Google, YouTube Settle With FTC, NY for $170 Million Over Child Privacy Claims

The platform and video service subsidiary will pay $136 million to the FTC and $34 million to New York in a joint agreement with New York Attorney General Leticia James over alleged Children’s Online Privacy Protection Act (COPPA) violations. It’s the largest penalty ever collected under COPPA, which applies to children under 13, and marks the FTC’s third privacy penalty levied against Google. The platform is prohibited from using any of the data it obtained improperly.

YouTube violated the law by tracking viewers of children’s channels with persistent identifiers, or cookies, and collecting data without proper consent, the FTC said. The agency alleged that YouTube boasted its popularity with children between ages two and 12, while telling channel owners that COPPA-compliance is unnecessary because underage viewers don’t use the platform. The platform earned millions of dollars by using cookies to “deliver targeted ads to viewers of these channels,” the FTC complaint said.

Democratic commissioners slammed the settlement for not going far enough in deterring future infractions with financial incentives and forcing the platform to take greater responsibility for its content. Republicans, meanwhile, said the historic financial penalty, “coupled with the far-reaching conduct relief, is almost certainly better than what we would achieve in litigation.”

The order prevents YouTube from turning a blind eye to children’s content obligations, Chairman Joe Simons said during a news conference at agency headquarters. The most important thing is that the settlement alters YouTube’s business model, Consumer Protection Bureau Director Andrew Smith said during his own remarks. “YouTube can no longer bury its head in the sand … pretend that it’s not aware of the content on its platform and hope to escape liability for COPPA,” Smith said.

YouTube announced sweeping changes to children’s content guidelines Wednesday. In about four months, it will “treat data from anyone watching children’s content on YouTube as coming from a child, regardless of the age of the user,” it said. YouTube will limit “data collection and use on videos made for kids only to what is needed to support the operation of the service.” It will also discontinue personalized ads for children’s content and features like comments and notifications. Google declined comment beyond the blog post.

The Google settlement repeats mistakes of the agency’s recent $5 billion deal with Facebook (see 1907240042), Commissioner Rohit Chopra said in dissent: “no individual accountability, insufficient remedies to address the company’s financial incentives, and a fine that still allows the company to profit from its lawbreaking.” It’s inconsistent with the “crippling” penalties collected against smaller companies for children’s privacy violations, he said.

The settlement does nothing to keep content creators and YouTube “honest about whether content is child-directed,” said Commissioner Rebecca Kelly Slaughter. She recommended a “technological backstop” to “identify undesignated child-directed content and turn off behavioral advertising.” She urged the other 49 state attorneys general to “finish the job,” and require YouTube to implement such a feature with another agreement.

Simons, Commissioner Wilson and Commissioner Noah Phillips noted the $170 million penalty “exceeds defendants’ gains from their unlawful collection of persistent identifiers.” Simons and Wilson agreed with Slaughter’s “concern that channel creators may not have an incentive to self-designate content as child-directed.” However, Simons, Wilson and Smith noted the agency will be conducting industry sweeps to ensure compliance. That’s typically how COPPA compliance is reviewed, Smith said, arguing it’s been successful in the past, despite the large quantity of content on the internet.

The settlement didn’t make the agency rethink its authority or what to ask of Congress, Smith told reporters after the news conference. That’s mainly because the FTC enjoys civil penalty authority under the children’s privacy law, he said. He called it a “really big deal” the agency is holding a platform liable for content posted by channel owners, saying it’s a game changer for other platforms. Section 230 of the Communications Decency Act didn’t play into his thinking about the penalty, Smith told reporters, saying it was based on the FTC’s knowledge standard. “This is clearly the first battle,” he said. “We’re not going to be resting on our laurels. This is a new front in the COPPA enforcement world.”

The deal drew backlash from prominent Democrats, including Sen. Ed Markey, D-Mass., House Commerce Committee Chairman Frank Pallone, D-N.J., House Consumer Protection Subcommittee Chair Jan Schakowsky, D-Ill., and House Antitrust Subcommittee Chairman David Cicilline, D-R.I. Google knowingly harvested children’s data, said Cicilline, arguing the FTC failed to deliver: “No single executive is being held accountable, and this settlement does nothing to change the incentives that led Google to break the law in the first place.” The settlement “should have done more to protect this vulnerable population going forward,” Pallone and Schakowsky said, calling for comprehensive federal privacy legislation. Markey urged Congress to pass his legislation updating and expanding COPPA (see 1908220057): “The FTC pulled the curtain back on this practice, but it did not go far enough to put in place critical new rules for accountability.” Sen. Josh Hawley, R-Mo., co-author of the COPPA update with Markey, called the settlement a “flagrant disregard” for children's privacy.

Consumer groups prompted the FTC’s investigation of Google, Smith said. The Center for Digital Democracy and Campaign for a Commercial-Free Childhood, which filed a complaint in 2018, lauded the company improvements but said the settlement falls “far short.” The group essentially equated the fine to the cost of doing business for Google. The settlement is “grossly inadequate,” said Open Markets Institute Chief of Staff Laura Hatalsky.