VTech Agrees to $650K Settlement For FTC’s Child Privacy Claims

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Donnett Hickson,
Legal Staff Writer

On January 8, 2018, Hong Kong-based toymaker VTech and its United States subsidiary agreed to pay $650,000 to settle charges brought by the U.S. Federal Trade Commission (“FTC”) alleging that the company violated U.S. child privacy laws.

The FTC’s complaint held that the company sold electronic toys installed with the Kid Connect app, which collected personal information from hundreds of thousands of children without parental consent or providing “sufficient notice of its information collection and use practices.”

VTech also allegedly failed to properly secure the data that was collected after making misleading statements to the extent of which the data was encrypted in order to ensure the privacy and safety of minors.

In 2015, a hacker gained access to VTech’s network and the personal information of thousands of families, including names, ages, physical addresses and email addresses. The children’s photos, audio files and personal messages captured by the VTech toys were found to be stored in encrypted files, however the hacker also accessed a database that stored the decryption keys, consequently allowing access to files containing pictures and messages.

Since children’s information in the app linked to corresponding parental accounts, if a child submitted a picture, the hacker would also be able to attain their physical address.
A spokesperson for VTech argued that parents were made fully aware of what personal information was being collected from their children and were in full control of with whom their children could communicate. As to why the company collected personal information from adults and children, VTech responded, “it [was] collected solely to enable children and adults to communicate on the platform, not for marketing or other purposes.”

According to Tom Pahl, Director of the FTC’s Bureau of Consumer Protection, “there are potential data security risks associated with any connected product, including toys. As you have more and more of these products online, certainly the possibility exists that there will be greater and greater risks.”

The case is USA v. VTech Electronics Ltd. et al, case number 1:18-cv-00114 in the U.S. District Court for the Northern District of Illinois.

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