FTC CommissionerRebecca Kelly Slaughter, a dissenting vote, wrote in a statementthat the agreed-upon reforms by YouTube didn't go far enough.(Photo: Jason Doiy/ALM)

Google and YouTube have agreed to pay $170 million to theFederal Trade Commission and New York state in the largest-eversettlement in an enforcement matter brought under a federallaw intended to prevent companies from collectingpersonal data from children without the consent of theirparents.

The companies were accused of unlawfully tracking the behaviorof users below 13 years old and serving them targetedadvertisements based on that information, the New York AttorneyGeneral's Office said.

"These companies put children at risk and abused their power,which is why we are imposing major reforms to their practices andmaking them pay one of the largest settlements for a privacy matter inU.S. history," said New York Attorney General LetitiaJames.

Of the $170 million Google and YouTube agreed to pay as part ofthe settlement, $136 million will go to the FTC. The remainder willbe paid to New York state.

The FTC said in a news release on the settlement that theamount paid to them is by far the largest ever obtained by thefederal agency under the Children's Online PrivacyProtection Act since it was approved by Congress two decades ago.YouTube earned millions of dollars by using the data to servetargeted ads to viewers of child-directed channels, the FTCsaid.

"YouTube touted its popularity with children to prospectivecorporate clients," FTC Chairman Joe Simons said. "Yet when it cameto complying with COPPA, the company refused to acknowledge thatportions of its platform were clearly directed to kids. There's noexcuse for YouTube's violations of the law."

The commission was split on approving the settlement, with threecommissioners in favor and two against.

Commissioner Rohit Chopra, for example, wrote in a statementdissenting from the settlement that the amount to be paid by Googleand YouTube was too low. He argued that the FTC should have made ahigher opening bid for monetary relief to highlight the depth ofthe matter.

"Financial penalties need to be meaningful or they will notdeter misconduct," Chopra wrote.

He also suggested that Congress approve additional digitalprivacy legislation to give state attorneys general, like James,more power to seek penalties in future instances. In this case,because of how COPPA was written, that wasn't an option, Choprawrote.

"In COPPA, state attorneys general can only seek forfeiture ofill-gotten gains and refunds to victims, but not financialpenalties beyond that. In this matter, the New York attorneygeneral was unable to pursue civil penalties, since the FTC hasexclusive authority to do so," Chopra wrote. "This shouldchange."

Aside from the financial penalties, YouTube, which is owned byGoogle, agreed to implement reforms to avoid future violations ofCOPPA, according to the New York Attorney General's Office.

YouTube agreed to develop, implement and maintain a system forusers to choose whether their videos are directed to children. Theywill now notify users that content directed toward children on thewebsite may be subject to the COPPA rule, and that the burden is oncontributors to designate that content as child-directed.

The company will also obtain verifiable parental consent beforecollecting, using or disclosing the personal information ofchildren, as is required under COPPA. Employees who work with userswill also receive annual compliance training with the law.

FTC Commissioner Rebecca Kelly Slaughter, the other dissentingvote, wrote in a statement that the agreed-upon reforms by YouTubedidn't go far enough. She argued that the company should have beenrequired to develop a safety net mechanism to turn off behavioraladvertising for content that was directed for children, but hadn'tbeen designated as such.

"True, a technological backstop is not explicitly mandated byCOPPA's text, but such a requirement would, I believe, beappropriate and necessary fencing-in relief," Slaughter wrote.

YouTube said in a blog post, which it said served as itsstatement for the press, that it intends on treating data fromanyone watching children's content on the site as coming from achild, regardless of the user's actual age. They'll also stopserving personalized ads on that content, entirely, the companysaid.

"This means that we will limit data collection and use on videosmade for kids only to what is needed to support the operation ofthe service," YouTube said in the blog post.

This piece first published on our sister site,law.com.

See also:

• 5 questions the U.S. must answer before enacting privacylaw
• How technology is changing the face of insurance as we knowit
• 10 P&C provider websites ranked by customer satisfaction, netpromoter score