Consumer Alert
Scammers are hijacking job ads. Here’s how to spot the fakes
By
Gema de las Heras
Consumer Education Specialist, FTC
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Scammers are taking outdated ads from real employers, changing them, and posting them on employment websites and career-oriented platforms like Indeed or LinkedIn. The modified ads seem to be real job offers with legitimate companies. They’re not. In fact, their goal is to trick you into sharing personal information. So how do you know if you’re dealing with a scammer?
Know that some of the hijacked job postings are offers to work from home as a personal assistant or customer service representative. Then, they’ll ask you for information like your Social Security and your bank account number so they can (supposedly) deposit your salary. Sometimes, they say you got the job and send you a check to buy equipment that you have to cash (and send money to them). But these are scams.
Here are more ways to spot and avoid phony job postings:
- Verify job openings before you apply. Visit the official website for the organization or company you’re applying for. Most include a “career opportunities” or “jobs” section.
- See what others are saying. Look up the name of the company along with words like “scam,” “review,” or “complaint.” The results may include the experiences of others who’ve lost money.
- Never deposit a check from someone you don’t know. An honest employer will never send you a check and then tell you to send them part of the money. That’s a scam.
See a suspicious posting? Tell the FTC at ReportFraud.ftc.gov and check out more advice to stay clear of job scams.
Topics
Scams
Consumer Alert
Franchise Fundamentals: Taking a deep dive into the Franchise Disclosure Document
By
Lesley Fair
Senior Attorney, Division of Consumer and Business Education, FTC
May 26, 2023
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Love at first sight may (or may not) be a real thing, but when it comes to investing your money, it’s unwise to fall for a franchise without first subjecting it to tough-minded scrutiny. The third in the FTC’s Franchise Fundamentals blog series walks through an essential part of that evaluation: an in-depth review of the Financial Disclosure Document (FDD) required by the FTC’s Franchise Rule.
You must receive the Franchise Disclosure Document at least 14 days before you’re asked to sign any contract or pay any money to the franchisor or one of its affiliates. In fact, you have the right to the FDD once the franchisor has received your application and agrees to consider it. So speak up if you don’t receive it and ask questions – lots of them – as you review the FDD and any attached documents.
Indeed, the franchisor’s conduct regarding the FDD may raise some red flags about how they do business. Providing the FDD doesn’t establish that a franchisor is reputable – it’s required by law, after all – but if a franchisor doesn’t promptly provide this mandatory document, gives you an incomplete FDD, evades your probing questions, or tries to rush you through the process, it doesn’t speak well of their approach to legal compliance.
Assuming you have the FDD in hand, let’s consider some of the 23 required items line by line. Here are things to look for as you review the FDD.
Franchisor’s Background (FDD Item 1)
Item 1 provides background information about the franchisor and any parent companies, predecessors, and affiliates, including how long the franchise has been in business. It also lets you know if there are any legal requirements unique to the franchised business, like the need to get a special license or permit. This can help you understand the costs and risks you would be taking on.
Business Background (FDD Item 2)
Remember the old adage “People are known by the company they keep”? Well, companies are known by the people they keep, which is why Item 2 identifies directors, principal officers, and other key executives. Pay attention to their business backgrounds, their experience in managing a franchise system, and how long they’ve been with the franchisor.
Litigation History (FDD Item 3)
Item 3 lists information about prior litigation, including whether the franchisor or any of its executive officers have been convicted of certain crimes or have been found liable – or settled lawsuits – related to the franchise relationship. Lawsuits against the franchisor could mean it hasn’t honored its agreements or that franchisees are dissatisfied with its performance. Item 3 also says whether the franchisor has sued any of its franchisees in the past year. That information could suggest problems in the franchise system. For example, if a franchisor sued franchisees for failing to pay royalties, was it because franchisees weren’t successful and couldn’t make their royalty payments?
Bankruptcy (FDD Item 4)
Have the franchisor, its affiliates, or any of its executives filed for bankruptcy? Item 4 discloses that information and could give you insights into the financial condition of the business.
Initial and Other Fees (FDD Items 5-7)
Items 5-7 go over some of the costs involved in starting and operating a franchise. That could include things like deposits or franchise fees (some of which may be non-refundable); what you’ll have to pay for initial inventory, signs, equipment, leases, or rentals; and ongoing costs, like royalties and advertising fees. A Consumer’s Guide to Buying a Franchise suggests more than a dozen other areas of financial inquiry, which should give you an indication about the importance of both getting in touch with your inner bean counter and consulting with independent accounting and legal professionals. Consider your living expenses in light of the reality that it takes time to start a business and often much longer just to break even – and some franchisees never break even.
