., FTC File No. 
102 3155 (proposed consent order) (Oct. 29, 2012), available at 
http://www.ftc.gov/os/caselist/1023155/121022competeincagreeorder.pdf; In the Matter of Franklin's Budget 
Car Sales, Inc., FTC Docket No. C-4371 (consent order) (Oct. 3, 
2012), available at http://ftc.gov/os/caselist/1023094/121026franklinautomalldo.pdf; In the Matter of EPN, Inc., FTC Docket 
No. C-4370 (consent order) (Oct. 3, 2012), available at http://ftc.gov/os/caselist/1123143/121026epndo.pdf; In the Matter of 
Upromise, Inc., FTC Docket No. C-4351 (consent order) (Apr. 3, 
2012), available at http://www.ftc.gov/os/caselist/1023116/120403upromisedo.pdf.
    \290\ 15 U.S.C. 6502(b)(1)(D).
---------------------------------------------------------------------------

    The Commission finds merit, however, in the concerns expressed 
about the difficulty operators may face in ``ensuring'' that any 
service provider or any third party to whom it releases children's 
personal information has in place reasonable procedures to protect the 
confidentiality, security, and integrity of children's personal 
information.\291\ The Motion Picture Association of America (``MPAA'') 
urged the Commission to take the approach adopted in the Safeguards 
Rule implemented under the Gramm-Leach-Bliley Act. Entities covered by 
the Safeguards Rule are required to take ``reasonable steps to select 
and retain service providers that are capable of maintaining 
appropriate safeguards for the customer information at issue'' and to 
``requir[e] service providers by contract to implement and maintain 
such safeguards.'' \292\
---------------------------------------------------------------------------

    \291\ Facebook (comment 50, 2011 NPRM), at 16; MPAA (comment 
109, 2011 NPRM), at 16-17.
    \292\ 16 CFR 314.4(d).
---------------------------------------------------------------------------

    After reviewing these comments, the Commission has decided to 
modify the standard required when an operator releases children's 
personal information to service providers and third parties. Operators 
must inquire about entities' data security capabilities and, either by 
contract or otherwise, receive assurances from such entities about how 
they will treat the personal information they receive. They will not be 
required to ``ensure'' that those entities secure the information 
absolutely.
    Accordingly, the revised confidentiality, security, and integrity 
provision (Sec.  312.8) states that the operator must establish and 
maintain reasonable procedures to protect the confidentiality, 
security, and integrity of personal information collected from 
children. The operator must also take reasonable steps to release 
children's personal information only to service providers and third 
parties who are capable of maintaining the confidentiality, security 
and integrity of such information, and who provide assurances that they 
will maintain the information in such a manner.

E. Section 312.10: Data Retention and Deletion Requirements

    In the 2011 NPRM, the Commission proposed adding a data retention 
and deletion provision (new Section 312.10).\293\ The general tenet of 
data security, that deleting unneeded information is an integral part 
of any reasonable data security strategy (discussed in the Commission's 
1999 COPPA Rulemaking), informed the Commission's rationale for this 
new provision.\294\ In addition, the new proposed provision flowed from 
the statutory authority granted in COPPA for regulations requiring 
operators to establish and maintain reasonable procedures to protect 
the confidentiality, security, and integrity of personal information 
collected from children.\295\
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    \293\ See 76 FR at 59822.
    \294\ See 1999 Notice of Proposed Rulemaking, 64 FR at 22750, 
22758-59 (``The Commission encourages operators to establish 
reasonable procedures for the destruction of personal information 
once it is no longer necessary for the fulfillment of the purpose 
for which it was collected. Timely elimination of data is the 
ultimate protection against misuse or unauthorized disclosure.'').
    \295\ See 15 U.S.C. 6502(b)(1)(D).
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    The Commission received support for its data retention and deletion 
proposal from several consumer groups and an individual commenter.\296\ 
The Institute for Public Representation stated that, without such a 
provision, operators have no incentive to eliminate children's personal 
information and may retain it indefinitely.\297\ Other supporters 
mentioned that a requirement to retain and eliminate data works in 
tandem with the Rule's requirement that data be kept confidential and 
secure, and has the added benefit of reducing the risk and impact of 
data breaches.\298\
---------------------------------------------------------------------------

    \296\ EPIC (comment 41, 2011 NPRM), at 4-5; Institute for Public 
Representation (comment 71, 2011 NPRM), at 42-43; Sarah Kirchner 
(comment 82, 2011 NPRM); Privacy Rights Clearinghouse (comment 131, 
2011 NPRM), at 2-3.
    \297\ Institute for Public Representation, supra note 296, at 
42-43.
    \298\ See EPIC (comment 41, 2011 NPRM), at 12; Privacy Rights 
Clearinghouse (comment 131, 2011 NPRM), at 2-3.
---------------------------------------------------------------------------

    Other commenters, primarily industry members, opposed the addition 
of a data retention and deletion provision, stating that it was 
unnecessary, vague, and unduly prescriptive.\299\ These commenters 
especially objected to the combination of the data retention and 
deletion provision with the proposed expansion of the definition of 
personal information to include persistent identifiers. They asserted 
that the proposed deletion requirement would require companies to 
delete non-personally identifiable information, such as data used for 
Web site and marketing analytics.\300\
---------------------------------------------------------------------------

    \299\ American Association of Advertising Agencies (comment 2, 
2011 NPRM), at 3; DMA (comment 37, 2011 NPRM), at 27; NCTA (comment 
113, 2011 NPRM), at 21; National Retail Federation (comment 114, 
2011 NPRM), at 4; TRUSTe (comment 164, 2011 NPRM), at 11-12; Yahoo! 
(comment 180, 2011 NPRM), at 15-16.
    \300\ See DMA (comment 37, 2011 NPRM), at 26; Yahoo! (comment 
180, 2011 NPRM), at 15.
---------------------------------------------------------------------------

    The Commission chose the phrases ``for only as long as is 
reasonably necessary'' and ``reasonable measures'' to avoid the very 
rigidity about which commenters opposing this provision complain.\301\ 
Such terms permit operators to determine their own data retention needs 
and data deletion capabilities, without the Commission dictating 
specific time-frames or data destruction practices.\302\
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    \301\ See National Retail Federation (comment 114, 2011 NPRM), 
at 4; TRUSTe (comment 164, 2011 NPRM), at 12.
    \302\ For this reason, the Commission declines to adopt the 
Institute for Public Representation's request that it require 
companies to delete children's personal information within three 
months. See Institute for Public Representation (comment 71, 2011 
NPRM), at 43.
---------------------------------------------------------------------------

    While this new provision may require operators to give additional 
thought to notions of data retention and deletion, it should not add 
significantly to operators' burden. The existing Rule already prohibits 
operators from conditioning a child's participation in an activity on 
the child disclosing more personal information than is reasonably 
necessary to participate.\303\ Operators also must establish and 
maintain reasonable procedures to protect the confidentiality, 
security, and integrity of personal information collected from 
children.\304\ This new data retention and deletion provision, Section 
312.10, requires operators to anticipate the reasonable lifetime of the 
personal information they collect from children, and apply the same 
concepts of data security to its disposal as they are required to do 
with regard to its collection and maintenance.
---------------------------------------------------------------------------

    \303\ 16 CFR 312.7.
    \304\ 16 CFR 312.8.
---------------------------------------------------------------------------

    Therefore, the Commission modifies Section 312.10 as originally 
proposed, without change from its 2011 proposal.

F. Section 312.11: Safe Harbors

    The COPPA statute established a ``safe harbor'' for participants in 
Commission-approved COPPA self-regulatory programs.\305\ As noted in 
the 2011 NPRM, with the safe harbor provision, Congress intended to 
encourage industry members and other groups to develop their own COPPA 
oversight programs, thereby promoting efficiency and flexibility in 
complying with

[[Page 3996]]

COPPA's substantive provisions.\306\ COPPA's safe harbor provision also 
was intended to reward operators' good faith efforts to comply with 
COPPA. The Rule therefore provides that operators fully complying with 
an approved safe harbor program will be ``deemed to be in compliance'' 
with the Rule for purposes of enforcement. In lieu of formal 
enforcement actions, such operators instead are subject first to the 
safe harbor program's own review and disciplinary procedures.\307\
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    \305\ See 15 U.S.C. 6503.
    \306\ See 2011 NPRM, 76 FR at 59822 (citing the 1999 Statement 
of Basis and Purpose, 64 FR at 59906).
    \307\ See 16 CFR 312.10(a) and (b)(4).
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    In the 2011 NPRM, the Commission proposed several significant 
substantive changes to the Rule's safe harbor provision to strengthen 
the Commission's oversight of participating safe harbor programs. The 
proposed changes include a requirement that applicants seeking 
Commission approval of self-regulatory guidelines submit comprehensive 
information about their capability to run an effective safe harbor 
program. The changes also establish more rigorous baseline oversight by 
Commission-approved safe harbor programs of their members. In addition, 
the changes require Commission-approved safe harbor programs to submit 
periodic reports to the Commission. The Commission also proposed 
certain structural and linguistic changes to increase the clarity of 
the Rule's safe harbor provision.\308\
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    \308\ See 2011 NPRM, 76 FR at 59822-24.
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    The Commission received several comments regarding the proposed 
changes, including comments from all four of the COPPA safe harbor 
programs the Commission had approved by 2011,\309\ as well as from 
several other industry associations.\310\ With the exception of a few 
areas discussed below, commenters favorably viewed the Commission's 
proposed revisions.\311\ First, among commenters who mentioned them, 
there was uniform support for the proposed revised criteria for 
approval of self-regulatory guidelines, which would mandate that (at a 
minimum) safe harbor programs conduct annual, comprehensive reviews of 
each of their members' information practices.\312\ Accordingly, the 
Commission retains paragraph (b)(2) (``Criteria for approval of self-
regulatory guidelines'') without change from its 2011 proposal.
---------------------------------------------------------------------------

    \309\ CARU (comment 20, 2011 NPRM); Entertainment Software 
Rating Board (``ESRB'') (comment 48, 2011 NPRM); Privo (comment 132, 
2011 NPRM); TRUSTe (comment 164, 2011 NPRM).
    \310\ DMA (comment 37, 2011 NPRM); IAB (comment 73, 2011 NPRM); 
kidSAFE Seal Program (comment 81, 2011 NPRM).
    \311\ See, e.g., CARU (comment 20, 2011 NPRM), at 2 (``In 
general, CARU believes that most of the proposed modifications will 
not only strengthen the safe harbor program, but will facilitate and 
enhance the Commission's named goals of reliability, accountability, 
transparency and sustainability.'').
    \312\ CARU (comment 20, 2011 NPRM), at 3; ESRB (comment 48, 2011 
NPRM), at 2; kidSAFE Seal Program (comment 81, 2011 NPRM), at 20; 
TRUSTe (comment 164, 2011 NPRM), at 12.
---------------------------------------------------------------------------

    In paragraph (c) (``Request for Commission approval of self-
regulatory program guidelines''), the Commission proposed requiring 
applicants to explain in detail their business model and their 
technological capabilities and mechanisms for initial and continuing 
assessment of subject operators' fitness for membership in the safe 
harbor program. Again, commenters who mentioned it uniformly supported 
this change.\313\ Accordingly, the Commission revises paragraph (c) 
(``Request for Commission approval of self-regulatory program 
guidelines'') without change from its 2011 proposal.
---------------------------------------------------------------------------

    \313\ See, e.g., kidSAFE Seal Program (comment 81, 2011 NPRM), 
at 20 (``KSP supports this change and believes more detailed 
information during the application process will give the FTC greater 
comfort regarding the operations of safe harbor programs''); see 
also CARU (comment 20, 2011 NPRM), at 3; ESRB (comment 48, 2011 
NPRM), at 3; TRUSTe (comment 164, 2011 NPRM), at 13. One commenter 
sought assurance that such materials will be treated confidentially. 
kidSAFE Seal Program (comment 81, 2011 NPRM), at 20. Safe harbor 
applicants may designate materials as ``confidential,'' and the 
Commission will apply the same standards of confidentiality to such 
materials as it does to other voluntary submissions. See 15 U.S.C. 
46(f) and 57b-2, and the Commission's Rules of Practice 4.10-4.11, 
16 CFR 4.10-4.11.
---------------------------------------------------------------------------

    The response to the 2011 proposal for periodic reporting by safe 
harbors to the Commission (paragraph (d)) was more ambivalent.\314\ 
While commenters generally supported stronger Commission oversight of 
safe harbor activities post-approval, they were concerned that a 
requirement forcing safe harbors to ``name names'' of violative member 
operators would chill the programs' abilities to recruit and retain 
members, and generally would be counter to notions of self-
regulation.\315\
---------------------------------------------------------------------------

    \314\ The proposed change would have required safe harbor 
programs to submit periodic reports--within one year after the 
revised Rule goes into effect and every eighteen months thereafter--
of the results of the independent audits under revised paragraph 
(b)(2) and of any disciplinary actions taken against member 
operators. See 2011 NPRM, 76 FR at 59823.
    \315\ See CARU (comment 20, 2011 NPRM), at 3 (``Much of the 
value of self-regulation is that issues can be handled quickly and 
effectively. The reporting of `any' action taken against a Web site 
operator may have a chilling effect on Web site operators' 
willingness to raise compliance issues themselves''); DMA (comment 
37, 2011 NPRM), at 26 (``Based on feedback from our members, the DMA 
has reason to believe that this revision would decrease interest and 
participation in the safe harbor programs in contravention of the 
Commission's goal of increasing safe harbor participation''); see 
also ESRB (comment 48, 2011 NPRM), at 4; IAB (comment 73, 2011 
NPRM), at 14; kidSAFE Seal Program (comment 81, 2011 NPRM), at 20; 
Privo (comment 132, 2011 NPRM), at 8; TRUSTe (comment 164, 2011 
NPRM), at 13.
---------------------------------------------------------------------------

    The Commission continues to believe that there is great value in 
receiving regular reports from its approved safe harbor programs. It is 
persuaded, however, that these reports need not name the member 
operators who were subject to a safe harbor's annual comprehensive 
review. Rather, the Commission has revised paragraph (d) to permit safe 
harbors to submit a report to the Commission containing an aggregated 
summary of the results of the independent assessments conducted under 
paragraph (b)(2). In addition, to simplify matters, the Commission has 
changed the required reporting period to an annual requirement rather 
than one occurring every eighteen months after the first annual 
report.\316\ Therefore, the Commission amends paragraph (d) of the safe 
harbor provision so that it reads as set forth at Sec.  312.11(d) in 
the regulatory amendments of this rule.
---------------------------------------------------------------------------

    \316\ The kidSAFE Seal Program also sought to limit the Rule's 
reporting requirements to ``material'' descriptions of disciplinary 
action taken against member operators (paragraph (d)(1)), 
``reasonable'' Commission requests for additional information 
(paragraph (d)(2)), and ``material'' consumer complaints (paragraph 
(d)(3)). See kidSAFE Seal Program (comment 81, 2011 NPRM), at 21. 
The Commission believes that such limitations are unnecessary and 
that the wording of the requirements in revised paragraph (d) will 
not be overly burdensome for compliance by safe harbor programs.
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III. Final Regulatory Flexibility Act Analysis

    The Regulatory Flexibility Act of 1980 (``RFA'')\317\ requires a 
description and analysis of proposed and final Rules that will have 
significant economic impact on a substantial number of small entities. 
The RFA requires an agency to provide an Initial Regulatory Flexibility 
Analysis (``IRFA'') with the proposed Rule, and a Final Regulatory 
Flexibility Analysis (``FRFA''), if any, with the final Rule.\318\ The 
Commission is not required to make such analyses if a Rule would not 
have such an economic effect.\319\ As described below, the Commission 
anticipates the final Rule amendments will result in more Web sites and 
online services being subject to the Rule and to the Rule's disclosure 
and other compliance requirements. As discussed in Part IV.C, below, 
the Commission believes that a high proportion of operators of Web 
sites and online services potentially affected by

[[Page 3997]]

these revisions are small entities as defined by the RFA.
---------------------------------------------------------------------------

    \317\ 5 U.S.C. 601-612.
    \318\ See 5 U.S.C. 603-04.
    \319\ See 5 U.S.C. 605.
---------------------------------------------------------------------------

    As described in Part I.B above, in September 2011, the Commission 
issued a Notice of Proposed Rulemaking setting forth proposed changes 
to the Commission's COPPA Rule. The Commission issued a Supplemental 
Notice of Proposed Rulemaking in August 2012 in which the Commission 
proposed additional and alternative changes to the Rule. In both the 
2011 NPRM and 2012 SNPRM, the Commission published IRFAs and requested 
public comment on the impact on small businesses of its proposed Rule 
amendments. The Commission received approximately 450 comments, 
combined, on the changes proposed in the 2011 NPRM and the 2012 SNPRM. 
Numerous comments expressed general concern that the proposed revisions 
would impose costs on businesses, including small businesses;\320\ few 
comments discussed the specific types of costs that the proposed 
revisions might impose, or attempted to quantify the costs or support 
their comments with empirical data.
---------------------------------------------------------------------------

    \320\ See, e.g., D. Russell-Pinson (comment 81, 2012 SNPRM), at 
1; Ahmed Siddiqui (comment 83, 2012 SNPRM), at 1; Mindy Douglas 
(comment 29, 2012 SNPRM), at 1; Karen Robertson (comment 80, 2012 
SNPRM), at 1; R. Newton (comment 118, 2011 NPRM), at 1.
---------------------------------------------------------------------------

    In the 2011 NPRM and 2012 SNPRM, the Commission proposed 
modifications to the Rule in the following five areas: Definitions, 
Notice, Parental Consent, Confidentiality and Security of Children's 
Personal Information, and Safe Harbor Programs. The Commission proposed 
modifications to the definitions of operator, personal information, 
support for internal operations, and Web site or online service 
directed to children. Among other things, the proposed definition of 
personal information was revised to include persistent identifiers 
where they are used for purposes other than support for internal 
operations, and to include screen and user names where they function as 
online contact information. In addition, the Commission proposed adding 
a new Section to the Rule regarding data retention and deletion.
    The Commission shares the concern many commenters expressed that 
operators be afforded enough time to implement changes necessary for 
them to comply with the final Rule amendments.\321\ Accordingly, the 
final Rule will go into effect on July 1, 2013.
---------------------------------------------------------------------------

    \321\ See DMA (comment 37, 2011 NPRM), at 17; National Cable & 
Telecommunications Association (comment 113, 2011 NPRM), at 15-16.
---------------------------------------------------------------------------

A. Need for and Objectives of the Final Rule Amendments

    The objectives of the final Rule amendments are to update the Rule 
to ensure that children's online privacy continues to be protected, as 
directed by Congress, even as new online technologies evolve, and to 
clarify existing obligations for operators under the Rule. The legal 
basis for the final Rule amendments is the Children's Online Privacy 
Protection Act, 15 U.S.C. 6501 et seq.

