Google and its subsidiary YouTube agreed to pay a record $170 million Wednesday to settle charges by the Federal Trade Commission and New York Attorney General’s Office that YouTube illegally collected personal information from children without their parents’ consent.
The settlement requires Google and YouTube to pay $136 million to the FTC and $34 million to New York for allegedly violating the Children’s Online Privacy Protection Act Rule. The $136 million penalty is the largest amount the FTC has gotten in a COPPA case since the law was enacted in 1998.
In a lawsuit filed against the companies, the agencies allege that YouTube violated the COPPA Rule by collecting personal information – identifiers that track users across the Internet – from viewers of child-directed channels, without notifying parents and getting their consent. YouTube earned millions of dollars by using the identifiers – cookies – to deliver targeted ads to viewers, according to the lawsuit.
The COPPA Rule requires that child-directed websites provide notice of their information practices and get parental consent before collecting personal information from children under 13, including the use of identifiers to track a user’s Internet browsing habits for targeted advertising.
In addition, third parties, such as advertising networks, are also subject to COPPA where they have knowledge they’re collecting personal information directly from users of child-directed websites.
“YouTube touted its popularity with children to prospective corporate clients,” said FTC Chairman Joe Simons. “Yet when it came to complying with COPPA, the company refused to acknowledge that portions of its platform were clearly directed to kids. There’s no excuse for YouTube’s violations of the law.”
The YouTube platform allows Google account holders, including large companies, to create “channels” to display their content. Eligible channel owners can choose to monetize their channel by allowing YouTube to serve targeted advertisements, which generates revenue for both the channel owners and YouTube, according to the lawsuit.
In the lawsuit, the FTC and New York state allege that while YouTube claimed to be a general-audience site, some of YouTube’s individual channels – such as those operated by toy companies – are child-directed and are required to comply with COPPA.
The complaint said that the defendants knew that the YouTube platform had many child-directed channels. YouTube marketed itself as a top destination for kids in presentations to the makers of popular children’s products.
For example, Google and YouTube told Mattel, maker of Barbie and Monster High toys, that “YouTube is today’s leader in reaching children age 6-11 against top TV channels” and told Hasbro, which makes My Little Pony and Play-Doh, that YouTube is the “#1 website regularly visited by kids.”
Several channel owners told YouTube and Google that their channels’ content was directed to children, and in other cases YouTube’s content rating system identified content as directed to children. In addition, YouTube manually reviewed children’s content from its YouTube platform to feature in its YouTube Kids app, according to the lawsuit.
Despite this, YouTube put targeted advertisements on these channels. It falsely told one advertising company it didn’t have users younger than 13 on its platform so channels on it didn’t need to comply with COPPA, according to the lawsuit.
Settlement with the FTC
In addition to the penalty, the proposed settlement requires Google and YouTube to develop, carry out, and maintain a system that permits channel owners to identify their child-directed content on YouTube.
In addition, the companies need to notify channel owners that their child-directed content may be subject to the COPPA Rule and provide annual training on complying with COPPA for employees who work with YouTube channel owners.
The settlement also prohibits Google and YouTube from violating the COPPA Rule and requires them to provide notice about their data collection practices and obtain parental consent before collecting personal information from children.
The FTC voted 3-2 to authorize the lawsuit and file the final order. Commissioner Rebecca Kelly Slaughter wrote a separate statement critical of the deal. She said that there are thousands of small channels, many located outside the United States, that will likely not follow the requirements of the settlement.
“The order does not require YouTube to police the channels that deceive by mis-designating their content, such as by requiring YouTube to put in place a technological backstop to identify undesignated child-directed content and turn off behavioral advertising,” Slaughter said.
A technological backstop isn’t mandated specifically by COPPA’s text, but such a requirement would, she said, be appropriate and necessary fencing-in relief. Fencing-in relief is action that goes beyond bare-minimum statutory requirements and is a common and important aspect of effective FTC orders, Slaughter added.
Commissioner Rohit Chopra, who joined Slaughter in voting against the settlement, wrote in a dissent that the fine "still allows the company to profit from its lawbreaking," and that "the terms of the settlement were not even significant enough to make Google issue a warning to its investors."
Consumer advocates say the $170 million fine is too low to prevent future wrong doing, according to the Consumer Reports article “Google Settles Claims YouTube Violated Children’s Privacy.”
