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Finally! A Record Label Gets Sued

By Rick Munarriz - Updated Apr 5, 2017 at 8:01PM

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Sony fails Internet 101 and pays the price.

It's one of those "man bites dog" moments.

The Federal Trade Commission is suing Sony's (NYSE:SNE) music arm for violating online privacy laws for children. Sony Music apparently accepted website registrations from children under 13, without notifying their parents for consent.

How Sony went about collecting and using the registrant data isn't clear, but Reuters is reporting that Sony is settling with the FTC for $1 million. Sony Music will also hire a Web compliance officer and begin screening its registrations.

The four major labels -- Sony, Vivendi's Universal, EMI, and Warner Music Group (NYSE:WMG) -- have become popular pushpin dolls for music fans, after the industry sued countless Internet users for illegally swapping MP3 files. One would think that a company that has thrived on one end of policing cyberspace crime would be smart enough not to commit it on the other.

Sony also should know better since its PS3 gaming console thrives through online connectivity with minors. As a music label, Sony's viral marketing ways should be well aware of the precautions that social networking sites like News Corp.'s (NYSE:NWS) MySpace and even Google's (NASDAQ:GOOG) YouTube will go to keep toddlers and preteens away from registering.

The FTC can be vicious. Just see how it's still gnawing on the leg of Whole Foods Market (NASDAQ:WFMI), long after it has integrated the purchase of rival organic grocer Wild Oats.

Sony certainly doesn't want any of that. It was an oversight. It was a simple yet unbelievably stupid oversight. Then again, when you're a music company coping with year after year of declining CD sales, it's hard to look forward when you can't even keep up with your past.

Google is a Motley Fool Rule Breakers pick. Whole Foods Market is a Motley Fool Stock Advisor recommendation. Try any of our Foolish newsletters today, free for 30 days.

Longtime Fool contributor Rick Munarriz has been a music fan since birth. His band was once signed to Sony's Columbia Records label many moons ago. He does not own shares in any of the companies in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.

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