B. Significant Issues Raised by Public Comments, Summary of the 
Agency's Assessment of These Issues, and Changes, if Any, Made in 
Response to Such Comments

    In the IRFAs, the Commission sought comment regarding the impact of 
the proposed COPPA Rule amendments and any alternatives the Commission 
should consider, with a specific focus on the effect of the Rule on 
small entities. As discussed above, the Commission received hundreds of 
comments in response to the rule amendments proposed in the NPRM and 
SNPRM. The most significant issues raised by the public comments, 
including comments addressing the impacts on small businesses, are set 
forth below. While the Commission received numerous comments about the 
compliance burdens and costs of the rules, the Commission did not 
receive much quantifiable information about the nature of the 
compliance burdens. The Commission has taken the costs and burdens of 
compliance into consideration in adopting these amendments.
(1) Definitions
Definition of Collects or Collection
    As described above in Part II.A.1.b., the Commission proposed 
amendments to the Rule provision that allows sites and services to make 
interactive content available to children, without providing parental 
notice and obtaining consent, if all personal information is deleted 
prior to posting. The Commission proposed replacing this 100% deletion 
standard with a ``reasonable measures'' standard to further enable 
sites and services to make interactive content available to children, 
without providing parental notice and obtaining consent, thereby 
reducing burdens on operators. Most comments favored the ``reasonable 
measures'' standard, and the Commission has adopted it.
Definitions of Operator and Web Site or Online Service Directed to 
Children
    As discussed above in Part II.A.4., the Commission's proposed rule 
changes clarify the responsibilities under COPPA when independent 
entities or third parties, e.g., advertising networks or downloadable 
plug-ins, collect information from users through child-directed sites 
and services. Under the proposed revisions, the child-directed content 
provider would be strictly liable for personal information collected 
from its users by third parties. The Commission also proposed imputing 
the child-directed nature of the content site to the entity collecting 
the personal information if that entity knew or had reason to know that 
it was collecting personal information through a child-directed site. 
Most of the comments opposed the Commission's proposed modifications. 
Some of these commenters asserted that the proposed revisions would 
impracticably subject new entities to the Rule and its compliance 
costs.\322\
---------------------------------------------------------------------------

    \322\ See, e.g., Application Developers Alliance (comment 5, 
2012 SNPRM), at 3-5; Association for Competitive Technology (comment 
7, 2012 SNPRM), at 3-5; Center for Democracy & Technology (``CDT'') 
(comment 15, 2012 SNPRM), at 4-5; DMA (comment 28, 2012 SNPRM), at 
5, 17; J. Garrett (comment 38, 2012 SNPRM), at 1; L. Mattke (comment 
63, 2012 SNPRM); S. Weiner (comment 97, 2012 SNPRM), at 1-2.
---------------------------------------------------------------------------

    With some modifications to the proposed Rule language, the 
Commission has retained the proposed strict liability standard for 
child-directed content providers that allow third parties to collect 
personal information from users of the child-directed sites, as 
discussed in Part II.A.5.b. The Commission recognizes the potential 
burden that strict liability places on child-directed content 
providers, particularly small app developers, but believes that the 
potential burden will be eased by the changes to the definitions of 
persistent identifier and support for internal operations adopted in 
the Final Rule, as well as the exception to notice and parental 
consent--Sec.  312.5(c)(7)--where an operator collects only a 
persistent identifier only to support its internal operations. Further, 
in light of the comments received, the Commission revised the language 
proposed in the 2012 SNPRM to clarify that the language describing ``on 
whose behalf'' does not encompass platforms, such as Google Play or the 
App Store, that offer access to someone else's child-directed content. 
Also in light of the comments received, the Commission deemed third-
party plug-ins to be co-operators only where they have actual knowledge 
that

[[Page 3998]]

they are collecting personal information from users of a child-directed 
site. This change will likely substantially reduce the number of 
operators of third-party plug-ins, many of whom are small businesses, 
who must comply with the Rule in comparison to the proposal in the 2012 
SNPRM. In response to comments requesting it, the Commission is also 
providing guidance in Part II.A.4.b. above as to when it believes this 
``actual knowledge'' standard will likely be met.
Definition of Online Contact Information
    The Commission proposed clarifications to the definition of online 
contact information to flag that the term broadly covers all 
identifiers that permit direct contact with a person online and to 
ensure consistency between the definition of online contact information 
and the use of that term within the definition of personal information. 
The proposed revised definition identified commonly used online 
identifiers, including email addresses, instant messaging (``IM'') user 
identifiers, voice over Internet protocol (``VOIP'') identifiers, and 
video chat user identifiers, while also clarifying that the list of 
identifiers was non-exhaustive. This amendment, which serves to clarify 
the definition, should not increase operators' burden.
Definition of Personal Information
a. Screen or User Names
    As described above, the Commission in the 2011 NPRM proposed 
modifications to the inclusion of screen names in the definition of 
personal information. Numerous commenters expressed concern that the 
Commission's screen-name proposal would unnecessarily inhibit functions 
that are important to the operation of child-directed Web sites and 
online services. In response to this concern, the 2012 SNPRM proposed 
covering screen names as personal information only in those instances 
in which a screen or user name rises to the level of online contact 
information. As discussed in Part II.A.5.a., the Commission has adopted 
the proposal in the SNPRM. The revision permits operators to use 
anonymous screen and user names in place of individually identifiable 
information, including use for content personalization, filtered chat, 
for public display on a Web site or online service, or for operator-to-
user communication via the screen or user name. Moreover, the 
definition does not reach single log-in identifiers that permit 
children to transition between devices or access related properties 
across multiple platforms. Thus, the provision for screen or usernames 
does not create any additional compliance burden for operators.
b. Persistent Identifiers and Support for Internal Operations
    In the 2011 NPRM, and again in the 2012 SNPRM, the Commission 
proposed broadening the definition of personal information to include 
persistent identifiers, except where used to support the internal 
operations of the site or service. Numerous commenters opposed the 
inclusion of persistent identifiers, while others sought to broaden the 
definition of support for internal operations to allow for more covered 
uses of persistent identifiers. Some commenters maintained that, to 
comply with COPPA's notice and consent requirements in the context of 
persistent identifiers, sites would be burdened to collect more 
personal information on their users, which is also contrary to COPPA's 
goals of data minimization.\323\ As set forth in Part II.A.5.b, the 
Commission believes that persistent identifiers permit the online 
contacting of a specific individual and thus are personal information. 
However, the Commission recognizes that including persistent 
identifiers within the definition of personal information may impose a 
burden on some operators to provide notice to parents and obtain 
consent under circumstances where they previously had no COPPA 
obligation. The Commission also recognizes that persistent identifiers 
are used for a host of functions that are unrelated to contacting a 
specific individual and fundamental to the smooth functioning of the 
Internet, the quality of the site or service, and the individual user's 
experience. Thus, the final Rule further restricts the proposed 
definition of persistent identifiers to ``a persistent identifier that 
can be used to recognize a user over time and across different Web 
sites or online services, where such persistent identifier is used for 
functions other than or in addition to support for the internal 
operations of the Web site or online service.'' (Emphasis added.) The 
Final Rule also modifies the definition of support for internal 
operations to broaden the list of activities covered within this 
category. As a result of these modifications, fewer uses of persistent 
identifiers will be covered in the Final Rule than in the proposals, 
thereby resulting in fewer operators being subject to the final Rule 
amendments.
---------------------------------------------------------------------------

    \323\ Facebook (comment 33, 2012 SNPRM), at 9-10; Google 
(comment 41, 2012 SNPRM), at 5; J. Holmes (comment 47, 2012 SNPRM).
---------------------------------------------------------------------------

c. Photographs, Videos, and Audio Files
    In the 2011 NPRM, the Commission proposed creating a new category 
within the definition of personal information covering a photograph, 
video, or audio file where such file contains a child's image or voice. 
Some commenters supported this proposal; others were critical. The 
latter claimed that the proposal's effect would limit children's 
participation in online activities involving ``user-generated 
content,'' that photos, videos, and/or audio files, in and of 
themselves, do not permit operators to locate or contact a child, or 
that the Commission's proposal is premature.\324\ The Commission 
determined, as discussed in Part II.A.5.c, that such files meet the 
standard for ``personal information'' set forth in the COPPA statute. 
While recognizing that defining personal information to include photos, 
videos, and/or audio files may affect a limited number of operators, 
this is warranted given the inherently personal nature of this content.
---------------------------------------------------------------------------

    \324\ See National Cable & Telecommunications Association 
(comment 113, 2011 NPRM), at 16; Wired Trust (comment 177, 2011 
NPRM), at 10; Toy Industry Association (comment 163, 2011 NPRM), at 
14; Privo (comment 132, 2011 NPRM), at 7; see also Center for 
Democracy and Technology (comment 17, 2011 NPRM), at 7-8.
---------------------------------------------------------------------------

d. Geolocation Information
    In the 2011 NPRM, the Commission stated that, in its view, existing 
paragraph (b) of the definition of personal information already covered 
any geolocation information that provides precise enough information to 
identify the name of a street and city or town. To make this clear, the 
Commission has made geolocation information a stand-alone category 
within the definition of personal information. Thus, this amendment 
should impose little or no additional burden on operators.
Definition of Web Site or Online Service Directed to Children
    In the 2012 SNPRM, the Commission proposed revising the definition 
of Web site or online service directed to children to allow a subset of 
sites falling within that category an option not to treat all users as 
children. However, several commenters expressed concern and confusion 
that the proposed amendment would expand COPPA's reach to sites or 
services not previously covered under the definition of Web site 
directed to children, and thus would be likely to impose COPPA's 
burdens on

[[Page 3999]]

operators not previously covered by the Rule. The Commission has 
clarified in Part II.A.7 that it did not intend to expand the reach of 
the Rule to additional sites and services through the proposed 
revision, but rather to create a new compliance option for a subset of 
Web sites and online services already considered directed to children 
under the Rule's totality of the circumstances standard. The Commission 
also clarified when a child-directed site would be permitted to age-
screen to differentiate among users, thereby providing further guidance 
to businesses. This amendment will ease compliance burdens on operators 
of sites or services that qualify to age-screen their visitors. In 
addition, the Commission has made further clarifying edits to the 
definition of Web site or online service directed to children to 
incorporate the ``actual knowledge'' standard for plug-ins or ad 
networks, as discussed above.
(2) Section 312.4: Notice
Direct Notice to a Parent
    The Commission proposed refining the Rule requirements for the 
direct notice to ensure a more effective ``just-in-time'' message to 
parents about an operator's information practices. Commenters generally 
supported the Commission's proposed changes as providing greater 
clarity and simplicity to otherwise difficult-to-understand statements. 
The Commission adopted the proposed modification but, in light of 
suggestions in the comments, reorganized the paragraphs to provide a 
better flow and guidance for operators.
Notice on the Web Site or Online Service
    The Commission proposed to change the Rule's online notice 
provision to require all operators collecting, using, or disclosing 
information on a Web site or online service to provide contact 
information, including, at a minimum, the operator's name, physical 
address, telephone number, and email address. This proposal marked a 
change from the existing Rule's ``single operator designee'' proviso 
that such operators could designate one operator to serve as the point 
of contact. Almost all commenters who spoke to the issue opposed 
mandating that the online notice list all operators. Among the varied 
reasons cited in opposition to this change was the potential burden on 
operators. After considering the comments, the Commission has 
determined to retain the Rule's ``single operator designee'' proviso.
(3) Section 312.5: Parental Consent
    Based on input the Commission received at its June 2, 2010 COPPA 
roundtable and comments to the 2010 FRN, in the 2011 NPRM the 
Commission proposed several significant changes to the mechanisms of 
verifiable parental consent set forth in paragraph (b) of Sec.  312.5. 
These included recognizing electronic scans of signed consent forms, 
video conferencing, government-issued ID, and a credit card in 
connection with a monetary transaction as additional mechanisms for 
operators to obtain parental consent. In response to comments, the 
Commission also adopted amendments to allow the use of other payment 
systems, in addition to credit cards, in connection with a monetary 
transaction as verifiable parental consent, provided that any such 
payment system notifies the primary account holder of each discrete 
transaction. These changes provide operators with further flexibility 
in complying with the Rule.
    The Commission also proposed eliminating the sliding scale (``email 
plus'') approach to parental consent for operators collecting personal 
information only for internal use. As discussed in Part II.C.7, most 
commenters urged the Commission to retain email plus, in part because 
they asserted it is more affordable and less burdensome for operators 
to use than other approved methods for obtaining consent. Persuaded by 
the weight of the comments, the Commission retained email plus as an 
acceptable consent method for internal use of personal information, 
thereby providing operators with the choice of a mechanism many deem 
useful and affordable.
    Finally, the Commission also added two new voluntary processes for 
evaluation and pre-clearance of parental consent mechanisms: use of an 
FTC preapproval process and use of a safe harbor program for such 
purpose. The availability of these voluntary pre-clearance mechanisms 
may provide benefits to participating operators in reducing the burden 
associated with the start-up of a new COPPA compliance mechanism.
(4) Section 312.8: Confidentiality, Security, and Integrity of Personal 
Information Collected From Children
    In 2011, the Commission proposed amending Sec.  312.8 of the Rule 
to require that operators take reasonable measures to ensure that any 
service provider or third party to whom they release children's 
personal information has in place reasonable procedures to protect the 
confidentiality, security, and integrity of such personal information. 
Although many commenters supported this proposal, some raised concerns 
about the language ``reasonable measures'' and ``ensure.'' Other 
commenters opposed the requirement as unduly onerous on small 
businesses. The Commission found merit in the concerns expressed about 
the difficulty operators may face in ``ensuring'' that any service 
provider or third party has in place reasonable confidentiality and 
security procedures. Thus, the Commission has lessened the burden on 
operators that would have been imposed by the earlier proposal by 
requiring operators to take reasonable steps to release personal 
information only to service providers and third parties capable of 
maintaining it securely.
(5) Section 312.10: Data Retention and Deletion Requirements
    The Commission also has added a data retention and deletion 
provision (new Section 312.10) to the Rule to require operators to 
anticipate the reasonable lifetime of the personal information they 
collect from children, and apply the same concepts of data security to 
its disposal as they are required to do with regard to its collection 
and maintenance. While several commenters supported this provision, 
several others objected to it as unnecessary, vague, or unduly 
prescriptive.\325\ These commenters especially objected to the burden 
imposed by the combination of the data retention and deletion provision 
with the proposed expansion of the definition of personal information 
to include persistent identifiers. The Commission believes these 
concerns are not warranted in light of the language of the final Rule 
amendments, and that this requirement should not add significantly to 
operators' burdens.
---------------------------------------------------------------------------

    \325\ See, e.g., DMA (comment 37, 2011 NPRM), at 27; Toy 
Industry Association (comment 163, 2011 NPRM), at 16-17.
---------------------------------------------------------------------------

(6) Section 312.11: Safe Harbors
    The Commission proposed changing the Rule's safe harbor provision 
to strengthen the Commission's oversight of participating safe harbor 
programs. Among other things, the Commission proposed requiring those 
programs to submit periodic reports to the Commission. Commenters 
generally viewed the proposed revisions favorably, but expressed 
concern that the proposed language requiring safe harbors to name 
violative member operators, would chill participation in the programs. 
Heeding these concerns,

[[Page 4000]]

the Commission will not require regular reports from approved safe 
harbor programs to name the member operators who were subject to a safe 
harbor's annual comprehensive review. The final Rule amendments instead 
will require safe harbor programs to submit an aggregated summary of 
the results of the annual, comprehensive reviews of each of their 
members' information practices. These amendments ensure the 
effectiveness of the safe harbor programs upon which numerous operators 
rely for assistance in their compliance with COPPA.

