United States of America Vs Sony BMG - Research Paper Example

? United s of America Vs Sony BMG Corporate Litigation: United s of America Vs Sony BMG Introduction This paperpresents an analytical discussion of a civil suit against by Sony BMG by the United States Government on behalf of the Federal Trade Commission. The legal ethical violations are evident in the case with the company being accused of violating the regulations of the FTC and the Children’s Online Privacy Protection Act. The company was found guilty of accessing, recording and using information of underage children within its websites which resulted into a hefty settlement of $ 1 million. The Issue This case is about the violation of the Children’s Online Privacy Protection Act (COPPA) by Sony BMG Music Entertainment in 2008. Sony Corporation of America is a company whose Sony BMG subsidiary represents musical entertainers who are popular even with underage children. COPPA aims at protecting the children’s privacy against misuse of their private information by the online community. The act was passed on 21st April, 2000 and provides legal guidelines for companies or organizations which provide Internet services through websites. This act covers the privacy of children who fall below the age of thirteen years.1 The legal provision of the act to the online service providers is that consent must be obtained from the parents of children under the age of thirteen before collecting personal information about the children. Moreover, the parents have to be informed when an online service provider needs to use or reveal personal information of the children. 2 In 2008, Sony BMG Music Entertainment violated the provision of COPPA by collecting, using and disclosing information of children below thirteen without the permission of their parents. This led to the legal suit against the company by the USA on behalf of the Federal Trade Commission. The websites of Sony BMG requires an individual to submit personal details prior to registering for an account in any of the company’s websites. The personal information required includes name, address and date of birth. The violation of COPPA, therefore, amounts to a legal and ethical issue which leads to civil suit against the violating company which in this case is Sony BMG. The information collected from the underage children by the company affected more than 30 000 of the young people within its 196 websites. The ethical and legal issue in this case is that the company collected the information with full knowledge that it was obtained from underage children. This demonstrates that the company knowingly violated the Children’s Online Privacy Protection Act. The legal issue was worsened by the failure of the company to reveal that it intended to keep the information. Additionally, the company did not disclose how the collected information was to be used. Applicable Law The law that was violated by the company is the Children’s Online Privacy Protection Act (COPPA). The Federal Trade Commission’s implementing rule was also violated by Sony BMG which made the commission to be the Civil Penalty Complainant. The Federal Trade Commission on 5th April, 2010 requested for opinions of the public on the use of private information by the online community in relation to the changes and advancement in technology. This was through the Commission’s publication in the Federal Register.3 The public opinion on the matter was received from members of the public, technologists, advocacy groups, representatives of various industries and academicians. The information obtained from the public was useful in clarifying and defining various terms within the COPPA, such as Child, Website and Private Information. The considerations of the opinions of the public led to the definition of a child as an individual below the age of thirteen. These considerations were based on expert opinion on the ability of a child to make right judgments on the information provided to the online service providers. The assessment of a child’s level of knowledge led to a decision that below the age of thirteen, a child is not at the capacity of determining the appropriateness of the information which is divulged to the online service providers.4 This is, thus, the legal and ethical framework that was violated by the Sony BMG Music Entertainment Company. The Children’s Online Privacy Protection Act provides two distinct kinds of operators. It provides by online service providers who offer services through websites which are focused on children and providers who are aware that the information being collected emanates from children below 13 years of age. 5 In this case an operator refers to an individual or a company who operates an online site via the Internet and who has the capacity to obtain, store and use private information of the visitors of the site or the registered individuals. COPPA provides that the operators comply with the legal framework, when handling information on children below the age of thirteen. This includes getting a consent form from the child’s parents before making use of information on the child. This would be obtained via fax, postal or electronic mail. When electronic mails are used, they must be accompanied with the operator’s digital signature for authentication. In addition, the operator must verify all credit card numbers with the parents before they are used in providing online services. 