Supplier, Territory and Customer Restrictions (FDD Items 8 and 12)
Item 8 and Item 12 explain restrictions the franchisor may place on your business – for example, what you must buy, where you must buy it, what you can sell, and where and how you can sell it. Does the franchisor limit what goods and services you can offer? Does it restrict where you can buy supplies? Must you buy from particular suppliers designated by the franchisor? Are you allowed to negotiate with those suppliers directly? Ask if goods and services may cost more than if you bought them elsewhere. Ask why. And does the franchisor get a financial benefit by requiring that you use their selected supplier?
Also, a franchisor may limit your business to a specific location or sales territory. If you have an “exclusive” or “protected” territory, it may prevent the franchisor and other franchisees from opening competing outlets or serving customers in your territory, but it may not protect you from all competition by the franchisor. For example, the franchisor may have the right to offer the same goods or services in your sales area through its website, in catalogs, through other retailers, or at competing outlets of a different company-owned franchise.
The FDD also discloses important information about e-commerce – for example, whether you can use the internet to sell goods or services to people within and outside your territory and whether the franchisor or other franchisees may use the internet to sell in your territory. Are you OK with restrictions that may limit your ability to exercise your own business judgment? Are you willing to face competition from the franchisor or other franchisees?
Advertising and Training (FDD Item 11)
Advertising and training can have a significant impact on a franchisee’s bottom line. Franchisors often require franchisees to contribute a portion of sales to advertising funds. In addition to determining how much you’ll have to pay, ask whether franchisees have a say in how those ad dollars are spent. How much goes toward national advertising vs. local or regional? Will your contribution be used to advertise for additional franchisees? What are the administrative costs of the program? In addition, investigate if you can buy your own ads and if you’ll need the franchisor’s consent.
Item 11 also includes information about training. Ask the franchisor about trainers’ qualifications, who pays for training new employees, whether on-site assistance is available and how much it costs, and the amount of time spent on technical training, business management, and marketing.
Talk to recent franchisees to get their take on the quality of the training. (Item 20 has more on the importance of interviewing franchisees.) If you still have questions, ask the franchisor to let you review the training materials. If the franchisor balks – even if you offer to sign a confidentiality agreement – that could signal a concern.
Renewal, Termination, Transfer, and Dispute Resolution (FDD Item 17)
At the very beginning of a business, it’s hard to think too far in advance, but Item 17 reminds prospective franchisees that they need to consider “what if?” contingencies. Find out about the renewal process – what do you have to do to qualify for renewal and will fees or other contract terms change? What if you want to sell your franchise? What are the grounds for termination and does the franchisor impose limits on your future activities? Many contracts include provisions that could stop you from operating a competing business for a number of years. If you have a dispute with the franchisor, can you go to court or must you use arbitration instead?
Financial Performance Representations (FDD Item 19)
Item 19 contains claims the franchisor chooses to make about sales or earnings. The Franchise Rule doesn’t require a franchisor to provide that information, but most do. But here’s the important thing: Any claims of that nature must be in Item 19. And if the claims aren’t in Item 19, the franchisor – as well as brokers, dealers, or other sellers – can’t make any spoken or written financial performance claims. So if a franchisor or other seller makes financial claims that aren’t included in Item 19, that should set off your baloney detector.
There are two narrow exceptions. We’ll discuss them in the next Franchise Fundamentals post, which will offer tips on how to evaluate potential earnings.
Franchisee and Franchise System Information (FDD Item 20)
Item 20 provides charts showing growth and owner turnover in the franchisor’s system. If any franchised outlets in your area have closed, investigate the reasons. Was it due to problems with the franchisor’s support or because franchises weren’t profitable?
Item 20 also unlocks a key source of highly relevant data: contact information for current and former franchisees. Talking to them may be the most reliable way to get the straight story about the franchisor’s claims. Reach out to as many of them as possible. Some franchisors may give you a separate list of franchisees to contact. To ensure you get the full picture, you may want to contact franchisees in the FDD and some on the separate list.
