Fri. Jul 12th, 2024
FTC Order Will Ban NGL Labs and its Founders from Offering Anonymous Messaging Apps to Kids Under 18 and Halt Deceptive Claims Around AI Content Moderation
FTC Order Will Ban NGL Labs and its Founders from Offering Anonymous Messaging Apps to Kids Under 18 and Halt Deceptive Claims Around AI Content Moderation

The Federal Trade Commission and the Los Angeles District Attorney’s Office are taking action against NGL Labs, LLC and two of its co-founders, Raj Vir and Joao Figueiredo, for a host of law violations related to their anonymous messaging app, including unfairly marketing the service to children and teens. The defendants will pay $5 million to settle the lawsuit, and will be banned from offering their “NGL: ask me anything” app to anyone under the age of 18.

In their complaint, the FTC and Los Angeles DA’s Office allege that NGL and its co-founders not only actively marketed their service to children and teens, but that they also falsely claimed that its AI content moderation program filtered out cyberbullying and other harmful messages. In addition, the complaint alleges that the defendants sent fake messages that appeared to come from real people and tricked users into signing up for their paid subscription by falsely promising that doing so would reveal the identity of the senders of messages.

“NGL marketed its app to kids and teens despite knowing that it was exposing them to cyberbullying and harassment,” said FTC Chair Lina M. Khan. “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.”

“The consequences of these actions can be severe. The anonymity provided by the app can facilitate rampant cyberbullying among teens, causing untold harm to our young people,” Los Angeles District Attorney George Gascón said. “We cannot tolerate such behavior, nor can we allow companies to profit at the expense of our children’s safety and well-being. Today’s charges send a clear message that deceptive practices and targeting vulnerable populations will not be tolerated.”

California-based NGL was launched in 2021 as an anonymous messaging service that allows people to receive anonymous messages from their friends and social media followers. NGL and its operators marketed the app as a “safe space for teens” and claimed it uses “world class AI content moderation” including “deep learning and pattern matching algorithms” to combat cyberbullying and other harms.

In their complaint, however, the FTC and the Los Angeles DA’s office allege that NGL and its operators actively marketed their service to kids despite being aware of the harms from similar services; made false claims about their AI content moderation program; deceived users with fake messages and other tactics aimed at driving up the number of paid users; failed to clearly disclose and obtain consent for recurring charges for its NGL Pro service; and violated the Children’s Online Privacy Protection Act Rule (COPPA Rule).

After consumers downloaded the NGL app, they could share a link on their social media accounts urging their social media followers to respond to prompts such as “If you could change anything about me, what would it be?” Followers who clicked on this link were then taken to the NGL app, where they could write an anonymous message that would be sent to the consumer.

After failing to generate much interest in its app, NGL in 2022 began automatically sending consumers fake computer-generated messages that appeared to be from real people. When a consumer posted a prompt inviting anonymous messages, they would receive computer-generated fake messages such as “are you straight?” or “I know what you did.” NGL used fake, computer-generated messages like these or others—such as messages regarding stalking—in an effort to trick consumers into believing that their friends and social media contacts were engaging with them through the NGL App.

When a user would receive a reply to a prompt—whether it was from a real consumer or a fake message—consumers saw advertising encouraging them to buy the NGL Pro service to find out the identity of the sender. The complaint alleges, however, that consumers who signed up for the service, which cost as much as $9.99 a week, did not receive the name of the sender. Instead, paying users only received useless “hints” such as the time the message was sent, whether the sender had an Android or iPhone device, and the sender’s general location. NGL’s bait-and-switch tactic prompted many consumers to complain, which NGL executives laughed off, dismissing such users as “suckers.”

In addition, the complaint alleges that NGL violated the Restore Online Shoppers’ Confidence Act by failing to adequately disclose and obtain consumers’ consent for such recurring charges. Many users who signed up for NGL Pro were unaware that it was a recurring weekly charge, according to the complaint.

NGL Targeted Kids and Teens

The FTC and Los Angeles DA also say that NGL and its operators aggressively marketed its service to children and teens even though they were aware of the dangers of cyberbullying on anonymous messaging apps. Company executives told employees to reach out to high school kids directly. Figueiredo urged employees to get “kids who are popular to post and get their friends to post” and noted that the “best way is to reach out on [Instagram] by finding popular girls on high school cheer [Instagram] pages,” according to the complaint.

The complaint says the company falsely claimed that its AI-powered system would filter out cyberbullying and other harmful messages. In fact, users complained that NGL failed to prevent rampant cyberbullying and threats against children and teens. One consumer reported that their friend had attempted suicide because of the NGL app, according to the complaint.

In addition to failing to crack down on cyberbullying, the FTC and Los Angeles DA say NGL also violated the COPPA Rule, which requires apps and other online services that are directed to or knowingly being used by children under 13 to inform their parents about the personal information they collect from children and obtain verifiable parental consent from their parents. According to the complaint, the company was aware that numerous children used the app and made no attempt to verify the age of its users, failed to obtain parental consent to collect and use personal data collected from children under 13, failed to honor parents’ request to delete their children’s personal data, and retained children’s data longer than reasonably necessary to fulfill the purpose for which the data was collected.

Proposed Order

In addition to the ban on marketing anonymous messaging apps to kids and teens under 18, the proposed order also requires NGL, Vir, and Figueiredo to pay $4.5 million, which will be used to provide redress to consumers, and a $500,000 civil penalty to the Los Angeles DA’s office. Under the proposed order, which must be approved by a federal court before it can go into effect, NGL and its operators also will be:

  • Required to implement a neutral age gate that prevents new and current users from accessing the app if they indicate that they are under 18 and to delete all personal information that is associated with the user of any messaging app unless the user indicates they are over 13 or NGL’s operators obtain parental consent to retain such data;
  • Prohibited from making misrepresentations about the sender of messages on any app and making similar false claims as outlined in the complaint;
  • Prohibited from making misrepresentations about the capabilities of any artificial intelligence technology, and its ability to filter out cyberbullying;
  • Prohibited from making misrepresentations related to negative options and required to disclose all details related to recurring charges; and
  • Required to obtain express informed consent from consumers prior to billing them for a negative option subscription, provide a simple mechanism for cancelling any negative option subscriptions, and to send reminders to consumers about negative option charges.

The Commission vote authorizing the staff to file the complaint and stipulated final order was 5-0. The FTC filed the complaint and final order in the U.S. District Court for the Central District of California. Commissioners Melissa Holyoak and Andrew N. Ferguson issued separate statements.

NOTE: The Commission files a complaint when it has “reason to believe” that the named defendants are violating or are about to violate the law and it appears to the Commission that a proceeding is in the public interest. Stipulated final orders have the force of law when approved and signed by the District Court judge.

The lead attorneys on this matter are Miles Freeman, Siobhan Amin, Carla Cheung, and John Jacobs from the FTC’s Western Region Los Angeles office.

The FTC received invaluable assistance from Fairplay and social media reform advocate Kristin Bride. 

Official news published at https://www.ftc.gov/news-events/news/press-releases/2024/07/ftc-order-will-ban-ngl-labs-its-founders-offering-anonymous-messaging-apps-kids-under-18-halt

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originally published at Finance - RSVTV news