On February 5, 2016, the Federal Trade Commission (“FTC”) announced that it reached a settlement with the San Francisco company General Workings Inc., also doing business as Vulcun, and its founders. The FTC brought a complaint under its Section 5(a) authority, which prohibits unfair or deceptive trade practices. The FTC alleged that Vulcun and its founders acted unfairly by replacing a popular browser-based game with its own software program called Weekly Android Apps. The FTC further alleged that Vulcun and its founders made false claims regarding the popularity and endorsements for Weekly Android Apps and another program called Apps by Cindy. This settlement comes on the heels of recent settlements with other app developers.

The FTC’s complaint arose out of Vulcun’s acquisition of a popular Chrome extension game, Running Fred, on or around September 9, 2014. Chrome extensions are desktop browser extensions that modify and extend the capabilities of Google, Inc.’s web browser. After the acquisition of Running Fred, Vulcun allegedly replaced it with Weekly Android Apps.

This caused at least two serious problems according to the FTC.  First, this caused Weekly Android Apps to inherit Running Fred’s 4.5-star-rating, numerous reviews, and 200,000 users. This was especially problematic because Weekly Android Apps was not a game like Running Fred and instead was a software that featured and promoted other apps. Accordingly, the FTC claimed that this was a false claim that misled users about Weekly Android Apps’ popularity. The complaint also alleged that Vulcun made additional false claims that Weekly Android Apps selected its featured apps in an impartial manner and that it had been featured on prominent websites, such as Lifehacker.

Second, according to the FTC, users of Running Fred were not notified that it had been replaced by Weekly Android Apps, which allegedly bypassed users’ permissions to force-install apps that in some cases automatically re-installed after being deleted by a user. Weekly Android Apps then hid the permissions for the forced-installed apps and granted default Android permissions for these apps without the user’s knowledge. By doing this, the FTC alleged that Vulcun disrupted users’ operation of their desktops and mobile devices. The FTC also alleged that the apps could have accessed private information, such as address books, photos, location data, persistent device identifiers, and medical and financial information. As a result, the FTC claimed that this was an unfair practice.

The settlement will require Vulcun and its founders to inform customers about access of user’s information through products or services, display built-in permission notices in its apps, and obtain express consent before installing a product or service or making a material change to a product or service. The settlement prohibits Vulcun and its founders from making similar misrepresentations about products or services in the future. Vulcun will also be required to delete some of its users’ information, and, for the next five years, will have to maintain copies of its marketing materials, as well as user complaints and inquiries regarding its products or services for review by the FTC. In reaching the settlement, Vulcun and its founders did not admit or deny any of the specific allegations in the FTC complaint. If approved, the settlement will remain in effect for 20 years.

Reporter, Julie A. Stockton, Palo Alto, CA, + 650 422 6818, jstockton@kslaw.com.