German regulators said a doll named Cayla, was actually a stealthy espionage device that shared what it heard and was also vulnerable to takeover by third parties.
"Cayla ist verboten in Deutschland," says Jochen Homann, the president of Germany's Federal Network Agency (the Bundessnetzagentur), announcing a ban on the doll in Germany yesterday.
Homann whose agency oversees electronic privacy as part of its telecommunications mandate, also cited a special obligation to protect the privacy of children, calling them the most vulnerable members of society.
According to Homann, Cayla looked like an everyday doll and gave no indication that it collected and transmitted everything it heard, to a voice-recognition company in the US, which counted intelligence agencies amongst its customers.
The US company involved, Nuance, had sought to address similar criticisms saying that it "does not share voice data collected from or on behalf of any of our customers with any of our other customers."
The doll is currently on sale in the US on Amazon, but not with Toys R Us or Wal-Mart.
German regulators banned the doll under a federal law against espionage devices. Also as the law provided fines of up to €25,000 for anyone who insisted on selling or owning the equipment, the agency clarified in today's ruling that it did not plan to pursue action against parents who bought the doll.
UK-based toy company Vivid, which distributes the dolls in Germany, said it was serious about "compliance with all applicable rules and regulations" and it was "working with our German partners to resolve this issue," CNN reported.
Under German law wireless devices with hidden cameras or microphones are illegal, but products with visible cameras or microphones, or a cord, are permitted.
A group of consumer watchdog organisations argued in a complaint in December with the Federal Trade Commission, that the dolls could be used to listen in on children.
The groups claimed that the "toys subject young children to ongoing surveillance," and violated privacy and consumer protection laws.