New York, June 26, 2002 – The Children's Advertising Review Unit (CARU) of the Council of Better Business Bureaus, Inc. (CBBB) is pleased to announce that the Microsoft Corporation (Microsoft) has agreed to make major changes to its Kids Passport service, part of Microsoft's .NET Passport service, to better inform parents of the consequences and limitations of using the Kids Passport service. The Kids Passport service is a mechanism used to obtain parental consent for Kids Passport participating sites and services (KPPS) to independently collect and disclose personally identifiable information (PII) from children under age 13. To do so, parents must first consent to their child's obtaining a Kids Passport. Many of the sites and services that are part of Microsoft's core family of consumer oriented sites and services, known as MSN, use Kids Passport to obtain parental consent.

CARU, which monitors Websites for compliance with CARU's Self-Regulatory Guidelines for Children's Advertising (the Guidelines) first examined the Kids Passport in early 2002. CARU found that, at that time, Microsoft represented to parents that use of the service would help protect children's safety and privacy on KPPS and inadvertently gave the impression those sites and services were all "children's" sites, i.e., sites specifically designed for use by children. In fact, none of the 12 sites that were then KPPS was designed specifically for children, but were all general audience sites, i.e., used by people of all ages, and many of the sites offered chat rooms and other public forums that enable users to communicate with and disclose PII (such as full name, address, email address, phone number, etc.) to users of all ages, which would allow them to be contacted online or offline. These facts were not adequately disclosed to parents. In addition, CARU found that the privacy practices with regard to children, (which must be posted on the Web site and brought to the attention of parents at the time of granting consent), of both some of the participating sites and of Kids Passport, were not sufficient to meet the standards of CARU's Self-Regulatory Guidelines for Children's Advertising (the Guidelines) and were either non-existent or presented in a confusing manner.

After discussions with CARU, Microsoft voluntarily agreed to make several changes to its Kids Passport service, by late summer 2002, including, but not limited to, the posting of a separate children's privacy statement for its .NET Passport service, and the disclosure to parents that KPPS are not designed specifically for children, but are used by people of all ages and that some allow children to disclose personally identifiable information to and communicate with all other users.

Microsoft, stating that it "shares CARU's concerns with the protection of children online," worked cooperatively with CARU to modify its practices and sites. CARU commends Microsoft for the actions it has already started to take as well as those it has agreed to take in the near future. CARU believes that the changes agreed to by Microsoft adequately address CARU's concerns.

CARU's inquiry was conducted under NAD/NARB/CARU Procedures for Voluntary Self-Regulation of National Advertising. Details of the inquiry, CARU's decision and the advertiser's response will be included in the next NAD/CARU Case Report.

Members of the press who wish to see a copy of the decision now should email CARU.

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The National Advertising Review Council (NARC) was formed in 1971 by the Association of National Advertisers, Inc. (ANA), the American Association of Advertising Agencies, Inc. (AAAA), the American Advertising Federation, Inc. (AAF), and the Council of Better Business Bureaus, Inc. (CBBB). Its purpose is to foster truth and accuracy in national advertising through voluntary self-regulation. NARC is the body that establishes the policies and procedures for the CBBB's National Advertising Division (NAD), the Children's Advertising Review Unit (CARU), and the National Advertising Review Board (NARB).

NAD and CARU are the investigative arms of the advertising industry's voluntary self-regulation program. Their casework results from competitive challenges from other advertisers, and also from self-monitoring traditional and new media, including the Internet. The National Advertising Review Board (NARB), the appeals body, is a peer group from which ad-hoc panels are selected to adjudicate those cases that are not resolved at the NAD/CARU level. This unique, self-regulatory system is funded entirely by the business community; CARU is financed by the children's advertising industry, while NAD/NARB's sole source of funding is derived from membership fees paid to the Council of Better Business Bureaus.