CA Court Blocks Enforcement of Controversial Children’s Online Privacy Law
On September 18, 2023, the United States District Court for the Northern District of California granted a preliminary injunction to NetChoice, a tech umbrella group, against California Attorney General Rob Bonta from enforcing the California Age-Appropriate Design Code Act (CAADCA). The court found the CAADCA, which was slated to take effect on July 1, 2024, was likely to violate the First Amendment, marking a major win for online businesses in at least this initial stage of the litigation.
The CAADCA, which is modeled on the 2020 UK Age-Appropriate Design Code, restricts the use of children’s personal information collected by companies offering online goods or services that are “likely to be accessed by children” (children are defined as under 18). Companies are directed to “consider the best interests of children when designing, developing, and providing that online service, product, or feature” and must conduct a data protection impact assessment before offering new products, services, or features that could attract children. Businesses must also configure all default privacy settings provided to children to a high level of privacy and estimate the age of child users with a reasonable level of certainty or apply the same data and privacy protections afforded to children to all consumers.
To review, NetChoice launched a legal challenge to the CAADCA on December 14, 2022, and on February 17, 2023, sought a preliminary injunction to enjoin the law, arguing, among other points, that the CAADCA acts as a prior restraint on speech, is unconstitutionally overbroad, and attempts to regulate protected expression in violation of the First Amendment. NetChoice also argued that CAADCA violates the Dormant Commerce Clause of the Constitution and is preempted by Section 230 of the Communications Decency Act and by the Children’s Online Privacy Protection Act (COPPA).
To obtain a preliminary injunction, a plaintiff must show “a likelihood of success on the merits, that it would suffer irreparable harm, that the balance of equities favors the plaintiff, and that an injunction is in the public interest.” As Judge Beth Labson Freeman noted, Ninth Circuit courts historically consider the likelihood of success on the merits to be the most important factor in determining whether to grant a preliminary injunction. Her decision relied only on the First Amendment claims and found that CAADCA’s prohibitions and requirements effectively regulate speech because they limit the “availability and use” of information for some speakers and not others. Such a limitation is a violation of protected expression and warrants First Amendment protection under Supreme Court precedent. She acknowledged that while California has a substantial interest in protecting children online, the law does not “directly advance” that interest because its application is at times overbroad and does not show a link between the prohibitions and requirements and children’s well-being. Based on this analysis, the court found that NetChoice was likely to succeed in showing that the regulation was unconstitutional applying the most limited level of constitutional scrutiny, which applies to commercial speech.
With respect to the argument made by NetChoice that COPPA preempts CAADCA, the court noted that the Ninth Circuit recently held that a state law is not “inconsistent” with COPPA unless there exists contradiction between the laws or provisions “stand as obstacles to federal objectives.” The court said it was too early to decide whether CAADCA contradicts or supplements COPPA because NetChoice was entitled to relief based on First Amendment grounds.
This decision highlights the significant constitutional issues associated with laws that attempt to regulate use of online products and services, especially when tailored toward specific groups. Some groups have voiced similar concerns about proposed legislation such as the federal Kids Online Safety Act (KOSA) (S.3663), which includes language similar to the language challenged by NetChoice. As the case progresses, it is likely that other legal theories not addressed in this preliminary injunction will be explored and fleshed out in more detail by the parties.