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Update: Google fined $170M over alleged violation of children's privacy law

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Update: Google fined $170M over alleged violation of children's privacy law

Alphabet Inc.'s Google LLC and its subsidiary YouTube LLC will pay $170 million to settle allegations from the U.S. Federal Trade Commission and the New York attorney general that the companies violated children's online privacy rules.

Under the terms of the settlement, Google will pay $136 million to the FTC and $34 million to the state of New York.

The regulators said in a complaint that the companies violated the Children's Online Privacy Protection Act, or COPPA, by collecting personal information from viewers of "child-directed channels" without first notifying parents and gaining consent. The federal law aims to protect the privacy of children under 13 on commercial websites and mobile applications.

"YouTube touted its popularity with children to prospective corporate clients," said FTC Chairman Joe Simons in a statement. "Yet when it came to complying with COPPA, the company refused to acknowledge that portions of its platform were clearly directed to kids. There's no excuse for YouTube's violations of the law."

The FTC said in a Sept. 4 news release that the $136 million fine it stands to collect is the largest amount ever obtained in a COPPA case since Congress enacted the law in 1998.

The settlement will require the companies to make changes to YouTube's platform.

"The proposed settlement requires Google and YouTube to develop, implement, and maintain a system that permits channel owners to identify their child-directed content on the YouTube platform so that YouTube can ensure it is complying with COPPA," said the FTC in its news release. "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."

Andrew Smith, director of the FTC's Bureau of Consumer Protection said this action changes YouTube's business model.

"YouTube cannot pretend that it's not aware of the content on its platform and hope to escape liability for COPPA," said Smith. "YouTube is going to be explicitly held liable for complying with COPPA where it has actual knowledge of the content."

In a Sept. 4 blog post, YouTube announced new data practices for children's content in response to the settlement. The company says in about four months, it will treat data from anyone watching children's content on YouTube as coming from a child, regardless of the age of the user, which means it will limit data collection and use on videos made for kids strictly to what is needed to support service operation. The company will also stop serving personalized ads on children's content entirely.

YouTube will use machine learning to find videos that clearly target young audiences. During the FTC's Sept. 4 new conference, Smith said the agency considered imposing a technological requirement such as the machine learning effort YouTube announced but was concerned that such a requirement would not be enforceable.

Additionally, the company announced the creation of a $100 million fund, to be disbursed over three years, to invest in original children's content on YouTube and YouTube Kids, the company's child-friendly video app with content tailored for children.

The settlement was approved 3-2 by the commission along partisan lines. Democratic commissioners dissented in part by saying that the amount of the fine was not enough to deter lawbreaking.

In a dissenting statement, Democratic FTC Commissioner Rebecca Slaughter encouraged state attorneys general to sue YouTube to force the company to develop a technological algorithm to police children's content.

"The states could pursue an injunctive remedy that includes an enforceable promise of a technological backstop to keep content creators and YouTube honest about whether content is child-directed," she said. "YouTube might insist that an algorithmic classifier should not be included because even better technology could soon eclipse it; I trust that the smart people who represent the states and YouTube alike would be able to draft an adaptable but enforceable provision that serves as the fourth wall to the fence that New York and the Commission have begun constructing."