After breach exposing millions of parents and kids, toymaker VTech handed a $650K fine by FTC

VTech, the maker of smart toys whose poor security practices exposed data from millions of parents and children, has been slapped on the wrist by the FTC to the tune of $650,000 and probation. It seems a light penalty for such a multifaceted failure affecting so many.

The Hong Kong company makes a variety of “smart” toys, like watches and cameras, and parents and children were encouraged to set up profiles on VTech’s site with pictures and personal details. In November of 2015 a security researcher found that millions of those profiles could be accessed via one of the company’s websites.

Not only was the website itself not secure, but the data were not encrypted in transit or at rest, contradicting security claims made in VTech’s privacy policy. This is not just poor practice, it’s a violation of COPPA, a rule meant to protect children’s privacy. The FTC stepped in shortly afterwards to look into these violations.

The number of parents and children affected is hard to estimate, but at the time nearly 5 million parent records and 227,000 child records were shown to be accessible. However, the FTC in the summary of its investigation notes:

…about 2.25 million parents had registered and created accounts with Learning Lodge for nearly 3 million children. This included about 638,000 Kid Connect accounts for children. In addition, about 134,000 parents in the United States created Planet VTech accounts for 130,000 children by November 2015…

And the Canadian Office of the Privacy Commissioner writes that “more than 500,000 Canadian children and their parents” were affected. At any rate, the total number is certainly in the millions.

The FTC today announced the results of its investigation, namely that VTech violated U.S. law in a couple of ways and failed to secure its data both as promised and as required. Its punishment: pay $650,000 and never do it again. The Canadian OPC doesn’t seem to have issued any punishment at all. (Update: It hasn’t, and legally it can’t. But it would like to.)

It’s hardly a heavy fine for a company that was selling millions of devices, and may embolden others weighing the cost of real security against the risk of being caught and fined. It seems unlikely that the parents and children whose data was exposed by the extremely irresponsible actions of a global company will find this settlement satisfying — however logical it appears to the FTC.

It is also worth noting that this is the agency that will be responsible for enforcing part of our new, much-reduced net neutrality rules. If gross negligence and a breach affecting millions, including children, provokes only a minor fine and warning like this — two years after the fact, by the way — what hope do we have that the FTC will act as an effective deterrent for the subtler abuses and far richer companies that net neutrality protected people against?

You can read the full text of the settlement here (PDF).