YouTube's $170 million fine isn't enough—and part of the FTC knows it

For YouTube, $170 million is a drop in the bucket.

That’s how much the FTC fined YouTube on Wednesday for violating the Children’s Online Privacy Protection Act (COPPA).

The FTC claimed that YouTube collected personal information from users who watched children’s videos and proceeded to use that data in order to serve targeted ads. Under COPPA, internet services must inform parents of children under the age of 13 about its data collection practices and get parental permission before collecting children’s data.

While the $170 million fine may be a record for COPPA violations, Google’s parent company, Alphabet, brought in $13 billion in revenue in 2018. While Alphabet has fought to keep from disclosing YouTube’s revenue, experts estimate the video service brought in $13 billion last year.

“Financial penalties need to be meaningful or they will not deter misconduct,” said Rohit Chopra, one of the two Democratic FTC commissioners, along with Rebecca Kelly Slaughter, in a statement. “The terms of the settlement were not even significant enough to make Google issue a warning to its investors.”

The FTC vote was 3-2. Both Chopra and Slaughter dissented and voted against the settlement.

This is far from the first time the FTC has been accused of letting tech giants get away with violating laws and receiving nothing more than a slap on the wrist.

Earlier this year, Facebook was hit with a record-breaking $5 billion fine from the FTC for privacy violations stemming from the Cambridge Analytica scandal. Now $5 billion is certainly a lot more than the $170 million fine that YouTube was hit with. However, Facebook revenue for the first two quarters of 2019 was more than $30 billion.

In fact, even with the FTC settlement looming, Facebook still beat analyst expectations in Q2. It’s like the $5 billion fine didn’t even really matter. Again, FTC commissioners Chopra and Slaughter voted against that settlement and said it didn’t go far enough. Chopra said it set a terrible precedent by providing executives, like Facebook CEO Mark Zuckerberg, with “blanket immunity for their role in the violations.”

The popular video app TikTok was also hit with a $5.7 million fine, which is actually the previous biggest fine for violating COPPA, earlier this year. While Chopra and Slaughter both voted for the settlement along with their Republican colleagues this time around, the two FTC commissioners put out a joint statement criticizing how these tech companies are being punished.

“FTC investigations typically focus on individual accountability only in certain circumstances—and the effect has been that individuals at large companies have often avoided scrutiny,” state Chopra and Slaughter. “We should move away from this approach. Executives of big companies who call the shots as companies break the law should be held accountable.”

The FTC has now taken action against Google three times. In 2011, Google agreed to a consent order over allegations regarding deceptive user privacy practices. The FTC then fined Google $22.5 million the following year for violating the agreement by tracking Apple Safari users.

When it comes to YouTube specifically, advocacy groups have alleged for years that the video service was breaking the laws laid out by COPPA.

As part of YouTube’s settlement, the company will also alter the way it collects data on videos geared towards children.

Content creators will now need to identify their content as targeted towards children and YouTube will no longer serve up targeted advertising on those videos, regardless of the age of the viewer. Just last week, the company got ahead of this news and announced the launch of its YouTube Kids website in order to help separate children’s content from the rest of the site’s videos.

However, Chopa lays out how even those changes are a problem.

“The settlement’s provisions requiring a function for content creators to disclose whether the content is child-directed may have the perverse effect of allowing Google to pin the blame on content creators,” he said.

The other dissenting voice in the FTC, Slaughter, explained another issue with the settlement.

“Channel owners will lie, pretending the next 'Baby Shark' is for adults, make lots more $$,” she posted on Twitter. “What then? We can play whack-a-mole with some channels that lie. But many channel owners are tough to find and sue.”

Slaughter explained she would have wanted an order that required YouTube to track misdesignated content. The settlement does not include such an order.

“Despite this specific authority, the Commission repeats many of the same mistakes from the flawed Facebook settlement: no individual accountability, insufficient remedies to address the company’s financial incentives, and a fine that still allows the company to profit from its lawbreaking,“ said Chopra. “Absent an enforceable commitment from Google that it will fundamentally change its business practices to ensure that child-directed content is not subject to impermissible data harvesting, children will still be at risk.”

Sen. Ed Markey, who authored COPPA, also wasn’t thrilled with the FTC’s settlement.

“YouTube knowingly broke federal law by tracking kids in order to rake in advertising dollars without the requisite notice to and permission from parents,” Senator Markey tweeted. “But the FTC let Google off the hook with a drop-in-the-bucket fine. Not a single Google executive or investor will bat an eye.”

In HBO’s Silicon Valley, Kumail Nanjiani’s character creates PiperChat, which gets hit with a fine for violating COPPA. The FTC fine on a fictional TV show for violating a very real law? $21 billion. In real life, the FTC should be ashamed.