This week the Federal Trade Commission (FTC) announced new privacy rules designed to protect children on-line. Despite good intentions, the rules will fail to protect children while endangering the privacy of others and making life more difficult for on-line entrepreneurs.

Written under the authority of the 1998 Children’s Online Privacy Protection Act (COPPA), the new laws require all commercial websites and on-line services to obtain “verifiable parental consent” before collecting information from children under 13 years old.

This means that before twelve-year-old John can access a children’s site with a registration form, he first has to get one of his parents to mail or fax a letter of consent, or e-mail their credit card number or digital signature to the site. But what would stop John from finding his mother’s purse and e-mailing the credit card number to the website himself?

A phone call to the FTC revealed that the regulatory agency is basing enforcement on the theory that “kids under 13 don’t lie as much as kids over 13.” When asked what studies backed up this assertion, the FTC confessed that their theory is based more on anecdote than fact. But some groups have been raving about the new laws.

Mary Ellen Fise from the Consumer Federation of America said that the new regulations “will greatly assist parents in protecting their families’ privacy.” What these advocates are ignoring, however, are the effects these new regulations will have on the privacy of adults in the family.

It is truly ironic that in attempting to protect the information of children, the rules dictate the extraction of information from their parents (i.e., credit card numbers, phone numbers, etc.). Even more worrisome, however, are the disincentives that the new laws create for kids to visit sites suitable for their age group.

If a child has difficulty entering a children-centric site, he or she will likely visit sites intended for adults instead. This is surely not the intention of the FTC or of privacy advocates, but it is likely to occur, particularly in the case of disadvantaged children who don’t spend much time with their parents and who could arguably benefit most from the content in children’s sites.

Children whose parents speak a foreign language, don’t have credit cards, or are just plain negligent will have trouble accessing sites meant for them, sites that often have valuable educational material. Clearly, these new laws will do more harm than good, especially for the disadvantaged. Not only will the regulations be ineffective and detrimental to some kids, but they will also have an adverse effect on on-line businesses.

For every regulation there is compliance cost, and the COPPA rules are no exception. Julie Richler, President of Able Minds, a company that operates a children’s site called Cyberkids, has estimated that COPPA compliance costs have already cost her company over $10,000. But an even bigger worry is that the laws give an unfair advantage to large sites like Disney and AOL.

Richler explains that since sites like AOL charge a subscription fee, they already have a credit card on file and this effectively puts them in compliance with COPPA. This, she says, really serves to “punish the little sites.” So what should be done?

Everyone wants their children to be safe when they surf the web, but COPPA regulations are not the answer. A better strategy would allow communities and markets to solve the problem.

Just as kids are taught that they shouldn’t take candy from strangers, they should also be taught not to give away their addresses to anyone who asks on the web. Parents, teachers, and others in the community should not relinquish this important responsibility to the FTC.

Further, markets have already provided tools for parents to protect their child’s on-line identity. Software products such as “ChatGard,” “NetNanny,” and “X-stop” prevent kids from giving out personal information on-line.

These types of solutions are more effective at protecting the privacy of kids, and they don’t compromise the privacy of parents or impose huge compliance costs on the small entrepreneurs that are driving this country’s economy.

Sonia Arrison is director of the Center for Freedom and Technology at the California-based Pacific Research Institute. She can be reached via email at sarrison@pacificresearch.org.