FTC touts YouTube children's privacy settlement amid skeptical reception

Officials at the US Federal Trade Commission today touted the tough signal they said their $170 million settlement with YouTube over alleged violations of children’s privacy law will send to the online video industry, even as activists and lawmakers panned the agency for being soft on Silicon Valley.

The settlement resolves a joint FTC and New York attorney general's office complaint that YouTube knowingly violated the Children’s Online Privacy Protection Act, or COPPA, by failing to obtain approval from parents before tracking the video consumption habits of children younger than 13.

YouTube is the first online platform, as opposed to content creator, to agree to a civil penalty and business model changes after being investigated for COPPA violations, FTC officials said.

Other platforms should take heed, said Andrew Smith, head of the agency’s Bureau of Consumer Protection, during a morning press conference. “People often speak of YouTube as being sort of sui generis,” he said. “If you think more broadly about platforms, could it include over-the-top television? YouTube is there.”

“This is a new front in the COPPA enforcement world,” he added.

Online platforms typically aren’t accountable for hosted third-party content, but COPPA creates liability should platforms knowingly profit from the unlawful tracking of children. And Google knew that children visit YouTube in huge numbers, alleges the FTC and New York attorney general complaint.

In a presentation to My Little Pony and Play-Doh maker Hasbro, Google boasted that “93 percent of tweens visit YouTube to watch videos.” It called itself “today’s leader in reaching children age 6-11 against top TV channels” in a presentation to Barbie company Mattel.

Platform providers should find it harder going forward to turn a blind eye to the presence of kids’ content, said FTC Chairman Joe Simons. “They can’t market their ability to get child viewers on the one hand, and disavow knowledge that children are using their service, on the other,” he said.

But FTC officials' bellicose turn at the press conference podium was met with skepticism outside.

Criticism was quick to pile up: “The FTC should have done more to protect this vulnerable population going forward,” said Democratic US Representatives Frank Pallone of New Jersey and Jan Schakowsky of Illinois in a joint statement.

The size of the fine incited derision. Although extremely large in the history of COPPA penalties, it’s a miniscule amount for Google parent company Alphabet, which last year made $30.7 billion in net income. “Every day I lose more confidence in the FTC. This paltry fine is an insult to every parent in America who has had their children’s privacy violated,” fumed US Senator Josh Hawley, a Missouri Republican.

Other avenues of disagreement with the settlement include a charge that the FTC should have held individual Google executives accountable, as often occurs with COPPA violations incurred by small companies.

The lack of personal accountability “sends the wrong message, that a giant like Google can get away with playing by its own set of rules,” said David Monahan, campaign manager of the Campaign for a Commercial-Free Childhood.

During the press conference, Smith denied that the intensity of FTC enforcement varies according to size. But establishing actual knowledge of a COPPA violation “as a practical matter, is much easier to do with a company with two employees than a company with 200,000 employees,” he said.

Smith also said small business owners are more likely to reestablish themselves in a new guise and continue to violate the children’s privacy law, making personal sanction particularly important for them. “You don’t typically have those circumstances at a large company," he said.

Monahan, who monitored the press conference, said Smith's comments amount to an admission that “a company like Google is too big to be held accountable” and points to a lack of will by the FTC to pursue who knew what, when. Even at Google, “it’s still human beings that are making decisions,” he said.

The FTC also took fire for not imposing on YouTube a requirement to algorithmically identify content aimed at children that hasn't been properly designated, a central reason behind Democratic Commissioner Rebecca Slaughter’s refusal to support the settlement.

Google, on its own initiative, said in a blog post it will begin using machine learning to hunt for misdesignated videos.

Smith defended the decision not to pursue a so-called “technological backstop” out of fears it would convert into a legal shield for YouTube. Were Google to construct an ineffective algorithm at the FTC’s behest, it would be difficult or impossible in court to break through a defense that the algorithm couldn't objectively be better, Smith said.

Criticism also came from the opposite direction, that the FTC went too far in sanctioning Google.

“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 trade association partially funded by Google.

“This means far fewer ad dollars to support videos that my teenager watches to learn about nutrition, sports instruction, and science projects," DelBianco added.