• by Wendy Davis  @wendyndavis, December 12, 2008

Sony BMG Music will pay $1 million to settle Federal Trade Commission charges that the company violated a federal privacy law by gathering information about children under age 13 at some of its 1,100 Web sites.

The FTC alleged in its complaint that since 2004, Sony collected, used and disclosed names and other personal information from at least 30,000 children in violation of the Children's Online Privacy and Protection Act. That law, which went into effect in 2000, bans marketers from amassing or spreading personal data about children without their parents' permission.

A Sony BMG executive said any violations of the law were the unintentional result of a computer glitch. The executive also said that the company has revised its sites and is currently in compliance with the federal privacy law. In addition, Sony is hiring a Web compliance officer.

According to the FTC, Sony collected registration information including names and birthdates from children at its own branded sites and at sites of musicians like Alicia Keys, Kelly Clarkson and Good Charlotte. The lawsuit alleges that Sony asked users to state their ages when they registered, and that it didn't either block children or seek permission from their parents to collect and allow the use of the children's personal data.

"Sony Music enabled children to create user profiles in the form of personal fan pages, through which children were able to interact with other Sony Music fans, including adults," the complaint alleges. "In addition, Sony Music made available to the public any reviews, comments, or other postings that children submitted in connection with their user profiles."

FTC attorney Phyllis Hurwitz Marcus said Sony's sites reflected companies' growing efforts to tap into social media by allowing consumers to voice their opinions, building buzz for the musicians. But, she added, marketers that want to incorporate social networking features into their sites need to keep in mind that using and disclosing information about children is unlawful in the absence of parental consent. "There's been a shift to Web 2.0, where your fans, or your customers, interact more with the brand," she said. "As you move there, you can't forget about your legal obligations."

Kathryn Montgomery, an American University professor who pushed for the passage of the federal children's privacy law, praised the FTC's actions against Sony. "The government's lawsuit against Sony sends a strong signal to the online industry that this law must be taken seriously," she said in a statement.

This case marks the 13th time that the FTC has brought an action to enforce the Children's Online Privacy Protection Act and the second such action against a major music label. In 2004, UMG agreed to pay $400,000 for allegedly collecting personal information from children younger than 13 at some of its sites.