Google will pay $170 million to settle charges that YouTube made millions of dollars over the years from violating children's privacy laws, the Federal Trade Commission (FTC) and New York’s attorney general announced on Wednesday.
The fine is by far the largest ever imposed on a website for violations of the 1998 Children's Online Privacy Protection Act (COPPA), which requires companies to obtain parental consent before collecting data on children under the age of 13. But the settlement also exposed a sharp partisan divide among regulators over how far to go in policing Silicon Valley.
The FTC alleged that YouTube, which is owned by Google, violated COPPA by collecting the personal information of users who watched videos that were clearly directed toward children and then used that data to serve up targeted advertising.
“YouTube touted its popularity with children to prospective corporate clients,” FTC Chairman Joseph Simons said in a statement. “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.”
“Google and YouTube knowingly and illegally monitored, tracked, and served targeted ads to young children just to keep advertising dollars rolling in,” New York Attorney General Letitia James (D) added in a statement. “These companies put children at risk and abused their power, which is why we are imposing major reforms to their practices and making them pay one of the largest settlements for a privacy matter in U.S. history."
Google and YouTube will pay $136 million to the FTC and the remaining $34 million will go to the New York attorney general’s office.
Under the agreement, YouTube will also have to require content creators uploading videos to designate whether they’re intended for children. Last week, the site announced that it was launching a separate site for children’s content.
In a blog post on Wednesday morning, YouTube CEO Susan Wojcicki said that the site would be disabling all targeted advertising on videos intended for children.
"Today’s changes will allow us to better protect kids and families on YouTube, and this is just the beginning," Wojcicki wrote. "We know how important it is to provide children, families and family creators the best experience possible on YouTube and we are committed to getting it right."
The settlement comes as Google and other Silicon Valley giants are facing heightened scrutiny over their handling of user data and their market power. A broad coalition of state attorneys general is reportedly announcing an antitrust investigation into Google next week.
The latest penalty is considerably higher than the previous record COPPA fine, which came earlier this year when the popular social media platform TikTok agreed to pay $5.7 million to the FTC.
But despite the record fine, the FTC is again facing questions about its willingness to adopt tough penalties for privacy violations by large companies.
The FTC approved the settlement in a 3-2 vote along party lines, with both Democrats on the commission dissenting and criticizing what they see as a weak fine and a lack of meaningful constraints on Google and YouTube’s business model.
“This outcome here is also inconsistent with how we approach other violators of COPPA,” dissenting Commissioner Rohit Chopra said in a statement.
“When small players and upstarts violate COPPA, the companies pay dearly and the executives are investigated and, if liable, held personally accountable. Here, where a dominant incumbent engaged in widespread violations, the company is paying a slice of their profits from wrongdoing and executives avoid scrutiny.”
In a complaint filed in federal court Wednesday morning, the FTC detailed how YouTube allegedly knew that it was collecting data from numerous children's video channels without seeking parental consent from users. In the filing, the commission said that YouTube collected around $50 million in targeted advertising revenue from a sample of channels that it surveyed.
The move also comes as the FTC is still weathering criticism over a record $5 billion settlement it reached with Facebook in July for privacy violations stemming from the company’s practices that led to the Cambridge Analytica scandal.
Critics argue that, despite the relatively large sum, the $5 billion settlement was insufficient to deter a firm worth nearly $500 billion from further wrongdoing and said that the conditions of the settlement lacked meaningful restraints. Google's market cap is nearly twice as large as Facebook's.
"I am a little saddened, I have to say, by the partisan divide," Andrew Smith, the director of the FTC's Consumer Protection Bureau, said at a press conference Wednesday. "Personally, I think this is a really strong settlement and I think that it passes muster under anybody's standards."
Wednesday’s settlement marks the third time the FTC has sanctioned Google over privacy violations since 2011. That year, the company entered into a consent agreement with regulators over charges that it had deceived users about its privacy practices. A year later, the FTC fined Google $22.5 million for violating the consent agreement by tracking users of Apple’s Safari browser without their knowledge.
Children’s privacy advocates have repeatedly complained about YouTube’s practices to regulators over the years, alleging that the company was collecting substantial profits by systematically violating COPPA.
When privacy groups found out about the proposed conditions in the settlement earlier this summer, they argued that a requirement to designate whether content is meant for kids would effectively let YouTube off the hook and leave the responsibility of COPPA compliance with content creators.
“We are pleased that our advocacy has compelled the FTC to finally address YouTube’s longstanding COPPA violations and that there will be considerably less behavioral advertising targeted to children on the number one kids’ site in the world,” Josh Golin, the executive director of the Campaign for a Commercial-Free Childhood, said in a statement. “But it’s extremely disappointing that the FTC isn’t requiring more substantive changes or doing more to hold Google accountable for harming children through years of illegal data collection."
The settlement also drew condemnation from lawmakers who have raised questions about the FTC's willingness to go after corporate giants.
Sen. Ed Markey (D-Mass.), who helped write COPPA as a House member, called the order "toothless" and said the FTC should have "put in place critical new rules for accountability."
Democratic Commissioner Rebecca Slaughter, who voted against Wednesday's announced fine, said that the settlement should have included a requirement that YouTube police its site for potential violators who continue to serve up targeted ads to children without parents’ permission.
She noted in a statement that the agreement does not prevent other state attorneys general from pursuing a more restrictive settlement with YouTube over the privacy violations that the FTC uncovered.
“This order will make YouTube safer for children than it has been, but, without a backstop to catch inappropriately designated content, it will not make YouTube safe enough,” Slaughter said. “More action is needed, and I hope that our partners in state attorneys’ general offices can finish the job.”
Updated at 3:09 p.m.