Markets Wired

The operator of the Path social networking app has agreed to settle Federal Trade Commission charges that it deceived users by collecting personal information from their mobile device address books without their knowledge and consent.  The settlement requires Path, Inc. to establish a comprehensive privacy program and to obtain independent privacy assessments every other year for the next 20 years.  The company also will pay $800,000 to settle charges that it illegally collected personal information from children without their parents’ consent.

The settlement with Path is part of the FTC’s ongoing effort to make sure companies live up to the privacy promises they make to consumers, and that kids’ personal information isn’t collected or shared online without their parents’ consent.

“Over the years the FTC has been vigilant in responding to a long list of threats to consumer privacy, whether it’s mortgage applications thrown into open trash dumpsters, kids information culled by music fan websites, or unencrypted credit card information left vulnerable to hackers,” said FTC Chairman Jon Leibowitz.  “This settlement with Path shows that no matter what new technologies emerge, the agency will continue to safeguard the privacy of Americans.”

Path operates a social networking service that allows users to keep journals about “moments” in their life and to share that journal with a network of up to 150 friends.  Through the Path app, users can upload, store, and share photos, written “thoughts,” the user’s location, and the names of songs to which the user is listening.

In its complaint, the FTC charged that the user interface in Path’s iOS app was misleading and provided consumers no meaningful choice regarding the collection of their personal information.  In version 2.0 of its app for iOS, Path offered an “Add Friends” feature to help users add new connections to their networks.  The feature provided users with three options: “Find friends from your contacts;” “Find friends from Facebook;” or “Invite friends to join Path by email or SMS.”  However, Path automatically collected and stored personal information from the user’s mobile device address book even if the user had not selected the “Find friends from your contacts” option.  For each contact in the user’s mobile device address book, Path automatically collected and stored any available first and last names, addresses, phone numbers, email addresses, Facebook and Twitter usernames, and dates of birth.

The FTC also alleged that Path’s privacy policy deceived consumers by claiming that it automatically collected only certain user information such as IP address, operating system, browser type, address of referring site, and site activity information.  In fact, version 2.0 of the Path app for iOS automatically collected and stored personal information from the user’s mobile device address book when the user first launched version 2.0 of the app and each time the user signed back into the account.

The agency also charged that Path, which collects birth date information during user registration, violated the Children’s Online Privacy Protection Act (COPPA) Rule by collecting personal information from approximately 3,000 children under the age of 13 without first getting parents’ consent.  Through its apps for both iOS and Android, as well as its website, Path enabled children to create personal journals and upload, store and share photos, written “thoughts,” their precise location, and the names of songs to which the child was listening.  Path version 2.0 also collected personal information from a child’s address book, including full names, addresses, phone numbers, email addresses, dates of birth and other information, where available.

The COPPA Rule requires that operators of online sites or services directed to children, or operators that have actual knowledge of child users on their sites or services, notify parents and obtain their consent before they collect, use, or disclose personal information from children under 13.  Operators covered by the Rule also have to post a privacy policy that is clear, understandable, and complete.

The FTC charged that Path violated the COPPA Rule by:

• not spelling out its collection, use and disclosure policy for children’s personal information;
• not providing parents with direct notice of its collection, use and disclosure policy for children’s personal information; and

• not obtaining verifiable parental consent before collecting children’s personal information.

In addition to the $800,000 civil penalty, Path is prohibited from making any misrepresentations about the extent to which it maintains the privacy and confidentiality of consumers’ personal information.  The proposed settlement also requires Path to delete information collected from children under age 13 and bars future violations of COPPA.  Path has already deleted the address book information that it collected during the time period its deceptive practices were in place.

The FTC also introduces Mobile App Developers: Start with Security, a new business guide that encourages developers to aim for reasonable data security, evaluate the app ecosystem before development, and includes tips such as making someone responsible for data security and taking stock of the data collected and maintained.

The Commission vote to authorize the staff to refer the complaint to the Department of Justice and to approve the proposed consent decree was 5-0.  The DOJ filed the complaint on behalf of the Commission in U.S. District Court for the Northern District of California on January 31, 2013.  The proposed consent decree will be filed with the same U.S. District Court today and is subject to court approval.

NOTE: The Commission authorizes the filing of a complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest.  The complaint is not a finding or ruling that the defendants have actually violated the law.  This consent decree is for settlement purposes only and does not constitute an admission by the defendants of a law violation.  Consent decrees have the force of law when signed by the District Court judge.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 2,000 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s website provides free information on a variety of consumer topics.  Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.