GOOGL Alphabet Inc

By Rob Copeland 

YouTube agreed to provide new protections for children on its platform and pay a $170 million fine, in a settlement that divided federal authorities over how to rein in technology giants.

The Federal Trade Commission and the New York state attorney general announced the penalty for YouTube following a yearlong investigation in response to complaints from consumer groups that the video platform illegally collected data on children in order to sell ads for products such as Barbie dolls and Play-Doh. The FTC said YouTube tracked internet activity for children under age 13, with the goal of keeping viewership high.

YouTube neither admitted nor denied wrongdoing as part of the settlement. No executives at YouTube or its parent, Google, were penalized. Democratic commissioners on the FTC, including the outspoken Rohit Chopra, voted against the action, losing in a 3-2 vote.

YouTube Chief Executive Susan Wojcicki said YouTube would make changes to its platform, including switching off comments on children's videos and cutting off data collection on videos aimed at kids.

The broad outlines of the settlement were previously reported, but the comments from commissioners show that regulators remain divided on the best approach for reining in Silicon Valley's biggest powers.

Google, a unit of Alphabet Inc., is at the beginning of widening regulatory interest in Washington. The Justice Department has opened an antitrust investigation into the company's dominant search platform, while a series of state attorneys general are expected to unveil their own intentions next week. Google executives have previously contended the company doesn't have monopolistic power in its various markets.

The enforcement action includes similarities to the controversial post-financial-crisis enforcement of big banks and other financial institutions. Consumer advocates critical of that enforcement action have said big banks and other companies didn't pay stiff enough penalties based on the economic damage wrought.

The $170 million in fines from the FTC and New York state amount to less than 2% of Google's profits in the past quarter. The settlement mandates that YouTube in the future not violate the federal Children's Online Privacy Protection Rule, though child advocacy groups have argued YouTube wasn't permitted to violate the law in the first place.

FTC Commissioners Joseph Simons and Christine Wilson said the fine was 30 times the previous largest penalty for similar violations. The commissioners, both Republicans, said the settlement forestalled a potentially drawn-out legal battle.

"We choose not to gamble the protection of children now in hopes of hitting a jackpot in the future," Mr. Simons and Ms. Wilson said in a joint statement.

Mr. Chopra said in dissent that the penalty was too weak to deter Google or YouTube from trying again to capitalize on its young users. "The company baited children using nursery rhymes, cartoons and other kid-directed content on curated YouTube channels to feed its massively profitable behavioral advertising business," Mr. Chopra said.

The FTC voted in July to impose a $5 billion penalty on Facebook Inc. for broader deceptions that included luring consumers into sharing personal information. The Democratic commissioners also voted against that action.

The Wall Street Journal first reported in June that YouTube was preparing major changes to its children's platform in response to the FTC's investigation.

The changes announced Wednesday fall on the lighter end of what was under consideration internally by regulators. No children's content will be removed from YouTube, though it may become less appealing or harder to find once YouTube turns off commenting and subscription functionality on content aimed at children under 13. Subscriptions deliver videos automatically to users from popular content creators.

The changes will require creators themselves to mark their videos as aimed at youngsters. YouTube says it will develop additional automated software to flag kids' content that isn't self-reported, though it hasn't publicly provided information on how that would work.

Write to Rob Copeland at rob.copeland@wsj.com

(END) Dow Jones Newswires

September 04, 2019 09:28 ET (13:28 GMT)

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