C. Description and Estimate of the Number of Small Entities Subject to 
the Final Rule or Explanation Why No Estimate Is Available

    The revised definitions in the Final Rule will affect operators of 
Web sites and online services directed to children, as well as those 
operators that have actual knowledge that they are collecting personal 
information from children. The Final Rule amendments will impose costs 
on entities that are ``operators'' under the Rule. The Commission staff 
is unaware of any comprehensive empirical evidence concerning the 
number of operators subject to the Rule. However, based on the public 
comments received and the modifications adopted here, the Commission 
staff estimates that approximately 2,910 existing operators may be 
subject to the Rule's requirements and that there will be approximately 
280 new operators per year for a prospective three-year period.
    Under the Small Business Size Standards issued by the Small 
Business Administration, ``Internet publishing and broadcasting and web 
search portals'' qualify as small businesses if they have fewer than 
500 employees.\326\ Consistent with the estimate set forth in the 2012 
SNPRM, Commission staff estimates that approximately 85-90% of 
operators potentially subject to the Rule qualify as small entities. 
The Commission staff bases this estimate on its experience in this 
area, which includes its law enforcement activities, discussions with 
industry members, privacy professionals, and advocates, and oversight 
of COPPA safe harbor programs. This estimate is also consistent with 
the sole comment that attempted to quantify how many operators are 
small entities.\327\
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    \326\ See U.S. Small Business Administration Table of Small 
Business Size Standards Matched to North American Industry 
Classification System Codes, available at http://www.sba.gov/sites/default/files/files/Size_Standards_Table.pdf.
    \327\ Association for Competitive Technology (comment 7, 2012 
SNPRM), at 2 (ACT's research ``found that 87% of educational apps 
are created by companies qualifying as `small' by SBA guidelines''). 
ACT gave only limited information about how it calculated this 
figure.
---------------------------------------------------------------------------

D. Description of the Projected Reporting, Recordkeeping, and Other 
Compliance Requirements of the Final Rule Amendments, Including an 
Estimate of the Classes of Small Entities Which Will Be Subject to the 
Rule and the Type of Professional Skills That Will Be Necessary To 
Comply

    The final Rule amendments will likely increase certain disclosure 
and other compliance requirements for covered operators. In particular, 
the requirement that the direct notice to parents include more specific 
details about an operator's information collection practices, pursuant 
to a revised Sec.  312.4 (Notice), would impose a one-time cost on 
operators. The addition of language in Sec.  312.8 (confidentiality, 
security, and integrity of personal information collected from 
children) will require operators to ``take reasonable steps'' to 
release children's personal information only to third parties capable 
of maintaining its confidentiality, security, and integrity, and who 
provide assurances that they will do so. The final Rule amendments 
contain additional reporting requirements for entities voluntarily 
seeking approval to be a COPPA safe harbor self-regulatory program, and 
additional compliance requirements for all Commission-approved safe 
harbor programs. Each of these improvements to the Rule may entail some 
added cost burden to operators, including those that qualify as small 
entities, but the Commission has considered these burdens and responded 
to commenters as described in Part III.C., above.
    The revisions to the Rule's definitions will also likely increase 
the number of operators subject to the final Rule amendments' 
disclosure and other compliance requirements. In particular, the 
revised definition of operator will cover additional child-directed Web 
sites and online services that choose to integrate plug-ins or 
advertising networks that collect personal information from visitors. 
Similarly, the addition of paragraph (2) to the definition of Web site 
or online service directed to children, which clarifies that the Rule 
covers a Web site or online service that has actual knowledge that it 
is collecting personal information directly from users of a Web site or 
online service directed to children, will potentially cover additional 
Web sites and online services. These amendments may entail some added 
cost burden to operators, including those that qualify as small 
entities; however, as described above, other final Rule amendments will 
ease the burdens on operators and facilitate compliance.
    The estimated burden imposed by these modifications to the Rule's 
definitions is discussed in the Paperwork Reduction Act section of this 
document, and there should be no difference in that burden as applied 
to small businesses. While the Rule's compliance obligations apply 
equally to all entities subject to the Rule, it is unclear whether the 
economic burden on small entities will be the same as or greater than 
the burden on other entities. That determination would depend upon a 
particular entity's compliance costs, some of which may be largely 
fixed for all entities (e.g., Web site programming) and others that may 
be variable (e.g., choosing to operate a family friendly Web site or 
online service), and the entity's income or profit from operation of 
the Web site or online service (e.g., membership fees) or from related 
sources (e.g., revenue from marketing to children through the site or 
service). As explained in the Paperwork Reduction Act section, in order 
to comply with the Rule's requirements, operators will require the 
professional skills of legal (lawyers or similar professionals) and 
technical (e.g., computer programmers) personnel. As explained earlier, 
the Commission staff estimates that there are approximately 2,910 Web 
site or online services that would qualify as operators under the final 
Rule amendments, that there will be approximately 280 new operators per 
year for a three-year period, and that approximately 85-90% of all such 
operators would qualify as small entities under the SBA's Small 
Business Size standards.

E. Steps the Agency Has Taken To Minimize Any Significant Economic 
Impact on Small Entities, Consistent With the Stated Objectives of the 
Applicable Statute

    In drafting the amendments to the Rule's definitions, the 
Commission has attempted to avoid unduly burdensome requirements for 
all entities, including small businesses. The Commission believes that 
the final Rule amendments will advance the goal of children's online 
privacy in accordance with COPPA. For each of the modifications, the 
Commission has taken into account the concerns evidenced by the record. 
On balance, the Commission believes that the benefits to children and 
their parents outweigh the costs of implementation to industry.
    The Commission has considered, but has decided not to propose, an

[[Page 4001]]

exemption for small businesses. The primary purpose of COPPA is to 
protect children's online privacy by requiring verifiable parental 
consent before an operator collects personal information. The record 
and the Commission's enforcement experience have shown that the threats 
to children's privacy are just as great, if not greater, from small 
businesses or even individuals than from large businesses.\328\ 
Accordingly, an exemption for small businesses would undermine the very 
purpose of the statute and Rule.
---------------------------------------------------------------------------

    \328\ See, e.g.,United States v. RockYou, Inc., No. 3:12-cv-
01487-SI (N.D. Cal., entered Mar. 27, 2012); United States v. 
Godwin, No. 1:11-cv-03846-JOF (N.D. Ga., entered Feb. 1, 2012); 
United States v. W3 Innovations, LLC, No. CV-11-03958 (N.D. Cal., 
filed Aug. 12, 2011); United States v. Industrious Kid, Inc., No. 
CV-08-0639 (N.D. Cal., filed Jan. 28, 2008); United States v. 
Xanga.com, Inc., No. 06-CIV-6853 (S.D.N.Y., entered Sept. 11, 2006); 
United States v. Bonzi Software, Inc., No. CV-04-1048 (C.D. Cal., 
filed Feb. 17, 2004); United States v. Looksmart, Ltd., No. 01-605-A 
(E.D. Va., filed Apr. 18, 2001); United States v. Bigmailbox.Com, 
Inc., No. 01-606-B (E.D. Va., filed Apr. 18, 2001).
---------------------------------------------------------------------------

    Nonetheless, the Commission has taken care in developing the final 
Rule amendments to set performance standards that regulated entities 
must achieve, but provide them with the flexibility to select the most 
appropriate, cost-effective, technologies to achieve COPPA's objective 
results. For example, the Commission has retained the standard that 
verifiable parental consent may be obtained via any means reasonably 
calculated, in light of available technology, to ensure that the person 
providing consent is the child's parent. The new requirements for 
maintaining the security of children's personal information and 
deleting such information when no longer needed do not mandate any 
specific means to accomplish those objectives. The Commission has 
adopted the ``reasonable measures'' standard enabling operators to use 
competent filtering technologies to prevent children from publicly 
disclosing personal information, which the Commission believes will 
make it easier for operators to avoid the collection of children's 
personal information. The new definition of support for internal 
operations is intended to provide operators with the flexibility to 
collect and use personal information for purposes consistent with 
ordinary operation, enhancement, or security measures. Moreover, the 
changes to Web site or online service directed to children should 
provide greater flexibility to ``family friendly'' sites and services 
in developing mechanisms to provide the COPPA protections to child 
visitors.

IV. Paperwork Reduction Act

    The existing Rule contains recordkeeping, disclosure, and reporting 
requirements that constitute``information collection requirements'' as 
defined by 5 CFR 1320.3(c) under the OMB regulations that implement the 
Paperwork Reduction Act (APRA''), as amended, 44 U.S.C. 3501 et seq. 
OMB has approved the Rule's existing information collection 
requirements through July 31, 2014. In accordance with the PRA, the 
Commission is seeking OMB approval of the final Rule amendments under 
OMB Control No. 3084-0117. The disclosure, recordkeeping, and reporting 
requirements under the final Rule amendments discussed above 
constitute``collections of information'' for purposes of the PRA.
    Upon publication of the 2011 NPRM and the 2012 SNPRM, the FTC 
submitted the proposed Rule amendments and a Supporting Statement to 
OMB. In response, OMB filed comments (dated October 27, 2011 and August 
10, 2012) indicating that it was withholding approval pending the 
Commission's examination of the public comments in response to the 2011 
NPRM and 2012 SNPRM. The remainder of this section sets forth a revised 
PRA analysis, factoring in relevant public comments and the 
Commission's resulting or self-initiated changes to the proposed Rule.

A. Practical Utility

    According to the PRA,``practical utility'' is`` the ability of an 
agency to use information, particularly the capability to process such 
information in a timely and useful fashion.'' \329\ The Commission has 
maximized the practical utility of the new disclosure (notice) and 
reporting requirements contained in the final Rule amendments, 
consistent with the requirements of COPPA.
---------------------------------------------------------------------------

    \329\ 44 U.S.C. 3502(11). In determining whether information 
will have ``practical utility,'' OMB will consider ``whether the 
agency demonstrates actual timely use for the information either to 
carry out its functions or make it available to third-parties or the 
public, either directly or by means of a third-party or public 
posting, notification, labeling, or similar disclosure requirement, 
for the use of persons who have an interest in entities or 
transactions over which the agency has jurisdiction.'' 5 CFR 
1320.3(l).
---------------------------------------------------------------------------

(1) Disclosure Requirements
    The final Rule amendments to Section 312.4(c) more clearly 
articulate the specific information that operators' direct notices to 
parents must include about their information collection and use 
practices. The succinct, ``just-in-time'' notices will present key 
information to parents to better enable them to determine whether to 
permit their children to provide personal information online, seek 
access from a Web site or online service operator to review their 
children's personal information, and object to any further collection, 
maintenance, or use of such information. The final Rule amendments to 
the definitions of operator and Web site or online service directed to 
children in Section 312.2 will better ensure that parents are provided 
notice when a child-directed site or service chooses to integrate into 
its property other services that collect visitors' personal 
information. For example, the final Rule amendment to the definition of 
operator clarifies that child-directed Web sites that do not collect 
personal information from users, but that employ downloadable software 
plug-ins or permit other entities, such as advertising networks, to 
collect personal information directly from their users, are covered 
operators with responsibility for providing parental notice and 
obtaining consent. Additionally, the changes to the definition of Web 
site or online service directed to children, among other things, will 
clarify that the Rule covers a plug-in or ad network where it has 
actual knowledge that it is collecting personal information directly 
from users of a child-directed Web site or online service.
    To avoid obscuring the most meaningful, material information for 
consumers, however, the Commission removed a previously proposed 
requirement, set forth in the 2011 NPRM, that all operators collecting, 
using, or disclosing information on a Web site or online service must 
provide contact information.\330\ The Commission retained the existing 
Rule's proviso that such operators could designate one operator to 
serve as the point of contact. For the same reason, the Commission has 
streamlined the Rule's online notice requirement to require a simple 
statement of: (1) What information the operator collects from children, 
including whether the Web site or online service enables a child to 
make personal information publicly available; (2) how the operator uses 
such information; and (3) the operator's disclosure practices for such 
information.\331\ As a part of this revision, the Commission also 
removed the required statement that the operator may not condition a 
child's participation in an activity on the child's disclosure of more 
personal

[[Page 4002]]

information than is reasonably necessary to participate in such 
activity.\332\
---------------------------------------------------------------------------

    \330\ 2011 NPRM, 76 FR at 59815.
    \331\ See id.
    \332\ See id.
---------------------------------------------------------------------------

(2) Reporting Requirements
    As stated above, the Commission believes that there is great value 
in receiving annual reports from its approved safe harbor programs. 
Obtaining this information (in addition to the Commission's right to 
access program records) will better ensure that all safe harbor 
programs keep sufficient records and that the Commission is routinely 
apprised of key information about the safe harbors' programs and 
membership oversight. Further, requiring annual reports to include a 
description of any safe harbor approvals of new parental consent 
mechanisms will inform the Commission of the emergence of new feasible 
parental consent mechanisms for operators. Additionally, the final Rule 
amendments impose more stringent requirements for safe harbor 
applicants' submissions to the Commission to better ensure that 
applicants are capable of administering effective safe harbor programs.
    Thus, given the justifications stated above for the amended 
disclosure and reporting requirements, the final Rule amendments will 
have significant practical utility.

