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Financial Services Law Insights and Observations

Video-sharing site reaches $170 million settlement with FTC and New York AG

Federal Issues FTC State Attorney General Enforcement Privacy/Cyber Risk & Data Security COPPA

Federal Issues

On September 4, the FTC and the New York Attorney General announced (see here and here) a combined $170 million proposed settlement with the world’s largest online search engine and its video-sharing site subsidiary concerning alleged violations of the Children’s Online Privacy Protection Act (COPPA). According to the complaint, the video-sharing site allegedly collected personal information in the form of “persistent identifiers” from viewers of child-directed channels without first obtaining verifiable parental consent. The persistent identifiers allegedly generated millions of dollars in revenue by delivering targeted ads to viewers. The FTC and New York AG allege, among other things, that the defendants knew the video-sharing site hosted numerous child-directed channels but told advertisers that the video-sharing site contains general audience content, even informing one advertising company that it did not have users younger than 13 on its platform and therefore channels on its platform did not need to comply with COPPA.

Under COPPA, operators of websites and online services directed at children are prohibited from collecting personal information of children under the age of 13—including through the use of persistent identifiers for targeted advertising purposes—unless the company has explicit parental consent. Furthermore, third parties—such as advertising networks—must also comply with COPPA where they have actual knowledge that personal information is being collected directly from users of child-directed websites and online services.

While neither admitting nor denying the allegations, except as specifically stated within the settlement, the defendants will, among other things, (i) pay a $136 million penalty to the FTC and a $34 million penalty to New York; (ii) change their business practices to comply with COPPA; (iii) maintain a system for channel owners to designate their child-directed content on the video-sharing site; and (iv) disclose their data collection practices and obtain verifiable parental consent prior to collecting personal information from children. According to the FTC, the $136 million penalty is “by far the largest amount the FTC has ever obtained in a COPPA case since Congress enacted the law in 1998.”

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