The Federal Trade Commission announced a proposed $US6 ($8) million settlement with education technology company Edmodo Tuesday for collecting data from kids without parental consent and using it to sell ads in violation of the Children’s Online Privacy Protection Act (COPPA). The case is unusual for several reasons, including the fact that the Edmodo went out of business while the government was still investigating. The FTC is on a tear in recent months, upending the status quo and making an example out of companies to show that you can’t, in fact, just ignore what few privacy laws exist in the United States.
“This order makes clear that ed tech providers cannot outsource compliance responsibilities to schools, or force students to choose between their privacy and education,” said Samuel Levine, director of the FTC’s Bureau of Consumer Protection, in a press release. “Other ed tech providers should carefully examine their practices to ensure they’re not compromising students’ privacy.”
Edmodo was an education company serving 600,000 children, some kindergarten-age, in 2020 alone, the FTC says. It provided classroom resources and let teachers give out and collect assignments and quizzes using the platform, which meant students and parents often had no choice but to use it. It was also free, and, you guessed it, Edmodo made its money showing ads to all those little kid eyeballs, propped up by personal data including kids’ names, birthdays, ages, emails, and locations, according to the FTC.
Once celebrated as the next big thing in education, Edmodo went out of business in September, 2022, right in the midst of the FTC’s investigation. At the time, education news site EdSurge reported on an Edmodo blog post, which said the company was shuttering because it was no longer possible “to maintain the level of service you deserve and that we can take pride in ourselves.” However, Edmodo’s website is now offline, and the blog post has been excluded from the Internet Archive, which preserves snapshots of webpages.
By COPPA’s comically low bar for privacy, companies can’t slurp up extra data from kids and use it for advertising — unless mum and dad give their consent, in which case it’s free range. COPPA also doesn’t apply to kids older than 13. Edmodo didn’t just break COPPA rules; the FTC says it illegally forced schools to handle COPPA compliance duties for it. In other words, this country’s sorry privacy laws gives companies like Edmodo a loophole big enough to drive a school bus through. All the company had to do was ask permission to monetise its captive underage audience, but, according to the FTC, it didn’t even bother to do that. Edmodo co-founders Nick Borg, Ed O’Neil, Jeff O’Hara, and Crystal Hutter could not immediately be reached for comment. The company’s lawyers did not provide a comment as of press time, we’ll update this article if we hear back.
The FTC’s proposed settlement includes a $US6 ($8) million penalty, which, if the order is approved by a judge, Edmodo’s owners won’t have to pay because the company doesn’t exist anymore. The FTC says that Edmodo would face binding privacy restrictions if it ever decides to start back up again.
Why would the FTC go after a defunct company like Edmodo?
Why would the Federal Trade Commission bother shelling out resources to sue a company that can’t face consequences? The answer may lie in an attempt to establish precedent for the rest of the education technology industry, which, writ large, has a lousy reputation when it comes to privacy.
Along with the FTC’s press release, the agency also published a blog post with the pithy headline “Oh no, you don’t, Edmodo.” There, FTC senior attorney Lesley Fair warns the rest of the education technology industry that “now is the time” to review privacy practices. Fair writes:
Ed tech companies can’t pass the COPPA compliance buck. This is the first FTC action alleging that it’s an unfair practice for a company to require schools and teachers to comply with COPPA on its behalf. The message to the industry is unmistakable. In the final analysis, the legal responsibility for complying with COPPA remains with the ed tech operator.
Mixing ed tech and advertising can lead to serious legal consequences. Ed tech providers may rely on schools to authorise data collection in lieu of parental consent if – and only if – the information collected from kids is used solely for educational purposes. Edmodo’s use of the data for commercial purposes is just one way in which the FTC says the company violated the law.
With the Edmodo case, the FTC has established a clear, bold strategy. The law gives the FTC little authority compared to other agencies. It’s biggest power is its mandate to address “unfair or deceptive business practices.” Making matters worse, there are almost zero privacy laws at the federal level. COPPA is one of them, along with the Health Information Portability and Accountability Act, better known as HIPAA.
Over the past few months, the FTC reached two similar settlements with healthcare technology companies. One was GoodRX, which used prescription data for ads without consent. The other was the fertility app Premom, which did the same with data about people’s menstrual cycles. In both of those cases, the companies faced paltry fines that will have little effect on their businesses.
What these cases do, however, is send a clear message to data-hungry corporations. For years, companies got away with ignoring consumers’ expectations about privacy, burying details in terms-of-service legalese or just failing to let people know about their shady data practices all together. These recent cases are essentially a power grab attempting to set new legal precedent to finally give consumers some privacy on this godforsaken internet.
The strategy appears to be making landmark settlements that go uncontested so as to scare other companies into straightening up. So far, it’s going smoothly for the FTC, but it’s early days. Experts say it’s not a given that the FTC has the authority to weigh in on these cases. Any company that wanted to fight about these issues in court would have a fair chance at winning.
Editor’s Note: Release dates within this article are based in the U.S., but will be updated with local Australian dates as soon as we know more.