Microsoft Settles Xbox Live Privacy Allegations With $20 Mln Payment

Microsoft Corporation (MSFT) agreed to pay $20 million to resolve accusations by the US government that the company unlawfully gathered children’s personal data through its Xbox Live gaming platform, thereby infringing upon their privacy.

The Federal Trade Commission has stated that Microsoft violated the law by neglecting to inform parents about the complete range of information it collected from children under 13 years old.

As per the lawsuit filed by the FTC on Monday, the information in question included details that children might upload images of themselves in their account profiles, along with video and audio recordings of themselves, their actual names, and records of their activities on the platform.

Furthermore, Microsoft is accused of retaining the personal information of millions of individuals, including children, who initiated the process of creating accounts on Xbox Live but did not complete the sign-up procedure for several years.

According to a statement from the FTC, even when a user indicated being under the age of 13, Microsoft continued to request additional personal information, including a phone number, and required consent to its service agreement and advertising policy. Until late 2021, there was also a pre-selected checkbox that allowed Microsoft to send promotional messages and share user data with advertisers.

Microsoft issued a statement acknowledging their recent settlement with the U.S. FTC to address issues with their account creation process and resolve a data retention error within their system. They expressed their commitment to complying with the order.

According to the FTC, parental settings on Xbox Live enable adults to have some control over the content displayed in their children’s accounts and limit interactions with other users. The default settings on Xbox Live are designed to restrict children’s interactions. However, the agency alleged that certain default settings still enable children to access third-party games and applications with minimal obstacles.

The FTC claimed that Microsoft violated the Children’s Online Privacy Protection Act (COPPA) by not adequately informing parents about the information being collected from children and how it was being utilized. The company allegedly failed to provide sufficient disclosure regarding these matters to parents.

As part of the settlement, Microsoft made additional commitments in addition to the financial penalty. The company pledged to delete any personal information collected from children who do not complete the account registration process. Microsoft also agreed to notify third-party game publishers when a user is identified as a child, thereby alerting them to comply with COPPA guidelines in handling the user’s information.

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