Microsoft will pay $20 million to settle US government allegations that the tech giant violated children's privacy by illegally collecting their personal information through its Xbox Live gaming service.
According to the Federal Trade Commission, Microsoft broke the law by failing to tell parents about the full breadth of information it gathered from kids under the age of 13.
That information, the FTC said in a lawsuit filed Monday, included the fact that children may share images of themselves in their account profiles, as well as video and audio recordings of themselves, their real names and logs of their activity on the platform.
Microsoft also allegedly kept for years the personal information of millions of people, including children, who started creating accounts with Xbox Live but who never completed the sign-up process.
"Even when a user indicated that they were under 13, they were also asked, until late 2021, to provide additional personal information including a phone number and to agree to Microsoft's service agreement and advertising policy, which until 2019 included a pre-checked box allowing Microsoft to send promotional messages and to share user data with advertisers," the FTC said in a release.
Microsoft didn't immediately respond to a request for comment.
Parental settings give adults some control over what their children's accounts show to other users. For example, Xbox Live's default settings restrict who children can interact with on the service, the FTC said. But other default settings, the agency alleged, allow kids to access third-party games and apps with minimal friction.
Microsoft failed to sufficiently disclose to parents what information the company was collecting from kids and how it was being used, the FTC said, alleging violations of the Children's Online Privacy Protection Act (COPPA).
In agreeing to settle the claims, Microsoft committed to several additional measures beyond the financial penalty.
Microsoft agreed to delete any personal information it collects from kids if they don't complete the account registration process. It also agreed to tell third-party game publishers when a user may be a child, effectively putting the third-party publishers on notice to comply with COPPA in handling the user's information.
The settlement comes as the FTC has challenged Microsoft's $69 billion acquisition of video game giant Activision-Blizzard, a proposed deal that would turn Microsoft into the world's third-largest game publisher and give it control over popular franchises such as "Call of Duty" and "World of Warcraft."
US and UK officials have alleged that Microsoft's acquisition could give it anti-competitive control over the games industry by being able to withhold titles from rival platforms, particularly in the nascent cloud gaming sector. To address the concerns, Microsoft has struck licensing deals with other companies to ensure their customers continue to have access to Activision games following the deal's close.
Those concessions have convinced the European Union to approve the deal, but litigation to block the deal involving US and UK regulators remains ongoing.