• Skip to primary navigation
  • Skip to main content
McKenna Storer

McKenna Storer

AV Rated Chicago Law Firm

  • Home
  • Insurance
    • Insurance Defense
    • Toxic Tort and Mass Tort Litigation
    • Construction Law
    • Commercial Transportation Law
    • Insurance Coverage
    • Professional Malpractice Defense
    • Medical Malpractice Defense
    • Legal Malpractice Defense
    • Appellate Practice
  • Business
    • Corporate Law & Commercial Litigation
    • Litigation Defense
    • SBA Lending
    • Commercial Real Estate
    • Appellate Practice
    • Health Care Law
    • Business Formation
    • Data Privacy and Cyber Liability
    • Employment Law
    • Employment Litigation
    • Workplace Harassment
  • Individual
    • Estate Planning
    • Wills and Trusts
    • Real Estate
    • Mediation Services
  • Banking Law
  • Our Attorneys
  • Our Firm
  • Blog
  • Contact Us
    • Chicago Office
    • Woodstock Office
  • Show Search
Hide Search

6 Data Security Compliance Lessons from the VTech-FTC Settlement

mckenna · February 12, 2018 ·

On January 8, 2018, VTech Electronics Limited (VTech) agreed to settle charges brought by the Federal Trade Commission (FTC) that the company violated U.S. children’s privacy law. As part of the settlement, VTech agreed to pay a $650,000 civil penalty, refrain from further violation of the law, and implement a comprehensive data security compliance program. This is the FTC’s first children’s privacy case involving internet-connected toys, but as we have highlighted in our previous blog on the topic, the FTC is aware of the privacy issues related to these types of toys and will surely pursue more of these cases in the future. Therefore, examining this case will be useful for COPPA-covered companies.

In the VTech complaint, the FTC alleged that the Kid Connect app used with VTech toys collected personal information of children without either providing direct notice to parents or obtaining verifiable consent from parents, concerning VTech’s information collection practices. Direct notice or verifiable consent is required by the Children’s Online Privacy Protection Act (COPPA). The FTC further alleged that VTech failed to use reasonable and appropriate data security measures to protect the personal information it gathered. Specifically, the company did not take steps such as implementing an intrusion prevention or detection system to alert it to unauthorized access. These violations came to light during the FTC’s investigation into a 2015 data breach of VTech’s system that exposed the personal data of parents and children using the Kid Connect app.

As is common in FTC cases, the settlement with VTech involves both a monetary judgment and corrective tasks. First, VTech is required to pay a $650,000 civil penalty to the United States government. In addition, VTech is permanently prohibited from violating COPPA and from misrepresenting its security and privacy practices. VTech also must implement a comprehensive data security program that will be subject to independent audits for the next twenty years.

6 Lessons For Internet-Connected Toy Businesses About Data Security Compliance

Companies can learn from the mistakes made by VTech to ensure they do not encounter similar problems in the future. The FTC highlighted these mistakes, and the corresponding lessons to learn from them as follows:

  1. The complaint alleges that VTech failed to develop, implement, and maintain a comprehensive information security program. Maintaining an information security program is an ongoing process. It is not something that you complete and forget about. The program must be reviewed and updated on a regular basis.
  2. The complaint alleges that VTech failed to implement adequate measures to segment and protect its live website from the test environment. The FTC addressed this issue in their Start with Security and Stick with Security initiatives. Companies should always strive to implement effective network segmentation.
  3. The complaint alleges that VTech failed to have an intrusion detection system. Companies should implement an intrusion detection system to promptly detect and respond to threats. The FTC has routinely suggested that companies implement such a system.
  4. The complaint alleges that VTech failed to monitor unauthorized attempts to exfiltrate personal information. Monitoring your system is a crucial component of protecting personal information. Having the knowledge that someone is trying to remove large amounts of data from your system should ensure that you take steps necessary to protect that data.
  5. The complaint alleges that VTech failed to complete vulnerability and penetration testing to see how its network could stand up to well-known vulnerabilities like SQL injection. The FTC suggested that companies used vulnerability and penetration testing in its Start with Start with Security and Stick with Security guides to protect sensitive data. Testing your systems will allow you to address vulnerabilities before you suffer a data breach.
  6. The complaint alleges that VTech failed to implement reasonable guidance or training for its employees. Training your employees regarding proper data security is one of the most important steps that an business can take to protect sensitive data.

Additionally, as we wrote back in July, the FTC has provided a 6-Step COPPA Compliance Plan that all COPPA-covered businesses should consult.

The case against VTech was the first of its kind for the FTC, but certainly won’t be its last. Companies that are subject to the requirements of COPPA should learn from this case to better position themselves for the future. If you have any questions regarding COPPA compliance, or any data privacy and security matter, please contact Tim Hayes, data privacy and security attorney at McKenna Storer.

If you found this information helpful, you may also find other helpful Privacy and Data Security articles by our attorneys.

Privacy and Data Security Litigation

About mckenna

McKenna Storer is a corporate law firm that provides a full spectrum of legal services for businesses and individuals. More than half of our lawyers have received positive peer review ratings from Martindale Hubbell, including 10 individual Preeminent AV ratings.
McKenna Storer has been serving its clients for more than 66 years. We are open and available for consultations at both our Chicago and Woodstock locations. Please follow us on or our LinkedIn, Twitter or Facebook pages.

Chicago Office
McKenna, Storer
33 N. LaSalle, Suite 1400
Chicago, Illinois 60602
312.558.3900
312.558.8348
Mo,Tu,We,Th,Fr 8:30 am – 5:00 pm
Woodstock Office
McKenna, Storer
1060 Lake Avenue
Woodstock, Illinois 60098
815.334.9690
815.334.9697
Mo,Tu,We,Th 8:30 am – 5:00 pm

  • Home
  • Insurance
  • Business
  • Individual
  • Banking Law
  • Our Attorneys
  • Our Firm
  • Blog
  • Contact Us