Google, owned by Alphabet Inc, and its YouTube video service will pay $170 million to settle allegations that it broke federal law.
This is equivalent to £138.5 million. On Wednesday, the Federal Trade Commission claimed that Google would be penalised for collecting personal information about children.
YouTube had been accused of tracking viewers of children's channels using cookies, without crucial parental consent. They were supposedly using those cookies to target million of dollars in advertisements to those viewers.
The settlement is with the FTC and the New York attorney general's office, which will receive $34 million. It is the largest settlement since a law came into effect in 1998, banning collecting information about children under age 13.
The law was revised in 2013 to include "cookies," used to track a person's internet viewing habits.
It is also small compared with the company's revenues. In July, Alphabet, which generates about 85% of its revenue from sales of ad space and technology, reported total second-quarter revenue of $38.9 billion.
In a statement on Wednesday, YouTube said that in four months it would begin treating all data collected from people watching children's content as if it came from a child. On its blog, YouTube said: "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".
The monetary fine is not the only consequence. The proposed settlement requires the company to create a system for identifying content aimed at children. They must notify channel owners about their obligations to get consent from parents before collecting information on children.
FTC Chairman Joe Simons noted, at a news conference on Wednesday, what he said were important changes to YouTube business practices. He told reporters: "No other company in America is subject to these types of requirements and they will impose significant costs on YouTube".
FTC's Bureau of Consumer Protection director Andrew Smith told reporters that the $170 million settlement was based on revenues from data collected, times a multiplier. "It happens that $170 million is roughly the budget of the Bureau of Consumer Protection for one year," he added.
Once the settlement takes effect, the FTC plans to "conduct a sweep of the YouTube platform to determine whether there remains child-directed content" in which personal information is being collected, Smith said.
The FTC could take actions against individual content creators or channel owners as a result.
In late August, YouTube announced it would launch YouTube Kids with separate niches for children. This would depend on their ages and be designed to exclude disturbing videos. It also has no behavioural advertising.
However, YouTube allows companies to create channels, which include advertisements that create revenue for both the company and YouTube. In its complaint, the government said that YouTube took advantage of its popularity with children in marketing itself to companies like Mattel and Hasbro. It told Mattel that "YouTube is today’s leader in reaching children age 6-11 against top TV channels," according to the complaint.
New York Attorney General Letitia James believed the companies "abused their power." She added: "Google and YouTube knowingly and illegally monitored, tracked, and served targeted ads to young children just to keep advertising dollars rolling in".
The two Democrats on the FTC, Rebecca Slaughter and Rohit Chopra, dissented from the settlement. Slaughter described the violations as "widespread and brazen,". She said the settlement fails to require YouTube to police channels that provide children's content but do not designate it as such. Thus, it actually allows more lucrative behavioural advertising, which relies on tracking viewers through cookies.
Senators Ed Markey and Richard Blumenthal, both Democrats active in online privacy matters, criticized the settlement in separate statements. "A financial settlement is no substitute for strict reforms that will stop Google and other tech companies from invading our privacy," Blumenthal said. He added his concern: "I continue to be alarmed by Big Tech’s policies and practices that invade children's lives."
Source: Reuters Washington, 04 September
Reporting: Diane Bartz, David Shepardson