Playdom to Pay $3 Million in FTC Settlement


Disney’s social gaming acquisition Playdom has agreed to pay $3 million to settle claims that it had collected and disclosed personal information about children, the Federal Trade Commission said Thursday. 

Specifically, Playdom was accused of violating the Children’s Online Privacy Protection Rule. The penalty is the largest in the 11-year history of the CAPPA Rule.
 
The FTC said Playdom, through its acquisition of Acclaim Games in May 2010, illegally collected and made public names, email addresses, locations and other private information about kids without their parents’ permission.
 
Playdom collected and disseminated such information pertaining to at least 403,000 children, and up to 821,000 more, the FTC said, through virtual worlds and online activities like Pony Stars, Age of Lore, 9Dragons, Dance Online, Ranch Stars, My Diva Doll, 2Moons and several others.
 
“Let’s be clear: Whether you are a virtual world, a social network, or any other interactive site that appeals to kids, you owe it to parents and their children to provide proper notice and get proper consent,” said Jon Leibowitz, chairman of the FTC. “It’s the law, it’s the right thing to do, and, as today’s settlement demonstrates, violating COPPA will not come cheap.”
 
In August, Disney paid $563 million for Playdom, and even before the $3 million fine the acquisition hadn’t exactly been paying dividends for the world’s most valuable media conglomerate.
 
Disney said just Tuesday, in fact, that it took a $34 million charge related to its purchase of Playdom, and CFO Jay Rasulo said the acquisition was one of four primary reasons for Disney posting disappointing fiscal second-quarter financial results.
 
Disney’s interactive unit, which includes Playdom, was the company’s worst-performing sector, losing $115 million in the quarter compared to a loss of $55 million a year earlier.
 
Besides Playdom, the FTC listed as a defendant in its complaint Howard Marks, who was CEO of Acclaim, became a senior vp at Playdom after the two merged then left the company in February.
 
The FTC said both defendants are responsible for the civil penalty. Disney would not say whether it was paying the entire $3 million or only a portion.

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