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Google to Pay $170 Million for YouTube Child Privacy Breaches

Ben Brody and Mark Bergen

(Bloomberg) -- Google’s YouTube agreed on Wednesday to pay a $170 million fine and limit ads on kids’ videos to settle claims that the company violated children’s privacy laws.

The world’s largest video-sharing site agreed to pay the fine, which is a record for a children’s privacy case, of $136 million to the U.S. Federal Trade Commission and $34 million New York State for failing to obtain parental consent in collecting data on kids under the age of 13, the FTC said.

Starting in four months, Google also will limit data collection and turn off commenting on videos aimed at kids, YouTube announced at the same time, moves that will hamstring its ability to sell advertisements against a massive portion of its media library.

The settlement under the 1998 Children’s Online Privacy Protection Act, or COPPA, represents the most significant U.S. enforcement action against a big technology company in at least five years over its practices involving minors. Washington is stepping up privacy and antitrust scrutiny of the big internet platforms that have largely operated with few regulatory constraints.

“The $170 million total monetary judgment is almost 30 times higher than the largest civil penalty previously imposed under COPPA,” FTC Chairman Joe Simons said in a joint statement with fellow Republican Commissioner Christine Wilson. “This significant judgment will get the attention of platforms, content providers, and the public.”

The commission’s two Democrats broke from its three Republicans, however, saying the settlement did not go far enough to fix the problems. Consumer groups and lawmakers from both sides of the aisle on Wednesday slammed the fine as an insufficient deterrent, given the size of the company.

“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,” said Josh Golin, executive director of Campaign for a Commercial-Free Childhood, which helped lead the complaints that led to the settlement. In a statement, Golin did praise a likely decrease in targeted ads aimed at kids.

Google’s shares rose 1.1% in New York.

YouTube said it will rely on both machine learning and video creators themselves to identify what content is aimed at children. The algorithms will look at cues such as kids’ characters and toys, although the identification of youth content can be tricky. Content creators are being given four months to adjust before changes take effect, the company said.

The company will also spend more to promote its kids app and establish a $100 million fund, disbursed over three years, “dedicated to the creation of thoughtful, original children’s content,” Chief Executive Officer Susan Wojcicki wrote in a blog posting.

“Today’s changes will allow us to better protect kids and families on YouTube,” Wojcicki wrote in the blog, which acknowledged the rising chances that children are watching the site alone. “In the coming months, we’ll share details on how we’re rethinking our overall approach to kids and families, including a dedicated kids experience on YouTube,” she said.

YouTube has already begun plans to strip videos aimed at kids of “targeted” ads, which rely on information such as web-browsing cookies, Bloomberg has reported. The company violated COPPA with data collection to serve these ads, the FTC alleged. Some consumer advocates including Golin and the Center for Digital Democracy say the move away from targeted ads would do little to stop tracking of kids when they watch content aimed at general audiences, and that relying on video creators to make the changes could hurt compliance.

Cracking Down

“Google made billions off the backs of children, developing a host of intrusive and manipulative marketing practices that take advantage of their developmental vulnerabilities,” said Jeff Chester, executive director of the Washington-based non-profit Center for Digital Democracy. He added that the deal announced Wednesday “sends a signal that if you are a politically powerful corporation, you do not have to fear any serious financial consequences when you break the law.”

The FTC has been cracking down on firms that violate COPPA. It fined the popular teen app now known as TikTok $5.7 million in February to resolve claims the video service failed to obtain parental consent before collecting names, email addresses and other information from children under 13. The agency is also planning to revamp its rules around children’s online privacy.

Alphabet Inc.’s Google doesn’t break out sales for the video site, but the company has reported that YouTube is its second-largest source of revenue behind search advertising. Research firm Loup Ventures estimates that 5% of YouTube’s annual revenue, or roughly $750 million a year, comes from content aimed at children.