B. Explanation of Estimated Incremental Burden Under the Final Rule 
Amendments

    1. Disclosure: 69,000 hours (for new and existing operators, 
combined).
    2. Reporting: 720 hours (one-time burden, annualized, and 
recurring).
    3. Labor Costs: $21,508,900.
    4. Non-Labor/Capital Costs: $0.
    Estimating PRA burden of the final Rule amendments' requirements 
depends on various factors, including the number of firms operating Web 
sites or online services directed to children or having actual 
knowledge that they are collecting or maintaining personal information 
from children, and the number of such firms that collect persistent 
identifiers for something other than support for the internal 
operations of their Web sites or online services.
    In its 2011 NPRM PRA analysis, FTC staff estimated that there were 
then approximately 2,000 operators subject to the Rule. Staff 
additionally stated its belief that the number of operators subject to 
the Rule would not change significantly as a result of the proposed 
revision to the definition of personal information proposed in the 2011 
NPRM.\333\ Staff believed that altering that definition would 
potentially increase the number of operators, but that the increase 
would be offset by other proposed modifications. These offsets included 
provisions allowing the use of persistent identifiers to support the 
internal operations of a Web site or online service, and permitting the 
use of ``reasonable measures,'' such as automated filtering, to strip 
out personal information before posting children's content in 
interactive venues. The 2011 NPRM PRA analysis also assumed that some 
operators of Web sites or online services will adjust their information 
collection practices so that they will not be collecting personal 
information from children.\334\ In the 2011 NPRM PRA analysis, staff 
estimated that approximately 100 new operators per year \335\ (over a 
prospective three-year OMB clearance \336\) of Web sites or online 
services would likely be covered by the Rule through the proposed 
modifications. No comments filed in response to the 2011 NPRM took 
direct issue with these estimates.\337\ Commission staff also estimated 
that no more than one safe harbor applicant will submit a request 
within the next three years,\338\ and this estimate has not been 
contested.
---------------------------------------------------------------------------

    \333\ Id. at 59826.
    \334\ Id.
    \335\ Id.
    \336\ Under the PRA, agencies may seek from OMB a maximum three 
year clearance for a collection of information. 44 U.S.C. 3507(g).
    \337\ Likewise, no comments were received in response to the 
February 9, 2011 and May 31, 2011 Federal Register notices (76 FR 
7211 and 76 FR 31334, respectively, available at http://www.gpo.gov/fdsys/pkg/FR-2011-02-09/pdf/2011-2904.pdf and http://www.gpo.gov/fdsys/pkg/FR-2011-05-31/pdf/2011-13357.pdf) seeking comment on the 
information requirements associated with the existing COPPA Rule and 
the FTC burden estimates for them. These notices included the 
Commission staff estimate that roughly 100 new web entrants each 
year will fall within the Rule's coverage.
    \338\ 2011 NPRM, 76 FR at 59826; accord 76 FR 7211 at 7213 and 
76 FR at 31335.
---------------------------------------------------------------------------

    In its 2012 SNPRM PRA analysis, staff stated that the proposed 
modifications to the Rule would change the definitions of operator and 
Web site or online service directed to children, potentially increasing 
the number of operators subject to the Rule. Staff added, however, that 
the proposed amendments to the definitions of support for internal 
operations and Web site or online service direct to children should 
offset some of the effects of these other definitional expansions.\339\ 
The 2012 SNPRM PRA analysis also assumed that some operators of Web 
sites or online services would adjust their information collection 
practices so that they would not be collecting personal information 
from children.\340\ Based on those assumptions, FTC staff estimated 
that, in addition to the 2,000 existing operators already covered by 
the Rule (per the 2011 NPRM PRA analysis), there would be approximately 
500 existing operators of Web sites or online services likely to be 
newly covered due to the proposed modifications.\341\ Staff also 
estimated that 125 additional new operators per year (over a 
prospective three-year clearance) would be covered by the Rule through 
the proposed modifications. That was incremental to the previously 
cleared FTC estimate of 100 new operators per year for the then 
existing Rule.\342\ The FTC's 2011 NPRM and 2012 SNPRM analyses thus 
cumulatively accounted for an estimated 2,500 existing operators and 
225 new operators each year that would be subject to the proposed Rule 
amendments.\343\
---------------------------------------------------------------------------

    \339\ 2012 SNPRM, 77 FR at 46650.
    \340\ Id.
    \341\ Id.
    \342\ Id.
    \343\ Commenter Association for Competitive Technology therefore 
is mistaken in asserting that the ``FTC has estimated 500 existing 
education app makers will be affected by the proposed rule, and an 
additional 125 newly affected entities each successive year.'' 
Association for Competitive Technology (comment 7, 2012 SNPRM), at 
2. The Commission's previous PRA analyses did not specifically 
estimate numbers of ``education app makers,'' and the commenter did 
not account for the Commission's 2011 NPRM estimate of 2,000 
existing entities.
---------------------------------------------------------------------------

    Given the public comments received, the Commission now estimates, 
as detailed further below, that the final Rule amendments will cover 
2,910 existing operators of Web sites or online services and 280 new 
operators per year.\344\ These groups of covered operators would 
generally consist of certain traditional Web site operators, mobile app 
developers, plug-in developers, and advertising networks.
---------------------------------------------------------------------------

    \344\ Under the existing OMB clearance for the pre-amended Rule, 
however, the FTC had already accounted for an estimated 100 new 
operators each requiring approximately 60 hours to comply with the 
Rule. See 76 FR at 7211, 7212 (Feb. 9, 2011); 76 FR at 31334, 31335 
(May 31, 2011). Thus, to avoid double-counting what has already been 
submitted to OMB and cleared, the ensuing calculations for new 
operators' disclosure burden account strictly for the difference 
between the revised population estimate (280) and the currently 
cleared estimate (100), i.e., 180 additional new operators.
---------------------------------------------------------------------------

Existing Operators
    The Commission received several comments directed to its estimates 
of the number of existing operators, all of which assert that the 
Commission significantly underestimated these

[[Page 4003]]

numbers.\345\ The Association for Competitive Technology (``ACT'') 
cited data showing that as of September 2012, there were approximately 
74,000 ``education'' apps in the iTunes App Store, and 30,000 in the 
Android market.\346\ Based on its review of ``top'' apps, ACT 
calculated a ratio of 1.54 apps per developer of ``education'' apps in 
the iTunes App Store,\347\ and that approximately 60% of apps in this 
category were directed to children under 13.\348\ Based on this 
information, ACT calculated that approximately 28,800 app developers 
would be ``potentially affected'' by the proposed modifications to the 
Rule set forth in the 2011 NPRM and 2012 SNPRM.\349\ One commenter, the 
moderator of an online group called ``Parents With Apps,'' stated that 
the group has more than 1,400 small developers of family-friendly apps 
as members.\350\ Another commenter stated that the Silicon Valley Apps 
for Kids Meetup group had ``well over 500 members'' as of September 
2012, and that ``the kids app market is incredibly vibrant with 
thousands of developers, over 500 of which'' are group members.\351\
---------------------------------------------------------------------------

    \345\ Association for Competitive Technology (comment 7, 2012 
SNPRM), at 2-3; S. Weiner (comment 97, 2012 SNPRM), at 1-2; J. 
Garrett (comment 38, 2012 SNPRM), at 1; see also DMA (comment 28, 
2012 SNPRM), at 17.
    \346\ Association for Competitive Technology (comment 7, 2012 
SNPRM), at 2.
    \347\ Id. (``Unlike the game sector, where one developer may 
have several applications in the top 100, Educational Apps tended to 
be much closer to a one-to-one ratio between app and creator at 1.54 
apps per developer.'').
    \348\ Id. ACT's comment does not describe the methodology it 
used to categorize apps as being directed to children under 13.
    \349\ Id. at 2-3.
    \350\ S. Weiner (comment 97, 2012 SNPRM), at 1-2.
    \351\ J. Garrett (comment 38, 2012 SNPRM), at 1.
---------------------------------------------------------------------------

    Per the industry information source cited by ACT, the Commission 
believes that as of November 2012, there were approximately 75,000 
education apps in the iTunes App Store and approximately 33,000 
education apps in the Android market.\352\ ACT's comment appears to 
suggest that it would be reasonable for the Commission to base its PRA 
estimate of the number of existing operators subject to the final Rule 
amendments on the number of ``Education'' app developers. The 
Commission agrees that developer activity in the ``Education'' 
category, to the extent it can be discerned through publicly available 
information, is a useful starting point for estimating the number of 
mobile app developers whose activities may bring them within coverage 
of the final Rule amendments. As discussed below, the Commission also 
looks to information about ``Education'' apps in the Google Play store, 
and apps in the game and entertainment categories in both the iTunes 
App Store and Google Play, as a basis for its estimates for this PRA 
analysis.\353\
---------------------------------------------------------------------------

    \352\ ``App Store Metrics,'' 148Apps.biz (accessed Nov. 14, 
2012), available at http://148apps.biz/app-store-metrics; ``Android 
Statistic Top Categories,'' AppBrain (accessed Nov. 15, 2012), 
available at http://www.appbrain.com/stats/android-market-app-categories.
    \353\ Although there are other mobile app platforms and 
distribution channels, the Commission believes that the education, 
games, and entertainment categories in the iTunes App Store and the 
Google Play store adequately approximate the relevant universe of 
unique mobile app developers whose apps may be directed to children 
under 13.
---------------------------------------------------------------------------

    Similar to what appears to have been ACT's methodology, Commission 
staff reviewed a list, generated using the desktop version of iTunes, 
of the Top 200 Paid and Top 200 Free ``Education'' apps in the iTunes 
App Store as of early November 2012. Based on the titles and a prima 
facie review of the apps' descriptions, staff believes that 
approximately 56% of them may be directed to children under 13.\354\ 
Averaging this figure and ACT's 60% calculation, FTC staff estimates 
that 58% of ``Education'' Apps in the iTunes App Store may be directed 
to children under 13, meaning that 43,500 of those 75,000 ``Education'' 
apps may be directed to children under 13. To determine a ratio for the 
Education apps for the Android platform, Commission staff reviewed 
listings of the Top 216 Paid and Top 216 Free ``Education'' apps in the 
Google Play store as of mid-November 2012. Staff believes that 
approximately 42% of them may be directed to children under 13; 42% of 
33,000 apps yields 13,860 apps that may be directed to children under 
13. Adding these projected totals together yields 57,360 such apps for 
both platforms, combined.
---------------------------------------------------------------------------

    \354\ In estimating this percentage (and similar percentages 
throughout this section) for purposes of the PRA analysis, the 
Commission's staff attempted to err on the side of inclusion to 
count any apps that were likely to be used by children, whether 
independently or with parents' assistance. To ensure a generous 
accounting of operators potentially subject to the Rule, this 
estimate included, for example, even toddler apps unlikely to be 
used by children themselves without direct parental assistance.
---------------------------------------------------------------------------

    It is unreasonable to assume, however, that all apps directed to 
children under 13 collect personal information from children, and that 
no developers only collect persistent identifiers in support for their 
internal operations. Data from the Mobile Apps for Kids II Report 
indicate that about 59% of the apps surveyed transmit device 
identification or other persistent identifiers, to their 
developers.\355\ However, it is not clear how many of those app 
developers would be using those persistent identifiers in a way that 
would fall within the final Rule's amended definition of personal 
information. Indeed, the Commission believes, based on the comments 
received, that many developers would use such persistent identifiers to 
support internal operations as defined in the final Rule amendments and 
not for other purposes, such as behavioral advertising directed to 
children.\356\ Furthermore, the Commission believes that some mobile 
app developers, like some other operators of Web sites or online 
services, will adjust their information collection practices so that 
they will not be collecting personal information from children. The 
data in the staff report do suggest, however, that approximately 3.5% 
of apps directed to children under 13 could be collecting location 
information or a device's phone number, thus making their developers 
more likely to be covered by the final Rule amendments.\357\ The 
Commission believes it is reasonable to assume that an additional 1.5% 
of those apps could be collecting other personal information, including 
transmitting persistent identifiers to developers (or their partners) 
to use in ways that implicate COPPA. This results in an estimate of 5% 
of apps that may be directed to children under 13, i.e., approximately 
2,870 apps, that operate in ways that implicate the final Rule 
amendments.
---------------------------------------------------------------------------

    \355\ See Mobile Apps for Kids II Report, at 9-10, supra note 
189.
    \356\ See L. Akemann (comment 2, 2012 SNPRM), at 1; DMA (comment 
37, 2011 NPRM), at 7, 14; Scholastic (comment 144, 2011 NPRM), at 
13-14; TRUSTe (comment 164, 2011 NPRM), at 5.
    \357\ See Mobile Apps for Kids II Report, at 5-6, 10, supra note 
189 (14 of 400 apps tested transmitted the mobile device's 
geolocation or phone number). These apps also transmitted device 
identification.
---------------------------------------------------------------------------

    To estimate the number of developers responsible for these 
apps,\358\ Commission staff used the ``Browse'' function in iTunes, to 
generate a list of 6,000 apps in the ``Education'' category. Sorting 
that list by ``Genre'' generates a list of approximately 3,300 apps for 
which ``Education'' was listed as the ``Genre.'' Approximately 1,800 
developers were listed in connection

[[Page 4004]]

with these apps. Dividing 3,300 apps by 1,800 developers yields an 
iTunes education-apps-per-developer ratio of approximately 1.83,\359\ 
and the Commission assumes this ratio would apply for Android apps, as 
well. Assuming a 1.83 education-apps-to-developer ratio, it appears 
that approximately 1,570 developers (2,870) 1.83) are responsible for 
apps directed to children under 13 that operate in ways likely to 
implicate the final Rule amendments.
---------------------------------------------------------------------------

    \358\ The Commission believes it is reasonable to assume, as ACT 
appears to, that developers responsible for multiple apps directed 
to children under 13 will typically have a single set of privacy 
practices, a single privacy policy to describe them, and will 
develop a single method of disclosing the information required by 
the final Rule amendments. Any marginal increase in developer 
burdens addressed in this PRA analysis arising from developers 
publishing additional apps is therefore not likely to be 
significant.
    \359\ This appears to be a larger universe of data than ACT 
consulted in generating its education-apps-to-developer ratio of 
1.54. See Association for Competitive Technology (comment 7, 2012 
SNPRM), at 2. Data from the industry source ACT cites indicate a 
more general apps-to-developer ratio of approximately 3.8 apps per 
developer of iTunes App Store apps. See ``App Store Metrics,'' 
148Apps.biz (accessed Nov. 14, 2012), available at http://148apps.bix/app-store-metrics (727,938 Total Active Apps; 191,366 
Active Publishers in the U.S. App Store).
---------------------------------------------------------------------------

    At least one more adjustment to this total of approximately 1,570 
potentially affected developers is warranted, however. Commission 
staff's research for its two Mobile Apps for Kids reports indicate that 
approximately 2.2% of developers of apps that may be directed to 
children under 13 develop apps for both iOS and Android.\360\ To avoid 
double-counting developers that develop for both platforms, the 
Commission subtracts 18 developers from the total (i.e., 1,570 x 2.2% = 
34.54; 35) 2 = 17.5), leaving approximately 1,552 potentially affected 
developers of iOS and Android education apps that may be directed to 
children under 13.
---------------------------------------------------------------------------

    \360\ See Mobile Apps for Kids II Report, at 26, supra note 189 
(approximately 1.6% of developers of apps studied developed apps for 
both Android and iOS); FTC Staff, Mobile Apps for Kids: Current 
Privacy Disclosures are Disappointing, at 8-9 (Feb. 2012), available 
at http://www.ftc.gov/os/2012/02/120216mobile_apps_kids.pdf 
(approximately 2.7% of developers of apps studied developed apps for 
both Android and iOS). Averaging these two percentages indicates 
developer overlap of approximately 2.2%.
---------------------------------------------------------------------------

    The Commission believes it is also reasonable to add to this total 
existing developers of game and entertainment apps directed to children 
under 13. Commission staff reviewed a list, generated using the desktop 
version of iTunes, of the Top 200 Paid and Top 200 Free ``Game'' apps 
in the iTunes App Store as of mid November 2012. Staff believes that 
approximately 7% of them may be directed to children under 13. Publicly 
available industry data show that approximately 131,000 game apps were 
available in the iTunes App Store as of mid-November 2012;\361\ thus, 
approximately 9,170 of those apps may be directed to children under 13. 
Assuming 5% of those apps operate in ways that bring their developers 
within the ambit of the final Rule amendments, at a general app-to-
developer ratio of 3.8 apps per developer,\362\ this yields 
approximately 120 developers (9,170 x .05 = 458.5; 458.5) 3.8 = 
120.66). Commission staff observed that approximately 35% of developers 
of games that may be directed to children under the age of 13 also 
develop similar education apps. Thus, of the aforementioned 120 
developers, 65% would not already have been counted in the previous 
tally of educational app developers. This calculation yields an 
estimate of approximately 78 additional developers of iTunes games apps 
primarily directed to children under 13 that likely are covered by the 
final Rule amendments.
---------------------------------------------------------------------------

    \361\ ``App Store Metrics,'' 148Apps.biz (accessed Nov. 14, 
2012), available at http://148apps.bix/app-store-metrics.
    \362\ See note 357, supra.
---------------------------------------------------------------------------

    Performing a similar calculation for iTunes ``Entertainment'' app 
developers yields few additional existing developers that are likely to 
be covered. Commission staff reviewed a list, generated using the 
desktop version of iTunes, of the Top 200 Paid and Top 200 Free 
``Entertainment'' apps in the iTunes App Store as of mid-November 2012. 
Staff believes that approximately 2.5% of them may be directed to 
children under 13. Publicly available industry data show that 
approximately 67,600 ``Entertainment'' apps were available in the 
iTunes App Store as of mid-November 2012; \363\ thus, approximately 
1,690 of those apps may be directed to children under 13. Assuming 5% 
of those apps operate in ways that bring their developers within the 
ambit of the final Rule amendments, at a general app-to-developer ratio 
of 3.8 apps per developer, this yields approximately 22 developers 
(1,690 x .05 = 84.5; 84.5) 3.8 = 22.24). Commission staff observed that 
approximately 84% of developers of ``Entertainment'' apps that may be 
directed to children under the age of 13 also develop similar education 
and game apps. Thus, of the aforementioned 22 developers, 16% would not 
already have been counted in the previous tally of educational and 
games app developers. This calculation yields an estimate of 
approximately 4 additional developers of iTunes entertainment apps 
primarily directed to children under 13 that likely are covered by the 
final Rule amendments.
---------------------------------------------------------------------------

    \363\ ``App Store Metrics,'' 148Apps.biz (accessed Nov. 14, 
2012), available at http://148apps.bix/app-store-metrics.
---------------------------------------------------------------------------