Relatively new franchisees may be able to give you insights into their total investment, whether they were able to open on time, whether they’re satisfied with the franchisor’s training and advertising, whether they’re OK with the cost and quality of goods or services they have to buy from the franchisor or from mandatory suppliers, and whether they’ve been able to break even. Franchisees who have been in business for five years or more can answer similar questions from a long-term perspective.
It’s also worth tracking down former franchisees listed in Item 20. Although some may have signed confidentiality agreements, if they’re willing to talk, ask if they had problems with their outlet, if they made a profit, and why they left the franchise system.
Some franchisors may buy back failed outlets and list them for sale. If you’re thinking of buying an outlet in that category, insist on seeing the financials showing the outlet’s actual operating results. If a franchise has had several owners in a short time, maybe the location isn’t a moneymaker or perhaps the franchisor hasn’t lived up to its promises of support. Again, talk to as many former owners as possible to find out what happened.
Item 20 also lists the franchisee associations sponsored by the franchisor. Independent associations may ask to be listed, too. Whether sponsored or independent, associations can offer insights into the kinds of challenges they’ve encountered and the relationship between franchisees and the franchisor
Financial Statements (FDD Item 21)
Item 21 provides the franchisor’s three most recent audited annual financial statements. Even if you’re comfortable reading financial statements, it’s a good idea to hire an accountant to go over them with you. An independent eye can offer a second opinion about whether the franchisor has experienced steady growth and devotes sufficient funds to support its franchise system. Another key piece of information may lie just below the surface: Does the franchisor makes more of its income from royalty payments from successful existing franchisees – or from the sale of franchises to other prospective franchisees?
A new franchise may not have three years of audited annual financial statements. Until they do, the Rule has special requirements for what the franchise needs to provide. But also consider the risks of investing in a company that hasn’t been around long enough to establish a verifiable track record for financial stability.
Contracts (FDD Item 22)
Item 22 requires franchisors to attach a copy of all proposed agreements relating to the franchise offering. These include leases, options, financing agreements, purchase agreements, etc., as well as a critically important document: the Franchise Agreement itself. More about that in the fourth Franchise Fundamentals post, along with a discussion of another key item that merits your careful review: the Operating Manual.
Next in the Franchise Fundamentals series: Evaluating potential earnings, comparing prospective franchises, and consulting professionals before making a final franchise decision.
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Business Blog
Franchise Fundamentals: Taking a deep dive into the Franchise Disclosure Document
By
Lesley Fair
May 24, 2023
Love at first sight may (or may not) be a real thing, but when it comes to investing your money, it’s unwise to fall for a franchise without first subjecting it to tough-minded scrutiny. The third in the FTC’s Franchise Fundamentals blog series walks through an essential part of that evaluation: an in-depth review of the Financial Disclosure Document (FDD) required by the FTC’s Franchise Rule.
You must receive the Franchise Disclosure Document at least 14 days before you’re asked to sign any contract or pay any money to the franchisor or one of its affiliates. In fact, you have the right to the FDD once the franchisor has received your application and agrees to consider it. So speak up if you don’t receive it and ask questions – lots of them – as you review the FDD and any attached documents.
Image
Indeed, the franchisor’s conduct regarding the FDD may raise some red flags about how they do business. Providing the FDD doesn’t establish that a franchisor is reputable – it’s required by law, after all – but if a franchisor doesn’t promptly provide this mandatory document, gives you an incomplete FDD, evades your probing questions, or tries to rush you through the process, it doesn’t speak well of their approach to legal compliance.
Assuming you have the FDD in hand, let’s consider some of the 23 required items line by line. Here are things to look for as you review the FDD.
Franchisor’s Background (FDD Item 1)
Item 1 provides background information about the franchisor and any parent companies, predecessors, and affiliates, including how long the franchise has been in business. It also lets you know if there are any legal requirements unique to the franchised business, like the need to get a special license or permit. This can help you understand the costs and risks you would be taking on.
Business Background (FDD Item 2)
Remember the old adage “People are known by the company they keep”? Well, companies are known by the people they keep, which is why Item 2 identifies directors, principal officers, and other key executives. Pay attention to their business backgrounds, their experience in managing a franchise system, and how long they’ve been with the franchisor.
