Antitrust Law Daily Google and YouTube to pay $170M, implement new practices over alleged COPPA violations
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Wednesday, September 4, 2019

Google and YouTube to pay $170M, implement new practices over alleged COPPA violations

By Jeffrey May, J.D.

In a three-to-two vote along party lines, FTC commissioners signed off on record settlement. Dissenting Democratic commissioners suggested that the agency did not go far enough. The agency anticipates a sweep of the platform for channel compliance with COPPA.

Google LLC and its video-sharing platform subsidiary YouTube, LLC have agreed to pay $136 million to the FTC and $34 million to the State of New York for allegedly violating the Children’s Online Privacy Protection Act (COPPA) Rule. Under the terms of the proposed consent decree, filed by the FTC in the federal district court in Washington, D.C., the defendants will be required to create and maintain a system under which content providers self-designate whether their content on YouTube is child-directed content. In addition, they must train employees about COPPA compliance. "No other company in America is subject to these types of requirements," said FTC Chairman Joseph Simons (FTC v. Google LLC, FTC File No. 1723083, Case 1:19-cv-02642).

According to the complaint, YouTube collected personal information from children under the age of 13 through its channels directed to children in violation of COPPA. The defendants were alleged to have had actual knowledge that they collected the personal information, including persistent identifiers for use in behavioral advertising, from viewers of channels and content directed to children under 13 years of age. Actual knowledge is required for general-audience platforms such as YouTube to be liable under COPPA.

The FTC contended that the defendants marketed YouTube to popular brands of children’s products and services as a top destination for kids, including toy brand Mattel, which had a channel that showed videos related to its popular Barbie, Monster High, Hot Wheels, and Thomas & Friends products. The complaint pointed to a "few examples of the possible universe of child-directed content on YouTube," including the YouTube channel Mother Goose Club, which shows videos of well-known nursery rhymes, and the Cartoon Network channel that shows animated kids television shows.

The COPPA rule requires a covered operator to give notice to parents and obtain their verifiable consent before collecting children’s personal information online. The rule prohibits the collection of persistent identifiers for behavioral advertising absent notice and verifiable parental consent. The defendants allegedly collected persistent identifiers from viewers of YouTube "channels" that they knew were directed to children, in order to serve behavioral advertising. At the same time, they did not attempt to provide parents with the COPPA-specified notice of their information practices or obtain verifiable parental consent, according to the complaint.

Amount of civil penalty. The FTC chair defended the amount of the civil penalty. Dissenting Commissioner Rohit Chopra had argued that, "[d]espite [the] authority to ensure that bad actors are meaningfully penalized for violating children’s privacy, the Commission is agreeing to a settlement that will result in Google profiting from its violations."

The $170 million total monetary judgment is almost 30 times higher than the largest civil penalty previously imposed under COPPA and ten times larger than all COPPA violation civil penalties combined to date, said Simons at a press conference this morning. A statement, jointly authored by Simons and Commissioner Christine S. Wilson, added that the penalty was higher than the company’s ill-gotten gains.

"The ill-gotten gains from the violative conduct here consist of gains from behavioral advertising on channels that contained child-directed content that Google actually knew were directed to children. The standard for proving actual knowledge in court is not speculation as to what Google must have known or should have known." The commissioners also noted that the "fencing-in relief comes at a significant ongoing cost to Google."

Conduct remedies. The settlement is changing YouTube's business model, so that the platform can't "bury its head in the sand," said FTC Bureau of Consumer Protection Director Andrew Smith at this morning’s press conference. In addition to the monetary penalty, the proposed settlement requires Google and YouTube to develop and maintain a system under which channel owners identify their child-directed content on the YouTube platform so that YouTube can ensure it is complying with COPPA. In addition, the companies must notify channel owners that their child-directed content may be subject to the COPPA Rule’s obligations and provide annual training about complying with COPPA for employees who deal with YouTube channel owners, according to the agency.

Commissioner Rebecca Kelly Slaughter, however, expressed concern that the settlement does not go far enough to ensure that child-directed content on YouTube will be treated in a COPPA-compliant manner. In a dissenting statement, she objected to the fact that 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."

COPPA Sweep. The Commission intends to conduct a sweep of the YouTube platform to ensure that the channels themselves are complying with COPPA. The sweep will not happen until after YouTube complies with the order. There is no release in this order for channel owners or content creators.

Consumer Protection Bureau Director Smith said that it would be easy for the agency to find these violations, suggesting it was like "shooting fish in a barrel."

The FTC has taken the position that individual channels on a general audience platform are "websites or online services" under COPPA. Thus, content creators and channel owners are on notice that the agency considers them to be standalone "operators" under COPPA, subject to strict liability for COPPA violations.

Google statement. Google issued a statement today, saying that it is changing how it treats data for children’s content on YouTube. "Starting in four months, we will treat data from anyone watching children’s content on YouTube as coming from a child, regardless of the age of the user," according to a post on the company’s blog. "This means that we will limit data collection and use on videos made for kids only to what is needed to support the operation of the service. We will also stop serving personalized ads on this content entirely, and some features will no longer be available on this type of content, like comments and notifications."

The post goes on to note that content creators will be required to tell the company when their content falls in this category. In addition, the company intends to use machine learning to find videos that clearly target young audiences.

Rule review. The settlement comes as the FTC considers changes to its COPPA rule. The agency announced in July that it was seeking comment on, among other things, the effectiveness of the amendments made to the rule in 2013 and whether additional changes were needed. In addition, the FTC plans to hold a public workshop to review the COPPA rule on October 7, 2019, in Washington, D.C. The workshop will consider whether to update the COPPA rule in light of evolving business practices in the online children’s marketplace, including the increased use of Internet of Things devices, social media, educational technology, and general audience platforms hosting third-party child-directed content.

Reaction from federal lawmakers. Democratic lawmakers in both the House and Senate were quick to criticize the FTC settlement. Energy and Commerce Committee Chairman Frank Pallone, Jr. (D., N.J.) and Consumer Protection and Commerce Chair Jan Schakowsky (D., Ill.) said the FTC should have "done more" to protect children. They both called for comprehensive federal privacy legislation that would "impose strict penalties on companies that abuse personal information, especially children’s information."

Senator Edward J. Markey (D., Mass.) said that the "FTC 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." He added that the "settlement makes clear that this FTC stands for ‘Forgetting Teens and Children’."

Attorneys: Meet Maneesha Mithal for FTC. Letitia James, Office of the New York State Attorney General, for State of New York. Christopher N. Olsen and Libby J. Weingarten (Wilson Sonsini Goodrich & Rosati) for Google LLC and YouTube, LLC.

Companies: Google LLC; YouTube, LLC

MainStory: TopStory Advertising ConsumerProtection Privacy FederalTradeCommissionNews CyberPrivacyFeed Enforcement

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