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Are smartphone apps spying on children? FTC to rule.

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The FTC also said it was investigating whether any of the apps developers engaged in unfair or deceptive trade practices, which would be illegal.

A trade group representing apps developers said the industry's growth has been fueled largely by small businesses, first-time developers and even high school students who do not have legal departments or privacy experts on staff. The FTC's report is a reminder of the importance of educating developers on best practices for privacy, the Washington-based Association for Competitive Technology said in a statement.

In one case mentioned in the FTC report, an app that allows children to paint pictures and save them in an online photo gallery didn't indicate that it included advertising. But investigators said the app ran an ad across the bottom of the screen for an online dating service that said, "See 1000+ Singles."

The FTC would not identify any companies it was investigating until a complaint is filed, Rich said. She said the agency expects the report will "light a fire" under the industry.

"We're not naming names, in part because we think this is a systematic problem, and we don't want people to think that if they avoid certain apps that they're home free," Rich said.

The commission is considering major changes to a 1998 law, the Children's Online Privacy Protection Act, that would impose tougher online safeguards for children under 13. Technology companies have warned that the proposed changes are too aggressive and could discourage them from producing kid-friendly content on the Internet. But public interest groups have pushed hard for the changes, saying expanded use of mobile devices and methods for collecting personal data have outpaced rules put in place more than a decade ago.

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