The Federal Trade Commission Takes Action Against NGL Labs
The Federal Trade Commission is taking action against an anonymous messaging app on allegations that it has been targeting teens and falsely claiming to use AI-powered content moderation to filter out harmful messages.
NGL Labs, a California-based company launched in 2021, is “unfairly marketing” to minors and overstates its efforts to protect users from cyberbullying, the FTC said in its complaint. The company also routinely sent fake messages in order to trick users into signing up for a paid subscription, according to the commission, and violated laws around collecting and retaining the personal data of children under 13.
“We cannot tolerate such behavior, nor can we allow companies to profit at the expense of our children’s safety and well-being,” said Los Angeles District Attorney George Gascón in a statement. “Today’s charges send a clear message that deceptive practices and targeting vulnerable populations will not be tolerated.”
The district attorney’s office filed the complaint in conjunction with the FTC.
FTC’s Crackdown on Stealth Marketing Aimed at Children
This is the latest in a series of actions taken by the FTC to strengthen regulations around collecting student data and crack down on “stealth marketing” aimed at children — an issue the government agency that promotes consumer protection has prioritized in the last few years.
Concerns around stealth marketing have risen as more children gain access to online platforms and digital media at earlier ages. Advocacy organizations say that marketers can increasingly reach children through embedded advertising, influencer and celebrity posts, games, and virtual worlds — and it’s not always clear that the content provided is an advertisement.
NGL routinely sent users fake, computer-generated messages to get them to pay for a subscription, which promised to reveal the identity of senders, according to the FTC. But many users weren’t aware that subscription came with a weekly cost, and names of messengers were not revealed after they signed up.
The complaint says the company also made no attempt to verify the ages of users or obtain parental consent to collect and use personal data collected from children under the age of 13 — a violation of federal COPPA rules. And it failed to honor parents’ requests to delete the data, instead retaining it longer than the FTC says is reasonably necessary, the agency asserted.
NGL has been cooperating with the FTC’s investigation for two years, the company said in a statement emailed to EdWeek Market Brief. The company said it believes the FTCs allegations around the young ages of its users are “factually incorrect,” it said in the statement. But they “anticipate that the agreed upon age-gating and other procedures will now provide direction for others in our space, and hopefully improve policies generally”
“We view this resolution as an opportunity to make NGL better than ever for our users,” the company said in its statement.
FTC’s Proposed Order and Response
The FTC’s proposed order, if approved by a federal court, would ban NGL from marketing to children under 18 years old and order co-founders Raj Vir and Joao Figueiredo to pay .5 million. It would also prohibit “misrepresentations” about AI capability and message senders.
“The FTC is right to focus on this conduct,” said Sara Kloek, vice president of education and children’s policy for the of the Software & Information Industry Association (SIIA), which has more than 350 member companies.
Kloek applauded the FTC for taking action, pointing to allegations in the agency’s complaint that it had failed to comply with COPPA privacy protections over time and disregarded customer complaints.
The practices alleged by federal officials “should not have happened in the first place,” she said. Education companies, both large and small, have found themselves caught up in legal action in recent years because of what the agency has viewed as lax data security practices.
