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In-house counsel need to review digital data collection if they are ever going to make money again

Posted by: Laurence Simons 12/10/12

Teenagers are a different breed these days. They are tiny little cash cows in low-slung jeans with haircuts. And that means, online especially, there is money to be made by pitching to teens, tweens and pre-teens. And pre-tweens. Jeez let's just call them 'young people'.

Take Club Penguin as just one example. Club Penguin is a website that allows you to control a tiny cartoon avatar of a penguin and talk to other little penguins. You can dress your penguin up. Your penguin can have its own pet. You can buy - with real-world money, actual money - stuff to adorn your virtual igloo with. In 2007 Disney brokered a deal to buy this thing for $700 million (£431 million). 

So selling tiny fake penguins to teenagers is all very well and good and lucrative and all, but it also throws up certain banana skins that you just don't get when your target audience can legally drive a car or get a tattoo. And those are this: data protection laws. And the data protection banana skin is one Artist Arena fell head-first over this week.

As Legal Times reports, the company operates a number of fan websites for young people favourites such as Justin Bieber, Demi Lovato and Selena Gomez. These people weren't born in 1990. In doing so, it collected the personal data of around 75,000 under-13s who wanted to keep abreast of the latest news about these eerie singing children. Oops. Whoops. Banana skin. The Federal Trade Commission (FTC) hit them with charges in violation of the Children's Online Privacy Protection Act, and Arena this week agreed to settle for $1 million (£600,000).

"Marketers need to know that even a bad case of Bieber Fever doesn't excuse their legal obligation to get parental consent before collecting personal information from children," said FTC chair Jon Leibowitz. Bieber Fever is not a real disease, in case you were worried about the symptoms.

But data protection is kind of a sticky issue for in-house counsel working at digital-focused corporations, because often customer data is one of the most valuable resources a company based in the ethereal world of the internet actually has. But that data has to be managed and stored responsibly. And that goes double for the data regarding kids with Justin Bieber posters on their walls.

"If you have an online site that is directed to children you must be very careful not to collect personally-identifiable information without going through an extensive process to make certain that you have the legally-required permissions," warned Montgomery, McCracken, Walker & Rhoads partner Jeremy Mishkin, in comments to the LT. "More and more sites are seeking to appeal to children, and that's a recipe for disaster if the site operator is trying to wing it rather than get good legal advice."