    To account for Android ``Games'' apps, Commission staff reviewed 
listings of the Top 216 Paid and Top 216 Free ``Games'' apps in the 
Google Play store as of mid-November 2012. Staff believes that 
approximately 3% of them may be directed to children under 13. Three 
percent of 75,000 apps \364\ yields about 2,250 Android ``Games'' apps 
that may be directed to children under 13. Assuming 5% of those apps 
operate in ways that bring their developers within the ambit of the 
final Rule amendments, at a general app-to-developer ratio of 3.8 apps 
per developer, this yields approximately 30 developers (2,250 x .05 = 
112.5; 112.5) 3.8 = 29.6). Assuming that, as Commission staff observed 
in the iTunes App Store, approximately 35% of developers of games that 
may be directed to children under the age of 13 also develop similar 
education apps, 65% of the aforementioned 30 developers would not 
already have been counted in the previous tally of educational app 
developers. This calculation yields an estimate of approximately 19 
additional developers of Android games apps primarily directed to 
children under 13 that likely are covered by the final Rule amendments.
---------------------------------------------------------------------------

    \364\ ``Android Statistic Top Categories,'' AppBrain (accessed 
Nov. 15, 2012), available at http://www.appbrain.com/stats/android-market-app-categories (total calculated by adding the number of apps 
in each ``Games'' subcategory).
---------------------------------------------------------------------------

    Similarly, for Android ``Entertainment'' apps, Commission staff 
reviewed listings of the Top 216 Paid and Top 216 Free 
``Entertainment'' apps in the Google Play store as of mid-November 
2012. Staff believes that approximately 2% of them may be directed to 
children under 13. Two percent of 67,000 apps \365\ yields about 1,340 
Android ``Entertainment'' apps that may be directed to children under 
13. Assuming 5% of those apps operate in ways that bring their 
developers within the ambit of the final Rule amendments, at a general 
app-to-developer ratio of 3.8 apps per developer, this yields 
approximately 18 developers (1,340 x .05 = 67; 67) 3.8 = 17.63). 
Assuming that, as Commission staff observed with regard to the iTunes 
App Store, approximately 84% of developers of entertainment apps that 
may be directed to children under the age of 13 also develop similar 
education and game apps, 16% of the aforementioned 18 developers would 
not already have been counted in the prior tally of educational and 
game app developers. This calculation yields an estimate of 
approximately 3 additional developers of Android entertainment apps 
primarily directed to children

[[Page 4005]]

under 13 that likely are covered by the final Rule amendments.
---------------------------------------------------------------------------

    \365\ Id.
---------------------------------------------------------------------------

    Thus, the FTC estimates that approximately 1,660 mobile app 
developers (1,552 for iTunes and Android education apps + 78 for iTunes 
games apps + 4 for iTunes entertainment apps + 19 for Android games 
apps + 3 for Android entertainment apps = 1,656) are existing operators 
of Web sites or online services that will be covered by the final Rule 
amendments. The FTC's 2011 NPRM PRA estimate of 2,000 existing 
operators already covered by the Rule and its 2012 SNPRM PRA estimate 
of 500 newly covered existing operators,\366\ however, already 
partially accounted for these mobile app developers because these 
estimates covered all types of operators subject to COPPA, including 
mobile app developers. As discussed above, comments on the FTC staff's 
estimate of the number of existing operators focused almost entirely on 
an asserted understatement of the number of mobile app developers that 
would be covered by the final Rule amendments. The estimate otherwise 
was not contested. Thus, the total numbers of mobile app developers set 
forth herein must be substituted for the total (unspecified) number of 
mobile app developers subsumed within the 2011 NPRM and 2012 SNPRM PRA 
estimates.
---------------------------------------------------------------------------

    \366\ See 2011 NPRM, 76 FR at 59812, 59813; 2012 SNPRM, 77 FR at 
46649.
---------------------------------------------------------------------------

    The Commission believes it is reasonable to substitute the above-
noted estimate of 1,660 mobile app developers for half, i.e., 1,250, of 
the 2,500 existing operators previously estimated to be ``covered'' and 
``newly covered'' by the 2011 NPRM and 2012 SNPRM PRA estimates. Based 
on its experience, the Commission believes that half--if not more--of 
the existing operators currently covered by the Rule already develop or 
publish mobile apps. The remaining 1,250 operators would account for 
traditional Web site and other online service providers that are not 
mobile app developers, as well as plug-in developers and advertising 
networks that could be covered by the ``actual knowledge'' 
standard.\367\ Thus, combining these totals (1,660 + 1,250) yields a 
total of 2,910 operators of existing Web sites or online services that 
would likely be covered by the final Rule amendments.
---------------------------------------------------------------------------

    \367\ Disclosure burdens do not increase when taking into 
account plug-in developers and advertising networks with actual 
knowledge because the burden will fall on either the primary-content 
site or the plug-in, but need not fall on both. They can choose to 
allocate the burden between them. The Commission has chosen to 
account for the burden via the primary-content site or service 
because it would generally be the party in the best position to give 
notice and obtain consent from parents.
---------------------------------------------------------------------------

New Operators
    The Commission received one comment asserting that the Commission 
significantly underestimated the number of new operators per year that 
will be covered by the proposed Rule amendments. One commenter, the 
moderator of an online group called ``Parents With Apps,'' stated that 
this group of more than 1,400 small developers of family-friendly apps 
grows by at least 100 new developers every six months.\368\ This would 
constitute an annual growth rate of nearly 15% (200 new developers per 
year divided by 1,400 developers in the group = 0.1429). Although the 
Commission believes this rate of increase is due, at least in part, to 
increased awareness among developers of the group's existence rather 
than growth in the number of new developers, the Commission concludes 
it is reasonable to incorporate this information into its revised 
estimate. Assuming a base number of 1,660 existing mobile app 
developers estimated to be covered by the final Rule amendments, a 15% 
growth rate would yield, year-over-year after three years, an 
additional 864 new developers, or approximately 290 per year averaged 
over a prospective three-year clearance (1,660 x 1.15 = 1,909; 1,909 x 
1.15 = 2,195; 2,195 x 1.15 = 2,524; 2,524 - 1,660 = 864; 864 / 3 = 
288).\369\
---------------------------------------------------------------------------

    \368\ S. Weiner (comment 97, 2012 SNPRM), at 1-2.
    \369\ See also Association for Competitive Technology (comment 
5, 2011 SNPRM), at 2 (``total unique apps across all platforms 
continue to grow beyond the one million mark'' since Apple's 2008 
launch of its App Store; ``[t]he mobile app marketplace has grown to 
a five billion dollar industry from scratch in less than four 
years.'').
---------------------------------------------------------------------------

    Bureau of Labor Statistics (``BLS'') projections suggest a much 
more modest rate of growth. BLS has projected that employment of 
software application developers will increase 28% between 2010 and 
2020.\370\ Assuming 10% of that total 28% growth would occur each year 
of the ten-year period, and a base number of 1,660 existing mobile app 
developers, one can derive an increase of approximately 46 (1,645 x 
0.028 = 46.48) new mobile app developers per year on average that will 
be covered by the final Rule amendments. Combining the average based on 
the annual growth rate of Parents With Apps and that based on the BLS 
software application developer growth projection yields an increase of 
approximately 168 (290 + 46 = 336; 336 / 2 = 168) new mobile app 
developers per year on average that will be covered by the proposed 
Rule amendments.
---------------------------------------------------------------------------

    \370\ Bureau of Labor Statistics, U.S. Department of Labor, 
Occupational Outlook Handbook, 2012-13 Edition, Software Developers, 
http://www.bls.gov/ooh/computer-and-information-technology/software-developers.htm (visited November 16, 2012).
---------------------------------------------------------------------------

    As with its previous estimates of existing developers, mobile app 
developers were already included in the Commission's 2011 NPRM PRA 
estimate of 100 new operators and the Commission's 2012 SNPRM PRA 
estimate of 125 additional new operators per year. As noted above, the 
Commission's 2011 NPRM and 2012 SNPRM PRA estimates of new operators 
were contested only as they relate to their estimation of new mobile 
app developers. Thus, the total number of new mobile app developers set 
forth herein should replace the total (unspecified) number of new 
mobile app developers subsumed within the 2011 NPRM and 2012 SNPRM PRA 
estimates.
    The Commission believes it is reasonable to substitute the above-
noted estimate of 168 mobile app developers for half, i.e., 113, of the 
225 new operators previously estimated to be covered by the 2011 NPRM 
and 2012 SNPRM PRA estimates. The remainder of the prior estimates 
would account for new Web site and other online service providers other 
than new mobile app developers, as well as new plug-in developers and 
advertising networks that could be covered by the ``actual knowledge'' 
standard. Thus, combining these totals (168 + 113 = 281) yields a total 
of approximately 280 new operators per year (over a prospective three-
year clearance) of Web sites or online services that would likely be 
covered by the final Rule amendments. Given that the FTC's existing 
clearance already accounts for an estimate of 100 new operators,\371\ 
the incremental calculation for additional OMB clearance is 180 new 
operators x 60 hours each = 10,800 hours.
---------------------------------------------------------------------------

    \371\ See note 342, supra.
---------------------------------------------------------------------------

C. Recordkeeping

    Under the PRA, the term ``recordkeeping requirement'' means a 
requirement imposed by or for an agency on persons to maintain 
specified records, including a requirement to (A) Retain such records; 
(B) notify third parties, the Federal Government, or the public of the 
existence of such records; (C) disclose such records to third parties, 
the Federal Government, or the public; or (D) report to third parties, 
the Federal Government, or the public

[[Page 4006]]

regarding such records.'' The final amendments do not affect the Rule's 
existing recordkeeping requirements. Moreover, FTC staff believes that 
most of the records listed in the Rule's pre-existing safe harbor 
recordkeeping provisions consist of documentation that such parties 
have kept in the ordinary course of business irrespective of the 
Rule.\372\ Any incremental burden, such as that for maintaining the 
results of independent assessments under section 312.11(d), would be, 
in staff's view, marginal.
---------------------------------------------------------------------------

    \372\ Under 5 CFR 1320.3(b)(2), OMB excludes from the definition 
of PRA ``burden'' the time and financial resources needed to comply 
with agency-imposed recordkeeping, disclosure, or reporting 
requirements that customarily would be undertaken independently in 
the normal course of business. Thus, on further reflection, the FTC 
has determined not to include recordkeeping costs for safe harbors 
as it did in the 2011 NPRM PRA analysis.
---------------------------------------------------------------------------

D. Disclosure Hours

(1) New Operators' Disclosure Burden
    Under the existing OMB clearance for the Rule, the FTC has 
estimated that new operators will each spend approximately 60 hours to 
craft a privacy policy, design mechanisms to provide the required 
online privacy notice and, where applicable, direct notice to parents 
in order to obtain verifiable consent. Several commenters noted that 
this 60-hour estimate failed to take into account accurate costs of 
compliance with the Rule, but they did not provide the Commission with 
empirical data or specific evidence on the number of hours such 
activities require.\373\ The Toy Industry Association (``TIA'') \374\ 
asserts that the Commission underestimated the number of hours shown in 
the 2011 NPRM and 2012 SNPRM PRA calculations,\375\ and that 
``[d]epending on the FTC's final revisions to the COPPA Rule, the time 
it takes to implement technological changes could more than triple the 
Commission's 60-hour estimate.'' \376\ These assertions appear to be 
based primarily on TIA's concern that the FTC's estimate did not 
include costs ``of `ensuring' security procedures of third parties, 
securing deletion, managing parental consents, or updating policies to 
disclose changes in `operators.' In addition, the FTC seems to 
reference only top level domains and, as such, its estimates for 
implementation of new verifiable parental consent requirements are very 
low.'' \377\ TIA states that ``the additional processes and procedures 
mandated under the revised proposed Rule will potentially include 
privacy policy and operational changes, with related resource-intensive 
measures, such as organizational management and employee training.'' 
\378\ Moreover, TIA suggests that changes proposed in the 2011 NPRM to 
the treatment of screen or user names would entail ``enormous'' costs 
that the FTC did not quantify.\379\
---------------------------------------------------------------------------

    \373\ See N. Savitt (comment 142, 2011 NPRM), at 1; NCTA 
(comment 113, 2011 NPRM), at 23-24.
    \374\ TIA contends that in the 2012 SNPRM, the Commission 
``disregarded the empirical economic input'' regarding compliance 
costs that TIA had submitted in response to the 2011 NPRM, including 
hour and labor cost estimates. Toy Industry Association (comment 89, 
2012 SNPRM), at 16. Although the Commission did not discuss TIA's 
2011 comments in the SNPRM--which focused on the potential 
incremental compliance cost changes that the Commission anticipated 
would flow from certain newly proposed Rule amendments--it has 
considered TIA's 2011 and 2012 comments on compliance costs as 
discussed herein.
    \375\ Toy Industry Association (comment 89, 2012 SNPRM), at 16-
17; Toy Industry Association (comment 163, 2011 NPRM), at 17-18; see 
also DMA (comment 28, 2012 SNPRM), at 17.
    \376\ Toy Industry Association (comment 163, 2011 NPRM), at 18.
    \377\ Id. at 17. Also with specific regard to potential costs 
associated with obtaining and verifying parental consent, TIA 
estimates that dedicating employees specifically to this task would, 
if the FTC were to require a ``scanned form type of control 
regime,'' require additional salary and benefit costs. Id. at 18.
    \378\ Id. at 17.
    \379\ Id. at 18.
---------------------------------------------------------------------------

    Substantially all of TIA's concerns about understated burden 
estimates relate to proposed requirements that the Commission has 
ultimately determined not to adopt. For example, the final Rule 
amendments do not require operators to ``ensure'' that third-parties 
secure information, but that they ``take reasonable steps'' to release 
children's information only to third parties capable of maintaining it 
securely and provide assurances that they will do so.\380\ The 
Commission is not eliminating the ``single operator designee'' proviso 
of the Rule's online notice requirement.\381\ It is not eliminating 
email plus as an acceptable consent method for operators collecting 
personal information only for internal use.\382\ The Commission 
determined to treat screen names as personal information only in those 
instances in which a screen or user name rises to the level of online 
contact information.\383\ Thus, in the Commission's view, TIA's 
proposed increase to the above-noted estimate of 60 hours for 
compliance is not warranted.\384\
---------------------------------------------------------------------------

    \380\ See Part II.D., supra. As for the ``reasonable steps'' 
requirement, the time and financial resources operators devote to 
this task would likely be incurred, anyway, in the normal course of 
their seeking to preserve the security of children's data conveyed 
to those third parties. To reiterate, PRA ``burden'' does not 
include effort expended in the ordinary course of business 
independent of a regulatory requirement. 5 CFR 1320.3(b)(2). See 
also Toy Industry Association (comment 163, 2011 NPRM), at 16 
(``Operators regularly investigate agents, service providers, and 
business partners to assure that they will responsibly maintain the 
security and confidentiality of children's data . * * *'').
    \381\ See Part II.B.2, supra.
    \382\ See Part II.C.7, supra. Furthermore, the requirement to 
obtain parental consent is not a collection of information under the 
PRA.
    \383\ See Part II.A.5.a, supra. This change also appears to moot 
NCTA's concern that operators would be faced with substantial costs 
if ``forced to redesign'' Web sites to eliminate the use of unique 
screen or user names. NCTA (comment 113, 2011 NPRM), at 23 n.69.
    \384\ TIA also cites the potential cost of needing to ``develop 
communication tools and respond to complaints from parents who may 
mistakenly believe that companies are altering data collection 
practices. * * *'' Toy Industry Association (comment 163, 2011 
NPRM), at 18. This speculative cost does not relate to any 
``information collection requirement'' in the final Rule amendments.
---------------------------------------------------------------------------

    Applying, then, the 60 hours estimate to the portion of new 
operators not accounted for in the FTC's previously cleared burden 
totals yields a cumulative total of 10,800 hours (180 new operators x 
60 hours each).
(2) Existing Operators' Disclosure Burden
    The final Rule amendments will not impose ongoing incremental 
disclosure time per entity, but, as noted above, would result in an 
estimated 2,910 existing operators covered by the Rule. These entities 
will have a one-time burden to re-design their existing privacy 
policies and direct notice procedures that would not carry over to the 
second and third years of a prospective three-year OMB clearance under 
the PRA. Commission staff believes that an existing operator's time to 
make these changes would be no more than that for a new entrant 
crafting its online and direct notices for the first time, i.e., 60 
hours. Annualized over three years of a prospective clearance,\385\ 
this amounts to 20 hours ((60 hours + 0 + 0) / 3) per year. Aggregated 
for the estimated 2,910 existing operators that would be subject to the 
Rule, annualized disclosure burden would be 58,200 hours per year.
---------------------------------------------------------------------------