6 The Federal Trade Commission is authorized to provide various regulations aimed at enforcing the Children’s Online Privacy Protection Act. However, the FTC tries to encourage companies to apply ethical practices and self regulation to avoid the violation of COPPA. Non compliance of an online service provider to the FTC’s self regulation framework and guidelines leads to enforcement of the law with leads to disciplinary action against the operators who violate the Children’s Online Privacy Protection Act. 7 It is notable that the act targets operators who provide online services for profit, while aiming to benefit from underage children. However, the Supreme Court ruling includes non-profit online companies which aim at benefiting from the online activities of underage children in the FTC legal framework.8 Sony BMG Music Entertainment Company was an operator who had knowledge that the information being obtained through the websites was from underage children. The violation of the company, therefore, emanate from the fact that proper ethical and legal procedures were not followed when processing the private information of the children. The company did not obtain consent forms from the parents of the children whose personal information was held. In addition, the company failed to verify the credit cards used in providing its online services. The failure of credit card verification by the company, thus, implies that many of these cards were used without the permission of the parents and, as a result, both legal and ethical violations were done by Sony BMG; this is what led to the civil suit by the US government on behalf of the Federal Trade Commission. Strategic Choices The evidence against Sony BMG was sufficiently convincing to the court. The FTC alleged that in addition to the company’s breach of COPPA, section 5 of the FTC Act was violated. This is because Sony BMG falsely indicated on its websites that there were restrictions to users below the age of 13. However, the company accepted registration of the underage children despite the fact that the age of birth entered during the signing up to the SONY BMG accounts indicated that the users were below the age limit provided by COPPA.9 Therefore, the dispute in the case included the privacy policy of Sony BMG which violated FTC’s regulations. The privacy policy of the company did not consider the ethical and legal business practices. This is demonstrated by the fact that company’s sites allowed fan page creation and commenting on the interactive segments by underage children. In addition, the children were allowed to upload videos and images and engaging in unrestricted interaction with fans of the sites of all ages including adults. Due to the apparent evidence against Sony BMG, the company agreed to have obtained, retained and used information on underage children within its websites. The proceedings took place in the US District Court in New York’s Southern District. As a result of the court ruling, the company complied with the settlement of 1 million US dollars which was paid to settle or resolve the charges brought against it by the FTC due to its non compliance with the provisions of COPPA.10 The strategic choices that the company was compelled to make include deletion of all information which was collected earlier, stored and used against the provisions of the FTC regulations and COPPA. In addition, Sony BMG was prohibited by the court against future violation or breach of any of the legal and ethical provisions for protection of private information of underage children. Furthermore, the company employees were required to be distributed with the rule of the FTC so that they are obliged to adhere to its provisions. This was a way of ensuring the privacy policy of the company was reviewed to prevent failure to comply with the ruling of the court. The terms of the order given to the company was aimed at making sure that information collection, retention, reporting and use was in standard compliance with the legal and ethical framework of the FTC. Ethical Issues The main ethical issue presented in this case is the company’s use of private information on underage children without the consent of the parents. However, the information presented in the sources used is slanted towards the legal aspects of the case. Sony BMG is presented as a violator of the regulations of the FCT and the Children’s Online Privacy Protection Act. The company apparently breaks the ethics of business practice when it violates the privacy policy by allowing underage children to register into its websites. As a result, there is an ethical dilemma which is demonstrated by restrictions in the company’s websites, which is ignored by the company. The sources do not provide defense of the company for its action. It is rather shown that the company agreed to the allegations and took legal responsibility for the violations. This case demonstrates that the company executives failed to adhere to ethical framework on online transactions and service delivery. This is the reason why they were obliged to the order of FCT as part of the case settlement. Conclusion The case which is presented in this paper shows how the legal and ethical framework can be breached, especially in the modern world of technological innovation and advancement. Sony BMG, which is being accused for the violations of the FCT regulations and the Children’s Online Privacy Protection Act, agrees to the accusations. This is due to the apparent evidence for the acquisition, storage and use of information on underage children for it financial benefits against the provisions of the Act. The case illustrates an ethical dilemma when it is claimed that the websites of the company provide restrictions for underage children; yet thousands were allowed to register into the company’s accounts, which involved the provision of private information to the company without the consent of the children’s parents. This led to a settlement of $1 million US dollars which was paid by the company, as well as strategic choices of the company, such as review of its privacy policy and prohibition from future violations of the Children’s Online Privacy Protection Act. Read More