Litigation History (FDD Item 3)
Item 3 lists information about prior litigation, including whether the franchisor or any of its executive officers have been convicted of certain crimes or have been found liable – or settled lawsuits – related to the franchise relationship. Lawsuits against the franchisor could mean it hasn’t honored its agreements or that franchisees are dissatisfied with its performance. Item 3 also says whether the franchisor has sued any of its franchisees in the past year. That information could suggest problems in the franchise system. For example, if a franchisor sued franchisees for failing to pay royalties, was it because franchisees weren’t successful and couldn’t make their royalty payments?
Bankruptcy (FDD Item 4)
Have the franchisor, its affiliates, or any of its executives filed for bankruptcy? Item 4 discloses that information and could give you insights into the financial condition of the business.
Initial and Other Fees (FDD Items 5-7)
Items 5-7 go over some of the costs involved in starting and operating a franchise. That could include things like deposits or franchise fees (some of which may be non-refundable); what you’ll have to pay for initial inventory, signs, equipment, leases, or rentals; and ongoing costs, like royalties and advertising fees. A Consumer’s Guide to Buying a Franchise suggests more than a dozen other areas of financial inquiry, which should give you an indication about the importance of both getting in touch with your inner bean counter and consulting with independent accounting and legal professionals. Consider your living expenses in light of the reality that it takes time to start a business and often much longer just to break even – and some franchisees never break even.
Supplier, Territory and Customer Restrictions (FDD Items 8 and 12)
Item 8 and Item 12 explain restrictions the franchisor may place on your business – for example, what you must buy, where you must buy it, what you can sell, and where and how you can sell it. Does the franchisor limit what goods and services you can offer? Does it restrict where you can buy supplies? Must you buy from particular suppliers designated by the franchisor? Are you allowed to negotiate with those suppliers directly? Ask if goods and services may cost more than if you bought them elsewhere. Ask why. And does the franchisor get a financial benefit by requiring that you use their selected supplier?
Also, a franchisor may limit your business to a specific location or sales territory. If you have an “exclusive” or “protected” territory, it may prevent the franchisor and other franchisees from opening competing outlets or serving customers in your territory, but it may not protect you from all competition by the franchisor. For example, the franchisor may have the right to offer the same goods or services in your sales area through its website, in catalogs, through other retailers, or at competing outlets of a different company-owned franchise.
The FDD also discloses important information about e-commerce – for example, whether you can use the internet to sell goods or services to people within and outside your territory and whether the franchisor or other franchisees may use the internet to sell in your territory. Are you OK with restrictions that may limit your ability to exercise your own business judgment? Are you willing to face competition from the franchisor or other franchisees?
Advertising and Training (FDD Item 11)
Advertising and training can have a significant impact on a franchisee’s bottom line. Franchisors often require franchisees to contribute a portion of sales to advertising funds. In addition to determining how much you’ll have to pay, ask whether franchisees have a say in how those ad dollars are spent. How much goes toward national advertising vs. local or regional? Will your contribution be used to advertise for additional franchisees? What are the administrative costs of the program? In addition, investigate if you can buy your own ads and if you’ll need the franchisor’s consent.
Item 11 also includes information about training. Ask the franchisor about trainers’ qualifications, who pays for training new employees, whether on-site assistance is available and how much it costs, and the amount of time spent on technical training, business management, and marketing.
Talk to recent franchisees to get their take on the quality of the training. (Item 20 has more on the importance of interviewing franchisees.) If you still have questions, ask the franchisor to let you review the training materials. If the franchisor balks – even if you offer to sign a confidentiality agreement – that could signal a concern.
Renewal, Termination, Transfer, and Dispute Resolution (FDD Item 17)
At the very beginning of a business, it’s hard to think too far in advance, but Item 17 reminds prospective franchisees that they need to consider “what if?” contingencies. Find out about the renewal process – what do you have to do to qualify for renewal and will fees or other contract terms change? What if you want to sell your franchise? What are the grounds for termination and does the franchisor impose limits on your future activities? Many contracts include provisions that could stop you from operating a competing business for a number of years. If you have a dispute with the franchisor, can you go to court or must you use arbitration instead?
Financial Performance Representations (FDD Item 19)
Item 19 contains claims the franchisor chooses to make about sales or earnings. The Franchise Rule doesn’t require a franchisor to provide that information, but most do. But here’s the important thing: Any claims of that nature must be in Item 19. And if the claims aren’t in Item 19, the franchisor – as well as brokers, dealers, or other sellers – can’t make any spoken or written financial performance claims. So if a franchisor or other seller makes financial claims that aren’t included in Item 19, that should set off your baloney detector.