    \385\ TIA states that this first-year cost associated with 
compliance should not be ``amortized'' over three years. Toy 
Industry Association (comment 89, 2012 SNPRM), at 17. As stated 
supra note 336, however, agencies may seek up to three years of 
clearance from OMB, and this is what the FTC routinely does for 
rulemakings. Moreover, OMB seeks estimates of annual burden 
(reflective of the clearance period sought). See 5 CFR 
1320.5(a)(1)(iv)(B).
---------------------------------------------------------------------------

E. Reporting Hours

    The final Rule amendments do not impose reporting requirements on 
operators; they do, however, for safe harbor programs. Under the FTC's 
already cleared estimates, pre-amendments, staff projected that each 
new safe harbor program applicant

[[Page 4007]]

would require 265 hours to prepare and submit its safe harbor 
proposal.\386\ The final Rule amendments, however, require a safe 
harbor applicant to submit a more detailed proposal than what the Rule, 
prior to such amendments, mandated. Existing safe harbor programs will 
thus need to submit a revised application and new safe harbor 
applicants will have to provide greater detail than they would have 
under the original Rule. The FTC estimates this added information will 
entail approximately 60 additional hours for each new, and each 
existing, safe harbor to prepare. Accordingly, for this added one-time 
preparation, the aggregate incremental burden is 60 hours for the 
projected one new safe harbor program per three-year clearance cycle 
and 300 hours, cumulatively, for the five existing safe harbor 
programs. Annualized for an average single year per three-year 
clearance, this amounts to 20 hours for one new safe harbor program, 
and 100 hours for the existing five safe harbor programs; thus, 
cumulatively, the burden is 120 hours.
---------------------------------------------------------------------------

    \386\ 76 FR at 7211, 7212 (Feb. 9, 2011); 76 FR at 31334, 31335 
(May 31, 2011). These safe harbor reporting hour estimates have not 
been contested. For PRA purposes, annualized over the course of 
three years of clearance, this averages roughly 100 hours per year, 
given that the 265 hours is a one-time, not recurring, expenditure 
of time for an applicant.
---------------------------------------------------------------------------

    The final Rule amendments require safe harbor programs to audit 
their members at least annually and to submit periodic reports to the 
Commission on the aggregate results of these member audits. As such, 
this will increase currently cleared burden estimates pertaining to 
safe harbor applicants. The burden for conducting member audits and 
preparing these reports likely will vary for each safe harbor program 
depending on the number of members. Commission staff estimates that 
conducting audits and preparing reports will require approximately 100 
hours per program per year. Aggregated for one new (100 hours) and five 
existing (500 hours) safe harbor programs, this amounts to an increased 
disclosure burden of 600 hours per year. Accordingly, the annualized 
reporting burden for one new and five existing safe harbor applicants 
to provide the added information required (120 hours) and to conduct 
audits and prepare reports (600 hours) is 720 hours, cumulatively.

F. Labor Costs

(1) Disclosure
    The Commission assumes that the time spent on compliance for new 
operators and existing operators covered by the final Rule amendments 
would be apportioned five to one between legal (lawyers or similar 
professionals) and technical (e.g., computer programmers, software 
developers, and information security analysts) personnel.\387\ In the 
2012 SNPRM, based on BLS compiled data, FTC staff assumed for 
compliance cost estimates a mean hourly rate of $180 for legal 
assistance and $42 for technical labor support.\388\ These estimates 
were challenged in the comments.
---------------------------------------------------------------------------

    \387\ See 76 FR at 7211, 7212-7213 (Feb. 9, 2011); 76 FR at 
31334, 31335 n.1 (May 31, 2011) (FTC notices for renewing OMB 
clearance for the COPPA Rule).
    \388\ As explained in the 2012 SNPRM, ``[t]he estimated rate of 
$180 is roughly midway between [BLS] mean hourly wages for lawyers 
($62.74) in the most recent annual compilation available online [as 
of August 2012] and what Commission staff believes more generally 
reflects hourly attorney costs ($300) associated with Commission 
information collection activities.'' 77 FR at 46651, n.54. This 
estimated rate was an upward revision of the Commission's estimate 
of $150 per hour used in the 2011 NPRM. See 76 FR at 59827 n.204 and 
accompanying text. The estimated mean hourly wages for technical 
labor support ($42) is based on an average of the salaries for 
computer programmers, software developers, information security 
analysts, and web developers as reported by the BLS. See National 
Occupational and Wages--May 2011, available at http://www.bls.gov/news.release/archives/ocwage_03272012.pdf.
---------------------------------------------------------------------------

    TIA asserts that the Commission underestimates the labor rate for 
lawyers used in the Commission's 2011 NPRM and 2012 SNPRM compliance 
cost calculations.\389\ Given the comments received, the Commission 
believes it appropriate to increase the estimated mean hourly rate of 
$180 for legal assistance used in certain of the Commission's 2011 NPRM 
and 2012 SNPRM compliance cost calculations. TIA stated in its 2011 
comment that the ``average rates'' of ``specialized attorneys who 
understand children's privacy and data security laws'' with whom its 
members typically consult are ``2-3 times the Commission's estimates'' 
of $150 per hour set forth in the 2011 NPRM.\390\ TIA reiterated this 
information in its 2012 comment\391\ and added: ``According to The 
National Law Journal's 2011 annual billing survey, the average hourly 
firm-wide billing rate (which combines partner and associate rates) 
ranges from $236 to $633, not taking into account any area of 
specialization.'' \392\ While the Commission believes TIA's information 
provides useful reference points, it does not provide an adequate basis 
for estimating an hourly rate for lawyers for compliance cost 
calculation purposes.
---------------------------------------------------------------------------

    \389\ Toy Industry Association (comment 89, 2012 SNPRM), at 16; 
Toy Industry Association (comment 163, 2011 NPRM), at 17.
    \390\ Toy Industry Association (comment 163, 2011 NPRM), at 17. 
See also NCTA (comment 113, 2011 NPRM), at 23 n.70 (``NCTA members 
typically consult with attorneys who specialize in data privacy and 
security laws and whose average rates are 2-3 times the Commission's 
[2011 NPRM] estimates [of $150 per hour].'').
    \391\ Toy Industry Association (comment 89, 2012 SNPRM), at 18.
    \392\ Id., at 10 (citation omitted).
---------------------------------------------------------------------------

    As an initial matter, the Commission notes that TIA has cited a 
range of average hourly rates that its members pay for counsel, not a 
single average hourly rate, and it did not submit the underlying data 
upon which those average rate calculations were based. The range of 
average hourly rates TIA stated that its members typically pay (i.e., 
$300-$450 per hour) may include some unusually high or low billing 
rates that have too much influence on the arithmetic means for those 
averages to be representative of the rates operators are likely to have 
to pay.\393\ Without more information about the distribution of the 
underlying rates factored into each average, or the distribution of the 
averages within the cited range, TIA's information is of limited value. 
Likewise, as TIA's comments appear to implicitly recognize, routine 
COPPA compliance counseling would likely be performed by a mix of 
attorneys billed at a range of hourly rates. Unfortunately, the 
information submitted in TIA's comments does not indicate how that 
workload is typically apportioned as between ``high-level partner[s]'' 
whose ``support'' is required for ``complex'' COPPA compliance matters 
and other, less senior, attorneys at a law firm. The National Law 
Journal survey the TIA cites is also a useful reference point, but it 
is a non-scientific survey of the nation's 250 largest law firms \394\ 
that are located predominantly in major metropolitan areas.\395\ Beyond 
the range of average hourly firm-wide billing rates that TIA cites, the 
survey states that the

[[Page 4008]]

average firm-wide billing rate (partners and associates) in 2011 was 
$403, the average partner rate was $482, and the average associate rate 
was $303.
---------------------------------------------------------------------------

    \393\ See Federal Judicial Center, Reference Manual on 
Scientific Evidence (3rd Ed.), David H. Kay and David A. Freedman, 
Reference Guide on Statistics at 238 (``[t]he mean takes account of 
all the data B it involves the total of all the numbers; however, 
particularly with small datasets, a few unusually large or small 
observations may have too much influence on the mean.'').
    \394\ Toy Industry Association (comment 89, 2012 SNPRM), at 19. 
Fifty-one law firms supplied the average rate information used in 
the survey's tabulation, ``A nationwide sampling of law firm billing 
rates,'' to which the TIA appears to refer.
    \395\ The Commission recognizes that many attorneys who 
specialize in COPPA compliance and data security law often work at 
large law firms located in major metropolitan areas. However, just 
as the nature of online technology and the mobile marketplace allow 
operators to live almost anywhere, see Association for Competitive 
Technology (comment 5, 2011 NPRM), at 2 (the ``nature of this 
industry allows developers to live almost anywhere''), it also 
allows them to seek the counsel of competent lawyers practicing 
anywhere in the United States.
---------------------------------------------------------------------------

    The Commission believes it reasonable to assume that the workload 
among law firm partners and associates for COPPA compliance questions 
could be competently addressed and efficiently distributed among 
attorneys at varying levels of seniority, but would be weighted most 
heavily to more junior attorneys. Thus, assuming an apportionment of 
two-thirds of such work is done by associates, and one-third by 
partners, a weighted average tied to the average firm-wide associate 
and average firm-wide partner rates, respectively, in the National Law 
Journal 2011 survey would be about $365 per hour. The Commission 
believes that this rate B which is very near the mean of TIA's stated 
range of purported hourly rates that its members typically pay to 
engage counsel for COPPA compliance questions B is an appropriate 
measure to calculate the cost of legal assistance for operators to 
comply with the final Rule amendments.\396\
---------------------------------------------------------------------------

    \396\ Cf. Civil Division of the United States Attorney's Office 
for the District of Columbia, United States Attorney's Office, 
District of Columbia, Laffey Matrix B 2003-2013, available at http://www.justice.gov/usao/dc/divisions/Laffey_Matrix_2003-2013.pdf 
(updated ``Laffey Matrix'' for calculating ``reasonable'' attorneys 
fees in suits in which fee shifting is authorized can be evidence of 
prevailing market rates for litigation counsel in the Washington, DC 
area; rates in table range from $245 per hour for most junior 
associates to $505 per hour for most senior partners).
---------------------------------------------------------------------------

    TIA also states that the 2012 SNPRM estimate of $42 per hour for 
technical support is too low, and that engaging expert technical 
personnel can, on average, involve hourly costs that range from $72 to 
$108.\397\ Similar to TIA's hours estimate, discussed above, the 
Commission believes that TIA's estimate may have been based on 
implementing requirements that, ultimately, the Commission has 
determined not to adopt. For example, technical personnel will not need 
to ``ensure'' the security procedures of third parties; operators that 
have been eligible to use email plus for parental consents will not be 
required to implement new systems to replace it. It is unclear whether 
TIA's estimate for technical support is based on the types of 
disclosure-related tasks that the final Rule amendments would actually 
require, other tasks that the final Rule amendments would not require, 
or non-disclosure tasks not covered by the PRA. Moreover, unlike its 
estimate for lawyer assistance, TIA's estimates for technical labor are 
not accompanied by an adequate explanation of why estimates for 
technical support drawn from BLS statistics are not an appropriate 
basis for the FTC's PRA analysis. Accordingly, the Commission believes 
it is reasonable to retain the 2012 SNPRM estimate of $42 per hour for 
technical assistance based on BLS data.
---------------------------------------------------------------------------

    \397\ Toy Industry Association (comment 89, 2012 SNPRM), at 18.
---------------------------------------------------------------------------

    Thus, for the 180 new operators per year not previously accounted 
for under the FTC's currently cleared estimates, 10,800 cumulative 
disclosure hours would be composed of 9,000 hours of legal assistance 
and 1,800 hours of technical support. Applied to hourly rates of $365 
and $42, respectively, associated labor costs for the 180 new operators 
potentially subject to the proposed amendments would be $3,360,600 
(i.e., $3,285,000 for legal support plus $75,600 for technical 
support).
    Similarly, for the estimated 2,910 existing operators covered by 
the final Rule amendments, 58,200 cumulative disclosure hours would 
consist of 48,500 hours of legal assistance and 9,700 hours for 
technical support. Applied at hourly rates of $365 and $42, 
respectively, associated labor costs would total $18,109,900 (i.e., 
$17,702,500 for legal support plus $407,400 for technical support). 
Cumulatively, estimated labor costs for new and existing operators 
subject to the final Rule amendments is $21,470,500.
(2) Reporting
    The Commission staff assumes that the tasks to prepare augmented 
safe harbor program applications occasioned by the final Rule 
amendments will be performed primarily by lawyers, at a mean labor rate 
of $180 an hour.\398\ Thus, applied to an assumed industry total of 120 
hours per year for this task, incremental associated yearly labor costs 
would total $21,600.
---------------------------------------------------------------------------

    \398\ Based on Commission staff's experience with previously 
approved safe harbor programs, staff anticipates that most of the 
legal tasks associated with safe harbor programs will be performed 
by in-house counsel. Cf. Toy Industry Association (comment 89, 2012 
SNPRM), at 19 (regional BLS statistics for lawyer wages can support 
estimates of the level of in-house legal support likely to be 
required on an ongoing basis). Moreover, no comments were received 
in response to the February 9, 2011 and May 31, 2011 Federal 
Register notices (76 FR at 7211 and 76 FR at 31334, respectively, 
available at http://www.gpo.gov/fdsys/pkg/FR-2011-02-09/pdf/2011-2904.pdf and http://www.gpo.gov/fdsys/pkg/FR-2011-05-31/pdf/2011-13357.pdf), which assumed a labor rate of $150 per hour for lawyers 
or similar professionals to prepare and submit a new safe harbor 
application. Nor was that challenged in the comments responding to 
the 2011 NPRM.
---------------------------------------------------------------------------

    The Commission staff assumes periodic reports will be prepared by 
compliance officers, at a labor rate of $28 per hour.\399\ Applied to 
an assumed industry total of 600 hours per year for this task, 
associated yearly labor costs would be $16,800.
---------------------------------------------------------------------------

    \399\ See Bureau of Labor Statistics National Compensation 
Survey: Occupational Earnings in the United States, 2010, at Table 
3, available at http://www.bls.gov/ncs/ocs/sp/nctb1477.pdf. This 
rate has not been contested.
---------------------------------------------------------------------------

    Cumulatively, labor costs for the above-noted reporting 
requirements total approximately $38,400 per year.

G. Non-Labor/Capital Costs

    Because both operators and safe harbor programs will already be 
equipped with the computer equipment and software necessary to comply 
with the Rule's new notice requirements, the final Rule amendments 
should not impose any additional capital or other non-labor costs.\400\
---------------------------------------------------------------------------

    \400\ NCTA commented that the Commission failed to consider 
costs ``related to redeveloping child-directed Web sites'' that 
operators would be ``forced'' to incur as a result of the proposed 
Rule amendments, including for ``new equipment and software required 
by the expanded regulatory regime.'' NCTA (comment 113, 2011 NPRM), 
at 23. Similarly, TIA commented that the proposed Rule amendments 
would entail ``increased monetary costs with respect to technology 
acquisition and implementation * * *.'' Toy Industry Association 
(comment 163, 2011 NPRM), at 17. These comments, however, do not 
specify projected costs or which Rule amendments would entail the 
asserted costs.
---------------------------------------------------------------------------

List of Subjects in 16 CFR Part 312

    Children, Communications, Consumer protection, Electronic mail, 
Email, Internet, Online service, Privacy, Record retention, Safety, 
science and technology, Trade practices, Web site, Youth.


0
Accordingly, for the reasons stated above, the Federal Trade Commission 
revises part 312 of Title 16 of the Code of Federal Regulations to read 
as follows:

PART 312--CHILDREN'S ONLINE PRIVACY PROTECTION RULE

Sec.
312.1 Scope of regulations in this part.
312.2 Definitions.
312.3 Regulation of unfair or deceptive acts or practices in 
connection with the collection, use, and/or disclosure of personal 
information from and about children on the Internet.
312.4 Notice.
312.5 Parental consent.
312.6 Right of parent to review personal information provided by a 
child.
312.7 Prohibition against conditioning a child's participation on 
collection of personal information.

[[Page 4009]]

312.8 Confidentiality, security, and integrity of personal 
information collected from children.
312.9 Enforcement.
312.10 Data retention and deletion requirements.
312.11 Safe harbor programs.
312.12 Voluntary Commission Approval Processes.
312.13 Severability.

    Authority:  15 U.S.C. 6501-6508.


Sec.  312.1  Scope of regulations in this part.