YouTube had long maintained that children under 13 don’t use its site without parental supervision, as its terms of service stipulate, but according to the FTC, it touted young users in advertising materials. There’s ample evidence these young viewers flock to the site, and the consumer groups complained.

‘Sends a Signal’

The site has already made tweaks as it tries to create a safer destination for children. In recent months, it changed its algorithm to promote what it called “quality” kids’ videos, a shift that alarmed many of its video creators. Wojcicki said the newest transitions “won’t be easy for some creators” and the company would work with them and provide resources to navigate the changes.

“This decree will slash the advertising revenue that supports video creators producing high-quality child-friendly content,” said Steve DelBianco, president and chief executive officer of NetChoice, a tech lobbying group that counts Google as a member. “This means far fewer ad dollars to support videos that my teenager watches to learn about nutrition, sports instruction, and science projects.”

The company also introduced more parental controls for YouTube Kids, the app it launched in 2015 to offer a smaller selection of YouTube’s massive library, and created a web version of the app. The service is far smaller than YouTube’s primary audience of more than two billion monthly visitors, and data show the main site is used by more children than the kids app.

Read more: YouTube Is Considering Changes to Kids Content After Criticism

Democratic Senator Ed Markey of Massachusetts, who was a key force behind the passage of COPPA, said in a statement that the settlement “let Google off the hook with a drop-in-the-bucket fine and a set of new requirements that fall well short of what is needed to turn YouTube into a safe and healthy place for kids.”

Markey said the deal should have required that Google delete all kids’ data and prohibited the company from launching new kids’ services without the approval of independent experts. Republican Senator Josh Hawley of Missouri, who has proposed a COPPA update with Markey, tweeted that the fine is “paltry.” Democratic Representative David Cicilline of Rhode Island, who is leading a House committee antitrust probe of the technology industry, called it the “friends and family treatment” and said “the seriousness of this misconduct cries out for a serious penalty” such as punishment aimed at specific executives.

The Justice Department, which typically reviews cases involving civil penalties, didn’t act on it and returned it to the FTC to file, according to Andrew Smith, head of the commission’s consumer protection bureau, who declined to say why. A Justice Department official who requested anonymity to discuss internal matters confirmed that the agency declined to pursue it without elaborating. The Justice Department is scrutinizing Google’s digital advertising and search operations, Bloomberg has reported.

Google isn’t the only big internet platform facing pressure for its practices with minors. Children’s advocacy organizations have filed complaints with the FTC accusing Facebook Inc. of tricking children into making purchases while playing games on the social network. The company recently disclosed it has discussed its children’s chat app with the FTC, although it’s not clear whether there was a formal probe. Kids advocates have also alleged that Amazon.com Inc.’s Echo kids smart speaker violates privacy law.

Other tech giants and Google have faced fines over their practices involving children before. In 2014, Google agreed to refund at least $19 million to settle with the FTC for failing to get parental consent for charges racked up by children playing games on mobile devices. Apple Inc. also agreed in 2014 to refund at least $32.5 million and change its billing practices after similar complaints. Yelp Inc. previously said it paid $450,000 for allegations it failed to test the age-registration feature on its applications and collecting names and email addresses from children as young as 9 years old without the consent of their parents.

Google could also still face additional legal exposure from other states, Rebecca Kelly Slaughter, one of the Democratic FTC commissioners, suggested in her dissent to Wednesday’s settlement.

“More action is needed, and I hope that our partners in state attorneys’ general offices can finish the job,” she wrote.

(Updates with reaction from sixth paragraph.)

--With assistance from Chris Strohm, David McLaughlin and Gerrit De Vynck.

To contact the reporters on this story: Ben Brody in Washington, D.C. at btenerellabr@bloomberg.net;Mark Bergen in San Francisco at mbergen10@bloomberg.net

To contact the editors responsible for this story: Sara Forden at sforden@bloomberg.net, ;Jillian Ward at jward56@bloomberg.net, Mark Niquette

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