FTC proposes $5M penalty for NGL Labs, founders over COPPA violations

The FTC additionally ordered FTG to stop marketing to children under 18, the agency announced in a press release Tuesday.

The details: Created in 2021 by Raj Vir and Joao Figueiredo, the “NGL: ask me anything” app was marketed as a “safe space for teens” and allowed users to receive anonymous messages, including candid and slanderous ones, from friends and contacts. The company engaged in aggressive, coercive marketing tactics toward children, the FTC alleged.

The app allowed for “rampant bullying and threats against children and teens,” the FTC alleged.

NGL sent fake, harassing messages to children and teens to try and trick them into signing up, or if already a user, for more services. The founders urged sales employees to target teens who appeared to be popular on Instagram, the FTC alleged.

Some users were sent fake, anonymous messages generated by NGL that said things like, “Are you straight?” and “I know what you did,” the FTC alleged.

They were told they would learn the identity of the message senders if they signed up for the additional service, which cost as much as $9.99 per week.

NGL flagrantly ignored the requirement under the federal Children’s Online Privacy Protection Act to obtain consent from parents of children 13 and under, the FTC alleged.

NGL also violated the Restore Online Shoppers’ Confidence Act, the FTC said.

The company and its founder agreed to pay $4.5 million in redress to affected customers and a $500,000 penalty to the Los Angeles District Attorney’s Office, according to the proposed order. The order is pending court approval.

Compliance considerations: NGL must obtain express consent from users before billing them, provide a simple option for canceling orders, prevent children 18 and under from accessing the app, and delete data of all past users 13 and under whose parents don’t consent or others who request deletion, the FTC said.

“NGL marketed its app to kids and teens despite knowing that it was exposing them to cyberbullying and harassment,” said Lina Khan, FTC chair, in the release. “In light of NGL’s reckless disregard for kids’ safety, the FTC’s order would ban NGL from marketing or offering its app to those under 18. We will keep cracking down on businesses that unlawfully exploit kids for profit.”

“After nearly two years of cooperating with the FTC’s investigation, we view this resolution as an opportunity to make NGL better than ever for our users and we think the agreement is in our best interest,” NGL co-founder Joao Figueiredo said in a statement.

“While we believe many of the allegations around the youth of our user base are factually incorrect, we anticipate that the agreed upon age-gating and other procedures will now provide direction for others in our space, and hopefully improve policies generally,” Figueiredo said.