Google will pay US$170 million (NZ$267m) to settle allegations it illegally collected data about children younger than 13 who were watching toy videos and television shows on YouTube, state and federal officials announced Wednesday, part of a record punishment that some in government criticized as too lenient.

Regulators charged that Google knew certain YouTube channels were popular among younger viewers, touted this fact to brands and advertisers, and tracked kids' viewing histories for the purpose of serving them targeted advertisements, ultimately raking in "millions of dollars" as a result of its repeated violations of federal children's privacy laws.

In response, Google agreed to the record fine to resolve charges with the Federal Trade Commission and the attorney general of New York, which are set to announce their findings at a news conference in Washington. The tech giant also must adapt its business practices, halting data collection on YouTube videos that are clearly created with kids in mind and requiring video creators to label content that's intended for young audiences.

"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."

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The settlement accepts many of the claims raised by more than 20 consumer and privacy groups in an April 2018 complaint and echoes years of concerns that YouTube had become the most popular site for children while sidestepping the Children's Online Privacy Protection Act, a 1998 federal law designed to protect their privacy. The Washington Post first reported on the FTC investigation in June.

In sanctioning the company, government officials specifically pointed to Google's marketing communications with brands such as Mattel, the maker of Barbie, which described YouTube as "today's leader in reaching children age 6-11 against top TV channels."

But the settlement - which does not require Google to admit guilt for its actions - stopped well short of what advocates were seeking. Backed by the agency's three Republicans, it also sparked criticism among the FTC's two Democratic members, who voted against the agreement even as they impugned YouTube for profiting improperly from its younger users.

In a dissenting statement, Commissioner Rebecca Kelly Slaughter expressed fears that the government's settlement requires too little from YouTube to find and discipline content creators that intentionally mislabel their videos, resulting in a "fence but one with only three sides."

Democratic Commissioner Rohit Chopra, meanwhile, faulted the FTC for failing to obtain a larger fine for Google's "illegally harvesting children's data," which he wrote was "extremely lucrative" for Google. His dissent includes redacted data suggesting that behavioural ads improperly displayed on videos viewed by kids should have resulted in a fine into the billions for Google, which in July reported US$39 billion in second-quarter revenue.

Susan Wojcicki, the chief executive of YouTube, said in a blog post Wednesday that the settlement would "better protect kids and families on YouTube," adding: "We'll continue working with lawmakers around the world in this area."

The FTC settlement with Google marks the latest effort to probe and penalize tech giants for their privacy mishaps, a series of punishments that have served as a litmus test - even within the agency itself - about its power to police Silicon Valley.

In July, the commission issued a historic, US$5 billion fine against Facebook for allegedly deceiving users about the way it collects and shares their personal information. But the penalty is far less than what some Democrats at the FTC, lawmakers on Capitol Hill and privacy hawks had hoped for, arguing the fine was too small - and the remedies too weak - to force significant changes in Facebook's business practices.

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Earlier this year, the FTC issued a US$5.7 million fine against the app now known as TikTok over charges that it illegally collected data from children. Democrats chafed at the FTC's decision at the time not to hold specific executives for the company's abuses.

With YouTube, privacy advocates for years had charged the company had flaunted COPPA, pointing to the fact that many popular channels on the site - from those featuring nursery rhymes to videos of kids unwrapping toys - are directed to younger audiences. Organisations including the Campaign for a Commercial-Free Childhood and Center for Digital Democracy filed multiple complaints at the FTC, pointing to YouTube's own marketing materials that crowed about its popularity among users, as a sign that the company was fully aware that children under age 13 were watching videos there.

Investigators at the FTC and in New York agreed, finding that Google's own content rating systems had identified certain YouTube channels as directed toward children. COPPA has two key tests in assessing whether a site must comply: Whether it is directed toward children and whether the site has "actual knowledge" that children use it. The FTC settlement asserted Wednesday that YouTube failed both tests after years of claiming that its site was not directed toward children and hence not covered by COPPA.

YouTube has long been popular among younger viewers. Photo / Getty Images
YouTube has long been popular among younger viewers. Photo / Getty Images

"Google and YouTube knowingly and illegally monitored, tracked, and served targeted ads to young children just to keep advertising dollars rolling in," said New York Attorney General Letitia James.

Josh Golin, the executive director of the Campaign for a Commercial Free Childhood, praised the FTC for "finally attempting to hold Google accountable for violating COPPA at a massive scale for a number of years." But he said the resulting settlement "shifts far too much of the responsibility onto the content creators and not enough to YouTube, and the fine is woefully inadequate." He added that it'll do little to deter future abuses of COPPA.

The FTC's settlement is likely to embolden calls on Capitol Hill to update and toughen the law. A bill from Sen. Josh Hawley, R-Mo., and Sen. Ed Markey, D-Mass., one of the original authors of the law, would significantly expand the law to expand the types of companies covered and the ages of the children protected. The FTC itself has embarked on a review of its rules, aiming to explore whether new technologies, including the rise of smart-home assistants, are sufficiently protecting kids' personal information.

YouTube also said Wednesday that it would work to train its software to detect content that is kid-oriented using a type of artificial intelligence known as machine learning, which learns to recognize regularly occurring patterns and identify them. But it is not required under the settlement itself, a major problem in the eyes of Slaughter, who said in her dissent that Google should have been legally bound to police YouTube for such wrongdoers. Videos clearly aimed at children - say, nursery rhyme singalongs or alphabet review - won't carry personalized ads, even if the viewer is an adult, according to the company.

YouTube also is prohibiting on kids videos any commenting, which has been a flash point for the company. Not only are comments rich with data collection opportunities, but they frequently veer into clearly offensive territory for adults and children alike.

The changes take effect in four months globally, a period YouTube said is necessary for video creators to adapt their business models. That's sure to upset children's privacy watchdogs who would prefer the data collection and targeted advertising cease immediately.

The settlement also must still be approved by a federal judge.

"This won't be easy for some creators and are committed to working with them through this transition and providing resources to help them better understand these changes," said Wojcicki said in the blog post.

- Washington Post