There are two narrow exceptions. We’ll discuss them in the next Franchise Fundamentals post, which will offer tips on how to evaluate potential earnings.
Franchisee and Franchise System Information (FDD Item 20)
Item 20 provides charts showing growth and owner turnover in the franchisor’s system. If any franchised outlets in your area have closed, investigate the reasons. Was it due to problems with the franchisor’s support or because franchises weren’t profitable?
Item 20 also unlocks a key source of highly relevant data: contact information for current and former franchisees. Talking to them may be the most reliable way to get the straight story about the franchisor’s claims. Reach out to as many of them as possible. Some franchisors may give you a separate list of franchisees to contact. To ensure you get the full picture, you may want to contact franchisees in the FDD and some on the separate list.
Relatively new franchisees may be able to give you insights into their total investment, whether they were able to open on time, whether they’re satisfied with the franchisor’s training and advertising, whether they’re OK with the cost and quality of goods or services they have to buy from the franchisor or from mandatory suppliers, and whether they’ve been able to break even. Franchisees who have been in business for five years or more can answer similar questions from a long-term perspective.
It’s also worth tracking down former franchisees listed in Item 20. Although some may have signed confidentiality agreements, if they’re willing to talk, ask if they had problems with their outlet, if they made a profit, and why they left the franchise system.
Some franchisors may buy back failed outlets and list them for sale. If you’re thinking of buying an outlet in that category, insist on seeing the financials showing the outlet’s actual operating results. If a franchise has had several owners in a short time, maybe the location isn’t a moneymaker or perhaps the franchisor hasn’t lived up to its promises of support. Again, talk to as many former owners as possible to find out what happened.
Item 20 also lists the franchisee associations sponsored by the franchisor. Independent associations may ask to be listed, too. Whether sponsored or independent, associations can offer insights into the kinds of challenges they’ve encountered and the relationship between franchisees and the franchisor
Financial Statements (FDD Item 21)
Item 21 provides the franchisor’s three most recent audited annual financial statements. Even if you’re comfortable reading financial statements, it’s a good idea to hire an accountant to go over them with you. An independent eye can offer a second opinion about whether the franchisor has experienced steady growth and devotes sufficient funds to support its franchise system. Another key piece of information may lie just below the surface: Does the franchisor makes more of its income from royalty payments from successful existing franchisees – or from the sale of franchises to other prospective franchisees?
A new franchise may not have three years of audited annual financial statements. Until they do, the Rule has special requirements for what the franchise needs to provide. But also consider the risks of investing in a company that hasn’t been around long enough to establish a verifiable track record for financial stability.
Contracts (FDD Item 22)
Item 22 requires franchisors to attach a copy of all proposed agreements relating to the franchise offering. These include leases, options, financing agreements, purchase agreements, etc., as well as a critically important document: the Franchise Agreement itself. More about that in the fourth Franchise Fundamentals post, along with a discussion of another key item that merits your careful review: the Operating Manual.
Next in the Franchise Fundamentals series: Evaluating potential earnings, comparing prospective franchises, and consulting professionals before making a final franchise decision
Tags:
- Consumer Protection
- Bureau of Consumer Protection
- Franchises, Business Opportunities, and Investments
- Small Business
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Business Blog
FTC public workshop on recyclable claims starts soon
By
Lesley Fair
May 23, 2023
Experts, advocates, and law enforcers are meeting at the FTC today to offer fresh perspectives on recyclable claims in advertising. Convened as part of the agency’s ongoing regulatory review, Talking Trash: Recyclable Claims and the Green Guides begins at 8:30 AM Eastern Time. Watch from the webcast link that will go live a few minutes before the start time.
The FTC is leaving the public record open until June 13, 2023, so you can offer your insights into the topics discussed at today’s event. Save a step by filing your comment online at Regulations.gov. Looking for more information about environmental marketing? The FTC has resources for businesses.
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Business Blog
Oh no, you don’t, Edmodo: FTC sues ed tech company for violating school kids’ privacy
By
Lesley Fair
May 22, 2023
Educational technology hasn’t totally overtaken chalk dust and penmanship, but ed tech certainly has found its way into schools. A proposed settlement with Edmodo, LLC, alleges the ed tech company violated the Children’s Online Privacy Protection Act Rule and the FTC Act by collecting personal information from school kids without their parents’ consent, using that data for advertising purposes, and unfairly requiring schools and teachers to comply with COPPA on its behalf. If you’ve been wondering who bears the bottom-line responsibility for complying with COPPA in the school setting, we’ll cut to the chase: It’s the ed tech company. The action against Edmodo illustrates that fundamental principle – and much more.