    This part implements the Children's Online Privacy Protection Act 
of 1998, (15 U.S.C. 6501, et seq.,) which prohibits unfair or deceptive 
acts or practices in connection with the collection, use, and/or 
disclosure of personal information from and about children on the 
Internet.


Sec.  312.2  Definitions.

    Child means an individual under the age of 13.
    Collects or collection means the gathering of any personal 
information from a child by any means, including but not limited to:
    (1) Requesting, prompting, or encouraging a child to submit 
personal information online;
    (2) Enabling a child to make personal information publicly 
available in identifiable form. An operator shall not be considered to 
have collected personal information under this paragraph if it takes 
reasonable measures to delete all or virtually all personal information 
from a child's postings before they are made public and also to delete 
such information from its records; or
    (3) Passive tracking of a child online.
    Commission means the Federal Trade Commission.
    Delete means to remove personal information such that it is not 
maintained in retrievable form and cannot be retrieved in the normal 
course of business.
    Disclose or disclosure means, with respect to personal information:
    (1) The release of personal information collected by an operator 
from a child in identifiable form for any purpose, except where an 
operator provides such information to a person who provides support for 
the internal operations of the Web site or online service; and
    (2) Making personal information collected by an operator from a 
child publicly available in identifiable form by any means, including 
but not limited to a public posting through the Internet, or through a 
personal home page or screen posted on a Web site or online service; a 
pen pal service; an electronic mail service; a message board; or a chat 
room.
    Federal agency means an agency, as that term is defined in Section 
551(1) of title 5, United States Code.
    Internet means collectively the myriad of computer and 
telecommunications facilities, including equipment and operating 
software, which comprise the interconnected world-wide network of 
networks that employ the Transmission Control Protocol/Internet 
Protocol, or any predecessor or successor protocols to such protocol, 
to communicate information of all kinds by wire, radio, or other 
methods of transmission.
    Obtaining verifiable consent means making any reasonable effort 
(taking into consideration available technology) to ensure that before 
personal information is collected from a child, a parent of the child:
    (1) Receives notice of the operator's personal information 
collection, use, and disclosure practices; and
    (2) Authorizes any collection, use, and/or disclosure of the 
personal information.
    Online contact information means an email address or any other 
substantially similar identifier that permits direct contact with a 
person online, including but not limited to, an instant messaging user 
identifier, a voice over internet protocol (VOIP) identifier, or a 
video chat user identifier.
    Operator means any person who operates a Web site located on the 
Internet or an online service and who collects or maintains personal 
information from or about the users of or visitors to such Web site or 
online service, or on whose behalf such information is collected or 
maintained, or offers products or services for sale through that Web 
site or online service, where such Web site or online service is 
operated for commercial purposes involving commerce among the several 
States or with 1 or more foreign nations; in any territory of the 
United States or in the District of Columbia, or between any such 
territory and another such territory or any State or foreign nation; or 
between the District of Columbia and any State, territory, or foreign 
nation. This definition does not include any nonprofit entity that 
would otherwise be exempt from coverage under Section 5 of the Federal 
Trade Commission Act (15 U.S.C. 45). Personal information is collected 
or maintained on behalf of an operator when:
    (1) It is collected or maintained by an agent or service provider 
of the operator; or
    (2) The operator benefits by allowing another person to collect 
personal information directly from users of such Web site or online 
service.
    Parent includes a legal guardian.
    Person means any individual, partnership, corporation, trust, 
estate, cooperative, association, or other entity.
    Personal information means individually identifiable information 
about an individual collected online, including:
    (1) A first and last name;
    (2) A home or other physical address including street name and name 
of a city or town;
    (3) Online contact information as defined in this section;
    (4) A screen or user name where it functions in the same manner as 
online contact information, as defined in this section;
    (5) A telephone number;
    (6) A Social Security number;
    (7) A persistent identifier that can be used to recognize a user 
over time and across different Web sites or online services. Such 
persistent identifier includes, but is not limited to, a customer 
number held in a cookie, an Internet Protocol (IP) address, a processor 
or device serial number, or unique device identifier;
    (8) A photograph, video, or audio file where such file contains a 
child's image or voice;
    (9) Geolocation information sufficient to identify street name and 
name of a city or town; or
    (10) Information concerning the child or the parents of that child 
that the operator collects online from the child and combines with an 
identifier described in this definition.
    Release of personal information means the sharing, selling, 
renting, or transfer of personal information to any third party.
    Support for the internal operations of the Web site or online 
service means:
    (1) Those activities necessary to:
    (i) Maintain or analyze the functioning of the Web site or online 
service;
    (ii) Perform network communications;
    (iii) Authenticate users of, or personalize the content on, the Web 
site or online service;
    (iv) Serve contextual advertising on the Web site or online service 
or cap the frequency of advertising;
    (v) Protect the security or integrity of the user, Web site, or 
online service;
    (vi) Ensure legal or regulatory compliance; or
    (vii) Fulfill a request of a child as permitted by Sec.  
312.5(c)(3) and (4);
    (2) So long as The information collected for the activities listed 
in paragraphs (1)(i)-(vii) of this definition is not used or disclosed 
to contact a specific individual, including through behavioral 
advertising, to amass a

[[Page 4010]]

profile on a specific individual, or for any other purpose.
    Third party means any person who is not:
    (1) An operator with respect to the collection or maintenance of 
personal information on the Web site or online service; or
    (2) A person who provides support for the internal operations of 
the Web site or online service and who does not use or disclose 
information protected under this part for any other purpose.
    Web site or online service directed to children means a commercial 
Web site or online service, or portion thereof, that is targeted to 
children.
    (1) In determining whether a Web site or online service, or a 
portion thereof, is directed to children, the Commission will consider 
its subject matter, visual content, use of animated characters or 
child-oriented activities and incentives, music or other audio content, 
age of models, presence of child celebrities or celebrities who appeal 
to children, language or other characteristics of the Web site or 
online service, as well as whether advertising promoting or appearing 
on the Web site or online service is directed to children. The 
Commission will also consider competent and reliable empirical evidence 
regarding audience composition, and evidence regarding the intended 
audience.
    (2) A Web site or online service shall be deemed directed to 
children when it has actual knowledge that it is collecting personal 
information directly from users of another Web site or online service 
directed to children.
    (3) A Web site or online service that is directed to children under 
the criteria set forth in paragraph (1) of this definition, but that 
does not target children as its primary audience, shall not be deemed 
directed to children if it:
    (i) Does not collect personal information from any visitor prior to 
collecting age information; and
    (ii) Prevents the collection, use, or disclosure of personal 
information from visitors who identify themselves as under age 13 
without first complying with the notice and parental consent provisions 
of this part.
    (4) A Web site or online service shall not be deemed directed to 
children solely because it refers or links to a commercial Web site or 
online service directed to children by using information location 
tools, including a directory, index, reference, pointer, or hypertext 
link.


Sec.  312.3  Regulation of unfair or deceptive acts or practices in 
connection with the collection, use, and/or disclosure of personal 
information from and about children on the Internet.

    General requirements. It shall be unlawful for any operator of a 
Web site or online service directed to children, or any operator that 
has actual knowledge that it is collecting or maintaining personal 
information from a child, to collect personal information from a child 
in a manner that violates the regulations prescribed under this part. 
Generally, under this part, an operator must:
    (a) Provide notice on the Web site or online service of what 
information it collects from children, how it uses such information, 
and its disclosure practices for such information (Sec.  312.4(b));
    (b) Obtain verifiable parental consent prior to any collection, 
use, and/or disclosure of personal information from children (Sec.  
312.5);
    (c) Provide a reasonable means for a parent to review the personal 
information collected from a child and to refuse to permit its further 
use or maintenance (Sec.  312.6);
    (d) Not condition a child's participation in a game, the offering 
of a prize, or another activity on the child disclosing more personal 
information than is reasonably necessary to participate in such 
activity (Sec.  312.7); and
    (e) Establish and maintain reasonable procedures to protect the 
confidentiality, security, and integrity of personal information 
collected from children (Sec.  312.8).


Sec.  312.4  Notice.

    (a) General principles of notice. It shall be the obligation of the 
operator to provide notice and obtain verifiable parental consent prior 
to collecting, using, or disclosing personal information from children. 
Such notice must be clearly and understandably written, complete, and 
must contain no unrelated, confusing, or contradictory materials.
    (b) Direct notice to the parent. An operator must make reasonable 
efforts, taking into account available technology, to ensure that a 
parent of a child receives direct notice of the operator's practices 
with regard to the collection, use, or disclosure of personal 
information from children, including notice of any material change in 
the collection, use, or disclosure practices to which the parent has 
previously consented.
    (c) Content of the direct notice to the parent--(1) Content of the 
direct notice to the parent under Sec.  312.5(c)(1) (Notice to Obtain 
Parent's Affirmative Consent to the Collection, Use, or Disclosure of a 
Child's Personal Information). This direct notice shall set forth:
    (i) That the operator has collected the parent's online contact 
information from the child, and, if such is the case, the name of the 
child or the parent, in order to obtain the parent's consent;
    (ii) That the parent's consent is required for the collection, use, 
or disclosure of such information, and that the operator will not 
collect, use, or disclose any personal information from the child if 
the parent does not provide such consent;
    (iii) The additional items of personal information the operator 
intends to collect from the child, or the potential opportunities for 
the disclosure of personal information, should the parent provide 
consent;
    (iv) A hyperlink to the operator's online notice of its information 
practices required under paragraph (d) of this section;
    (v) The means by which the parent can provide verifiable consent to 
the collection, use, and disclosure of the information; and
    (vi) That if the parent does not provide consent within a 
reasonable time from the date the direct notice was sent, the operator 
will delete the parent's online contact information from its records.
    (2) Content of the direct notice to the parent under Sec.  
312.5(c)(2) (Voluntary Notice to Parent of a Child's Online Activities 
Not Involving the Collection, Use or Disclosure of Personal 
Information). Where an operator chooses to notify a parent of a child's 
participation in a Web site or online service, and where such site or 
service does not collect any personal information other than the 
parent's online contact information, the direct notice shall set forth:
    (i) That the operator has collected the parent's online contact 
information from the child in order to provide notice to, and 
subsequently update the parent about, a child's participation in a Web 
site or online service that does not otherwise collect, use, or 
disclose children's personal information;
    (ii) That the parent's online contact information will not be used 
or disclosed for any other purpose;
    (iii) That the parent may refuse to permit the child's 
participation in the Web site or online service and may require the 
deletion of the parent's online contact information, and how the parent 
can do so; and
    (iv) A hyperlink to the operator's online notice of its information

[[Page 4011]]

practices required under paragraph (d) of this section.
    (3) Content of the direct notice to the parent under Sec.  
312.5(c)(4) (Notice to a Parent of Operator's Intent to Communicate 
with the Child Multiple Times). This direct notice shall set forth:
    (i) That the operator has collected the child's online contact 
information from the child in order to provide multiple online 
communications to the child;
    (ii) That the operator has collected the parent's online contact 
information from the child in order to notify the parent that the child 
has registered to receive multiple online communications from the 
operator;
    (iii) That the online contact information collected from the child 
will not be used for any other purpose, disclosed, or combined with any 
other information collected from the child;
    (iv) That the parent may refuse to permit further contact with the 
child and require the deletion of the parent's and child's online 
contact information, and how the parent can do so;
    (v) That if the parent fails to respond to this direct notice, the 
operator may use the online contact information collected from the 
child for the purpose stated in the direct notice; and
    (vi) A hyperlink to the operator's online notice of its information 
practices required under paragraph (d) of this section.
    (4) Content of the direct notice to the parent required under Sec.  
312.5(c)(5) (Notice to a Parent In Order to Protect a Child's Safety). 
This direct notice shall set forth:
    (i) That the operator has collected the name and the online contact 
information of the child and the parent in order to protect the safety 
of a child;
    (ii) That the information will not be used or disclosed for any 
purpose unrelated to the child's safety;
    (iii) That the parent may refuse to permit the use, and require the 
deletion, of the information collected, and how the parent can do so;
    (iv) That if the parent fails to respond to this direct notice, the 
operator may use the information for the purpose stated in the direct 
notice; and
    (v) A hyperlink to the operator's online notice of its information 
practices required under paragraph (d) of this section.
    (d) Notice on the Web site or online service. In addition to the 
direct notice to the parent, an operator must post a prominent and 
clearly labeled link to an online notice of its information practices 
with regard to children on the home or landing page or screen of its 
Web site or online service, and, at each area of the Web site or online 
service where personal information is collected from children. The link 
must be in close proximity to the requests for information in each such 
area. An operator of a general audience Web site or online service that 
has a separate children's area must post a link to a notice of its 
information practices with regard to children on the home or landing 
page or screen of the children's area. To be complete, the online 
notice of the Web site or online service's information practices must 
state the following:
    (1) The name, address, telephone number, and email address of all 
operators collecting or maintaining personal information from children 
through the Web site or online service. Provided that: The operators of 
a Web site or online service may list the name, address, phone number, 
and email address of one operator who will respond to all inquiries 
from parents concerning the operators' privacy policies and use of 
children's information, as long as the names of all the operators 
collecting or maintaining personal information from children through 
the Web site or online service are also listed in the notice;
    (2) A description of what information the operator collects from 
children, including whether the Web site or online service enables a 
child to make personal information publicly available; how the operator 
uses such information; and, the operator's disclosure practices for 
such information; and
    (3) That the parent can review or have deleted the child's personal 
information, and refuse to permit further collection or use of the 
child's information, and state the procedures for doing so.


Sec.  312.5  Parental consent.

    (a) General requirements. (1) An operator is required to obtain 
verifiable parental consent before any collection, use, or disclosure 
of personal information from children, including consent to any 
material change in the collection, use, or disclosure practices to 
which the parent has previously consented.
    (2) An operator must give the parent the option to consent to the 
collection and use of the child's personal information without 
consenting to disclosure of his or her personal information to third 
parties.
    (b) Methods for verifiable parental consent. (1) An operator must 
make reasonable efforts to obtain verifiable parental consent, taking 
into consideration available technology. Any method to obtain 
verifiable parental consent must be reasonably calculated, in light of 
available technology, to ensure that the person providing consent is 
the child's parent. (2) Existing methods to obtain verifiable parental 
consent that satisfy the requirements of this paragraph include:
    (i) Providing a consent form to be signed by the parent and 
returned to the operator by postal mail, facsimile, or electronic scan;
    (ii) Requiring a parent, in connection with a monetary transaction, 
to use a credit card, debit card, or other online payment system that 
provides notification of each discrete transaction to the primary 
account holder;
    (iii) Having a parent call a toll-free telephone number staffed by 
trained personnel;
    (iv) Having a parent connect to trained personnel via video-
conference;
    (v) Verifying a parent's identity by checking a form of government-
issued identification against databases of such information, where the 
parent's identification is deleted by the operator from its records 
promptly after such verification is complete; or
    (vi) Provided that, an operator that does not ``disclose'' (as 
defined by Sec.  312.2) children's personal information, may use an 
email coupled with additional steps to provide assurances that the 
person providing the consent is the parent. Such additional steps 
include: Sending a confirmatory email to the parent following receipt 
of consent, or obtaining a postal address or telephone number from the 
parent and confirming the parent's consent by letter or telephone call. 
An operator that uses this method must provide notice that the parent 
can revoke any consent given in response to the earlier email.
    (3) Safe harbor approval of parental consent methods. A safe harbor 
program approved by the Commission under Sec.  312.11 may approve its 
member operators' use of a parental consent method not currently 
enumerated in paragraph (b)(2) of this section where the safe harbor 
program determines that such parental consent method meets the 
requirements of paragraph (b)(1) of this section.
    (c) Exceptions to prior parental consent. Verifiable parental 
consent is required prior to any collection, use, or disclosure of 
personal information from a child except as set forth in this 
paragraph:
    (1) Where the sole purpose of collecting the name or online contact 
information of the parent or child is to provide notice and obtain 
parental consent under Sec.  312.4(c)(1). If the operator has not 
obtained parental consent after a reasonable time from the date of the 
information collection, the

[[Page 4012]]

operator must delete such information from its records;
    (2) Where the purpose of collecting a parent's online contact 
information is to provide voluntary notice to, and subsequently update 
the parent about, the child's participation in a Web site or online 
service that does not otherwise collect, use, or disclose children's 
personal information. In such cases, the parent's online contact 
information may not be used or disclosed for any other purpose. In such 
cases, the operator must make reasonable efforts, taking into 
consideration available technology, to ensure that the parent receives 
notice as described in Sec.  312.4(c)(2);
    (3) Where the sole purpose of collecting online contact information 
from a child is to respond directly on a one-time basis to a specific 
request from the child, and where such information is not used to re-
contact the child or for any other purpose, is not disclosed, and is 
deleted by the operator from its records promptly after responding to 
the child's request;
    (4) Where the purpose of collecting a child's and a parent's online 
contact information is to respond directly more than once to the 
child's specific request, and where such information is not used for 
any other purpose, disclosed, or combined with any other information 
collected from the child. In such cases, the operator must make 
reasonable efforts, taking into consideration available technology, to 
ensure that the parent receives notice as described in Sec.  
312.4(c)(3). An operator will not be deemed to have made reasonable 
efforts to ensure that a parent receives notice where the notice to the 
parent was unable to be delivered;
    (5) Where the purpose of collecting a child's and a parent's name 
and online contact information, is to protect the safety of a child, 
and where such information is not used or disclosed for any purpose 
unrelated to the child's safety. In such cases, the operator must make 
reasonable efforts, taking into consideration available technology, to 
provide a parent with notice as described in Sec.  312.4(c)(4);
    (6) Where the purpose of collecting a child's name and online 
contact information is to:
    (i) Protect the security or integrity of its Web site or online 
service;
    (ii) Take precautions against liability;
    (iii) Respond to judicial process; or
    (iv) To the extent permitted under other provisions of law, to 
provide information to law enforcement agencies or for an investigation 
on a matter related to public safety; and where such information is not 
be used for any other purpose;
    (7) Where an operator collects a persistent identifier and no other 
personal information and such identifier is used for the sole purpose 
of providing support for the internal operations of the Web site or 
online service. In such case, there also shall be no obligation to 
provide notice under Sec.  312.4; or
    (8) Where an operator covered under paragraph (2) of the definition 
of Web site or online service directed to children in Sec.  312.2 
collects a persistent identifier and no other personal information from 
a user who affirmatively interacts with the operator and whose previous 
registration with that operator indicates that such user is not a 
child. In such case, there also shall be no obligation to provide 
notice under Sec.  312.4.


