A vulnerability in Cayla’s software was first revealed in January 2015.
Complaints have been filed by US and EU consumer groups.
The EU Commissioner for Justice, Consumers and Gender Equality, Vera Jourova, told the BBC: “I’m worried about the impact of connected dolls on children’s privacy and safety.”
The Commission is investigating whether such smart dolls breach EU data protection safeguards.
In addition to those concerns, a hack allowing strangers to speak directly to children via the My Friend Cayla doll has been shown to be possible.
The TRA said “we would always expect parents to supervise their children at least intermittently”.
It said the distributor Vivid had “restated that the toy is perfectly safe to own and use when following the user instructions”.
Under German law, it is illegal to sell or possess a banned surveillance device. A breach of that law can result in a jail term of up to two years, according to German media reports.
Germany has strict privacy laws to protect against surveillance. In the 20th Century Germans experienced abusive surveillance by the state – in Nazi Germany and communist East Germany.
The warning by Germany’s Federal Network Agency came after student Stefan Hessel, from the University of Saarland, raised legal concerns about My Friend Cayla.
Mr Hessel, quoted by the German website Netzpolitik.org, said a bluetooth-enabled device could connect to Cayla’s speaker and microphone system within a radius of 10m (33ft). He said an eavesdropper could even spy on someone playing with the doll “through several walls”.
A spokesman for the federal agency told Sueddeutsche Zeitung daily that Cayla amounted to a “concealed transmitting device”, illegal under an article in German telecoms law (in German).
Working as a cyber security solutions architect, Alisa focuses on application and network security. Before joining us she held a cyber security researcher positions within a variety of cyber security start-ups. She also experience in different industry domains like finance, healthcare and consumer products.