Edmodo operates platforms and related apps that let teachers create accounts and invite students and parents to join their virtual classroom. Using Edmodo, teachers can host discussions, share materials, give quizzes, and communicate privately with students and parents. Edmodo offers a free version, which any teacher can use, and a paid version, to which school districts can subscribe. To register, students had to provide their name and email address. At certain times, Edmodo also asked for their date of birth and phone number.
According to the complaint, both versions of the Edmodo platform collected additional personal information from kids – for example, their school, where they were located, and a profile picture. In addition, Edmodo automatically collected certain use and device information, including cookies, IP address, and geographic location based on the IP address. What’s more, the complaint alleges Edmodo collected persistent identifiers from students’ devices and used that information to serve up advertising on its free platform.
The FTC says kids as young as kindergarteners had Edmodo accounts and the company estimated that around 600,000 students under 13 used its platform in 2020 alone. In other words, according to the complaint, Edmodo gathered all that data without parental permission and without complying with the requirements of the COPPA Rule.
So who’s responsible for COPPA compliance? Under COPPA, schools can authorize the collection of personal information from students on behalf of parents, but only in limited circumstances. A website operator like Edmodo first must notify the school of its collection, use, and disclosure practices. And schools can authorize collection, provided the personal information is used only for an educational purpose – and most certainly not to serve up ads, as Edmodo was doing.
According to the FTC, Edmodo illegally passed the COPPA compliance buck to teachers and schools. For example, when teachers opened an account, if they clicked on the Terms of Service link, if they scrolled down, and if they happened to find a paragraph buried on the bottom of the second page – all big ifs – here’s what Edmodo said:
If you are a school, district, or teacher, you represent and warrant that you are solely responsible for complying with COPPA, meaning that you must obtain advance written consent from all parents or guardians whose children under 13 will be accessing the Services. . . . When obtaining consent, you must provide parents and guardians with our Privacy Policy; you can find a sample permission slip here [NOTE: According to the complaint, the company website didn’t include a link]. You must keep all consents on file and provide them to us if we request them. For more information on COPPA, please click here [NOTE: No link here either, despite the “click here” prompt]. If you are a teacher, you represent and warrant that you have permission and authorization from your school and/or district to use the Services as part of your curriculum, and for purposes of COPPA compliance, you represent and warrant that you are entering into these Terms on behalf of your school and/or district.
The FTC alleges the company unfairly used that hard-to-find and hard-to-understand legalese to shift COPPA compliance responsibilities to teachers and schools. Oh no, you don’t, Edmodo.
In 2022, Edmodo shut down its operations in the United States. The terms of the proposed settlement, however, will still bind the company, including if it resumes U.S. operations in the future. Parts of the order should be familiar to those who follow the FTC’s two decades of COPPA enforcement. Other provisions track the May 2022 Policy Statement of the Federal Trade Commission on Education Technology and the Children’s Online Privacy Protection Act. The following order provisions apply to Edmodo, but they merit the attention of others in the ed tech industry.
- Edmodo can’t condition a kid’s participation in an activity on disclosing more information than is reasonably necessary.
- To get a school’s authorization to collect information from a child, Edmodo must agree the data will be used just for educational purposes – and to be clear, that doesn’t include advertising or creating user profiles.
- Edmodo must stick to a retention schedule for children’s personal information, including an explanation of why the company is collecting it in the first place, the specific business need for retaining it, and a time frame for deleting it, which has to be no more than a year.
- Edmodo must delete models or algorithms it developed using information collected from kids without school authorization or their parents’ verifiable consent.
The proposed order includes a $6 million civil penalty, which will be suspended based on the company’s inability to pay.
What can other companies take from the action against Edmodo?
Reread the FTC’s Ed Tech Policy Statement. If you haven’t evaluated your company’s practices against the FTC’s Ed Tech Policy Statement, now is the time. Savvy industry members will conduct periodic reassessments as their products and practices change.
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 authorize 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.
Consult the FTC’s Children’s Privacy page for more information about complying with COPPA.