Sec.  312.6  Right of parent to review personal information provided by 
a child.

    (a) Upon request of a parent whose child has provided personal 
information to a Web site or online service, the operator of that Web 
site or online service is required to provide to that parent the 
following:
    (1) A description of the specific types or categories of personal 
information collected from children by the operator, such as name, 
address, telephone number, email address, hobbies, and extracurricular 
activities;
    (2) The opportunity at any time to refuse to permit the operator's 
further use or future online collection of personal information from 
that child, and to direct the operator to delete the child's personal 
information; and
    (3) Notwithstanding any other provision of law, a means of 
reviewing any personal information collected from the child. The means 
employed by the operator to carry out this provision must:
    (i) Ensure that the requestor is a parent of that child, taking 
into account available technology; and
    (ii) Not be unduly burdensome to the parent.
    (b) Neither an operator nor the operator's agent shall be held 
liable under any Federal or State law for any disclosure made in good 
faith and following reasonable procedures in responding to a request 
for disclosure of personal information under this section.
    (c) Subject to the limitations set forth in Sec.  312.7, an 
operator may terminate any service provided to a child whose parent has 
refused, under paragraph (a)(2) of this section, to permit the 
operator's further use or collection of personal information from his 
or her child or has directed the operator to delete the child's 
personal information.


Sec.  312.7  Prohibition against conditioning a child's participation 
on collection of personal information.

    An operator is prohibited from conditioning a child's participation 
in a game, the offering of a prize, or another activity on the child's 
disclosing more personal information than is reasonably necessary to 
participate in such activity.


Sec.  312.8  Confidentiality, security, and integrity of personal 
information collected from children.

    The operator must establish and maintain reasonable procedures to 
protect the confidentiality, security, and integrity of personal 
information collected from children. The operator must also take 
reasonable steps to release children's personal information only to 
service providers and third parties who are capable of maintaining the 
confidentiality, security and integrity of such information, and who 
provide assurances that they will maintain the information in such a 
manner.


Sec.  312.9  Enforcement.

    Subject to sections 6503 and 6505 of the Children's Online Privacy 
Protection Act of 1998, a violation of a regulation prescribed under 
section 6502 (a) of this Act shall be treated as a violation of a rule 
defining an unfair or deceptive act or practice prescribed under 
section 18(a)(1)(B) of the Federal Trade Commission Act (15 U.S.C. 
57a(a)(1)(B)).


Sec.  312.10  Data retention and deletion requirements.

    An operator of a Web site or online service shall retain personal 
information collected online from a child for only as long as is 
reasonably necessary to fulfill the purpose for which the information 
was collected. The operator must delete such information using 
reasonable measures to protect against unauthorized access to, or use 
of, the information in connection with its deletion.


Sec.  312.11  Safe harbor programs.

    (a) In general. Industry groups or other persons may apply to the 
Commission for approval of self-regulatory program guidelines (``safe 
harbor programs''). The application shall be filed with the 
Commission's Office of the Secretary. The Commission will publish in 
the Federal Register a document seeking public comment on the 
application. The Commission shall issue a written determination within 
180 days of the filing of the application.
    (b) Criteria for approval of self-regulatory program guidelines. 
Proposed safe harbor programs must demonstrate

[[Page 4013]]

that they meet the following performance standards:
    (1) Program requirements that ensure operators subject to the self-
regulatory program guidelines (``subject operators'') provide 
substantially the same or greater protections for children as those 
contained in Sec. Sec.  312.2 through 312.8, and 312.10.
    (2) An effective, mandatory mechanism for the independent 
assessment of subject operators' compliance with the self-regulatory 
program guidelines. At a minimum, this mechanism must include a 
comprehensive review by the safe harbor program, to be conducted not 
less than annually, of each subject operator's information policies, 
practices, and representations. The assessment mechanism required under 
this paragraph can be provided by an independent enforcement program, 
such as a seal program.
    (3) Disciplinary actions for subject operators' non-compliance with 
self-regulatory program guidelines. This performance standard may be 
satisfied by:
    (i) Mandatory, public reporting of any action taken against subject 
operators by the industry group issuing the self-regulatory guidelines;
    (ii) Consumer redress;
    (iii) Voluntary payments to the United States Treasury in 
connection with an industry-directed program for violators of the self-
regulatory guidelines;
    (iv) Referral to the Commission of operators who engage in a 
pattern or practice of violating the self-regulatory guidelines; or
    (v) Any other equally effective action.
    (c) Request for Commission approval of self-regulatory program 
guidelines. A proposed safe harbor program's request for approval shall 
be accompanied by the following:
    (1) A detailed explanation of the applicant's business model, and 
the technological capabilities and mechanisms that will be used for 
initial and continuing assessment of subject operators' fitness for 
membership in the safe harbor program;
    (2) A copy of the full text of the guidelines for which approval is 
sought and any accompanying commentary;
    (3) A comparison of each provision of Sec. Sec.  312.2 through 
312.8, and 312.10 with the corresponding provisions of the guidelines; 
and
    (4) A statement explaining:
    (i) How the self-regulatory program guidelines, including the 
applicable assessment mechanisms, meet the requirements of this part; 
and
    (ii) How the assessment mechanisms and compliance consequences 
required under paragraphs (b)(2) and (b)(3) provide effective 
enforcement of the requirements of this part.
    (d) Reporting and recordkeeping requirements. Approved safe harbor 
programs shall:
    (1) By July 1, 2014, and annually thereafter, submit a report to 
the Commission containing, at a minimum, an aggregated summary of the 
results of the independent assessments conducted under paragraph (b)(2) 
of this section, a description of any disciplinary action taken against 
any subject operator under paragraph (b)(3) of this section, and a 
description of any approvals of member operators' use of a parental 
consent mechanism, pursuant to Sec.  312.5(b)(4);
    (2) Promptly respond to Commission requests for additional 
information; and
    (3) Maintain for a period not less than three years, and upon 
request make available to the Commission for inspection and copying:
    (i) Consumer complaints alleging violations of the guidelines by 
subject operators;
    (ii) Records of disciplinary actions taken against subject 
operators; and
    (iii) Results of the independent assessments of subject operators' 
compliance required under paragraph (b)(2) of this section.
    (e) Post-approval modifications to self-regulatory program 
guidelines. Approved safe harbor programs must submit proposed changes 
to their guidelines for review and approval by the Commission in the 
manner required for initial approval of guidelines under paragraph 
(c)(2) of this section. The statement required under paragraph (c)(4) 
of this section must describe how the proposed changes affect existing 
provisions of the guidelines.
    (f) Revocation of approval of self-regulatory program guidelines. 
The Commission reserves the right to revoke any approval granted under 
this section if at any time it determines that the approved self-
regulatory program guidelines or their implementation do not meet the 
requirements of this part. Safe harbor programs that were approved 
prior to the publication of the Final Rule amendments must, by March 1, 
2013, submit proposed modifications to their guidelines that would 
bring them into compliance with such amendments, or their approval 
shall be revoked.
    (g) Operators' participation in a safe harbor program. An operator 
will be deemed to be in compliance with the requirements of Sec. Sec.  
312.2 through 312.8, and 312.10 if that operator complies with 
Commission-approved safe harbor program guidelines. In considering 
whether to initiate an investigation or bring an enforcement action 
against a subject operator for violations of this part, the Commission 
will take into account the history of the subject operator's 
participation in the safe harbor program, whether the subject operator 
has taken action to remedy such non-compliance, and whether the 
operator's non-compliance resulted in any one of the disciplinary 
actions set forth in paragraph (b)(3).


Sec.  312.12  Voluntary Commission Approval Processes.

    (a) Parental consent methods. An interested party may file a 
written request for Commission approval of parental consent methods not 
currently enumerated in Sec.  312.5(b). To be considered for approval, 
a party must provide a detailed description of the proposed parental 
consent methods, together with an analysis of how the methods meet 
Sec.  312.5(b)(1). The request shall be filed with the Commission's 
Office of the Secretary. The Commission will publish in the Federal 
Register a document seeking public comment on the request. The 
Commission shall issue a written determination within 120 days of the 
filing of the request; and
    (b) Support for internal operations of the Web site or online 
service. An interested party may file a written request for Commission 
approval of additional activities to be included within the definition 
of support for internal operations. To be considered for approval, a 
party must provide a detailed justification why such activities should 
be deemed support for internal operations, and an analysis of their 
potential effects on children's online privacy. The request shall be 
filed with the Commission's Office of the Secretary. The Commission 
will publish in the Federal Register a document seeking public comment 
on the request. The Commission shall issue a written determination 
within 120 days of the filing of the request.


Sec.  312.13  Severability.

    The provisions of this part are separate and severable from one 
another. If any provision is stayed or determined to be invalid, it is 
the Commission's intention that the remaining provisions shall continue 
in effect.


[[Page 4014]]


    By direction of the Commission, Commissioner Rosch abstaining, 
and Commissioner Ohlhausen dissenting.
Donald S. Clark,
Secretary.

Dissenting Statement of Commissioner Maureen K. Ohlhausen

    I voted against adopting the amendments to the Children's Online 
Privacy Protection Act (COPPA) Rule because I believe a core 
provision of the amendments exceeds the scope of the authority 
granted us by Congress in COPPA, the statute that underlies and 
authorizes the Rule.\401\ Before I explain my concerns, I wish to 
commend the Commission staff for their careful consideration of the 
multitude of issues raised by the numerous comments in this 
proceeding. Much of the language of the amendments is designed to 
preserve flexibility for the industry while striving to protect 
children's privacy, a goal I support strongly. The final proposed 
amendments largely strike the right balance between protecting 
children's privacy online and avoiding undue burdens on providers of 
children's online content and services. The staff's great expertise 
in the area of children's privacy and deep understanding of the 
values at stake in this matter have been invaluable in my 
consideration of these important issues.
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    \401\ 15 U.S.C. 6501-6506.
---------------------------------------------------------------------------

    In COPPA Congress defined who is an operator and thereby set the 
outer boundary for the statute's and the COPPA Rule's reach.\402\ It 
is undisputed that COPPA places obligations on operators of Web 
sites or online services directed to children or operators with 
actual knowledge that they are collecting personal information from 
children. The statute provides, ``It is unlawful for an operator of 
a Web site or online service directed to children, or any operator 
that has actual knowledge that it is collecting personal information 
from a child, to collect personal information from a child in a 
manner that violates the regulations prescribed [by the FTC].'' 
\403\
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    \402\ COPPA, 15 U.S.C. 6501(2), defines the term ``operator'' as 
``any person who operates a Web site located on the Internet or an 
online service and who collects or maintains personal information 
from or about users of or visitors to such Web site or online 
service, or on whose behalf such information is collected and 
maintained * * *'' As stated in the Statement of Basis and Purpose 
for the original COPPA Rule, ``The definition of `operator' is of 
central importance because it determines who is covered by the Act 
and the Rule.'' Children's Online Privacy Protection Rule 64 FR 
59888, 59891 (Nov. 3, 1999) (final rule).
    \403\ 15 U.S.C. 6502(a)(1).
---------------------------------------------------------------------------

    The Statement of Basis and Purpose for the amendments (SBP) 
discusses concerns that the current COPPA Rule may not cover child-
directed Web sites or services that do not themselves collect 
children's personal information but may incorporate third-party 
plug-ins that collect such information \404\ for the plug-ins' use 
but do not collect or maintain the information for, or share it 
with, the child-directed site or service. To address these concerns, 
the amendments add a new proviso to the definition of operator in 
the COPPA Rule: ``Personal information is collected or maintained on 
behalf of an operator when: (a) it is collected or maintained by an 
agent or service provider of the operator; or (b) the operator 
benefits by allowing another person to collect personal information 
directly from users of such Web site or online service.'' \405\
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    \404\ If the third-party plugs-ins are child-directed or have 
actual knowledge that they are collecting children's personal 
information they are already expressly covered by the COPPA statute. 
Thus, as the SBP notes, a behavioral advertising network that 
targets children under the age of 13 is already deemed an operator. 
The amendment must therefore be aimed at reaching third-party plug-
ins that are either not child-directed or do not have actual 
knowledge that they are collecting children's personal information, 
which raises a question about what harm this amendment will address. 
For example, it appears that this same type of harm could occur 
through general audience Web sites and online services collecting 
and using visitors' personal information without knowing whether 
some of the data is children's personal information, which is a 
practice that COPPA and the amendments do not prohibit.
    \405\ 16 CFR 312.2 (Definitions).
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    The proposed amendments construe the term ``on whose behalf such 
information is collected and maintained'' to reach child-directed 
Web sites or services that merely derive from a third-party plug-in 
some kind of benefit, which may well be unrelated to the collection 
and use of children's information (e.g., content, functionality, or 
advertising revenue). I find that this proviso--which would extend 
COPPA obligations to entities that do not collect personal 
information from children or have access to or control of such 
information collected by a third-party does not comport with the 
plain meaning of the statutory definition of an operator in COPPA, 
which covers only entities ``on whose behalf such information is 
collected and maintained.'' \406\ In other words, I do not believe 
that the fact that a child-directed site or online service receives 
any kind of benefit from using a plug-in is equivalent to the 
collection of personal information by the third-party plug-in on 
behalf of the child-directed site or online service.
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    \406\ This expanded definition of operator reverses the 
Commission's previous conclusion that the appropriate test for 
determining an entity's status as an operator is to ``look at the 
entity's relationship to the data collected,'' using factors such as 
``who owns and/or controls the information, who pays for its 
collection and maintenance, the pre-existing contractual 
relationships regarding collection and maintenance of the 
information, and the role of the Web site or online service in 
collecting and/or maintaining the information (i.e., whether the 
site participates in collection or is merely a conduit through which 
the information flows to another entity.)'' Children's Online 
Privacy Protection Rule 64 FR 59888, 59893, 59891 (Nov. 3, 1999) 
(final rule).
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    As the Supreme Court has directed, an agency ``must give effect 
to the unambiguously expressed intent of Congress.'' \407\ Thus, 
regardless of the policy justifications offered, I cannot support 
expanding the definition of the term ``operator'' beyond the 
statutory parameters set by Congress in COPPA.
---------------------------------------------------------------------------

    \407\ Chevron v. Natural Resources Defense Council, Inc., 467 
U.S. 837, 842-43 (1984) (``When a court reviews an agency's 
construction of the statute which it administers, it is confronted 
with two questions. First, always, is the question whether Congress 
has directly spoken to the precise question at issue. If the intent 
of Congress is clear, that is the end of the matter; for the court, 
as well as the agency, must give effect to the unambiguously 
expressed intent of Congress.'').
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    I therefore respectfully dissent.

[FR Doc. 2012-31341 Filed 1-16-13; 8:45 am]
BILLING CODE 6750-01-P