Exclusive: Disney will pay $10M to settle children's privacy lawsuit with FTC

• The fine targets Disney for content that wasn't uploaded to its own platforms, likely opening the door to penalties against other content providers that distribute their work on other sites and apps.

State of play: The FTC complaint alleges Disney failed to designate certain YouTube videos as being made for children when it added them to the platform.

• In failing to do so, Disney inadvertently allowed those videos to be targeted with online advertising, which is why the FTC considers the improper designation problematic.
• In settling the matter, Disney concedes that it made an administrative error in the way it characterized videos it uploaded to YouTube mostly during the pandemic.

Between the lines: In failing to categorize the videos correctly, the FTC claims Disney violated the 1998 Children's Online Privacy Protection Act (COPPA).

• The law requires companies to notify users of content directed toward children when data tracking occurs, and requires them to obtain parental consent for such tracking.

Zoom in: The complaint also claims that the viewers of those videos, who were presumably children, also had their data collected without parental consent.

• The videos in question are mostly storytime videos that were uploaded in the early days of the COVID-19 pandemic, which featured celebrities reading to kids.
• The FTC investigation into the issue began during the Biden administration several years ago, according to a source familiar with the complaint.
• Under the order, Disney is required to establish an "Audience Designation" program to formalize the review of videos before upload to ensure they are categorized correctly, the source said. Disney already has a process in place for children's privacy compliance on YouTube, but will work to strengthen the program.

Of note: The videos Disney is settling over represent a tiny amount of the total content Disney uploads to YouTube, but the company concedes it made an error in how those particular videos were labeled at the time of upload, which is why it's settling the FTC's complaint.

• "Supporting the well-being and safety of kids and families is at the heart of what we do," a Disney spokesperson said. "This settlement does not involve Disney-owned and -operated digital platforms, but rather is limited to the distribution of some of our content on YouTube's platform."
• "Disney has a long tradition of embracing the highest standards of compliance with children's privacy laws, and we remain committed to investing in the tools needed to continue being a leader in this space," they added.
• YouTube declined to comment. The FTC didn't respond to a request for comment.

How it works: All publishers are responsible for designating whether their videos target children under 13 years of age, in compliance with the FTC's rules, according to YouTube's policies.

• Given YouTube's scale, it's easy to see how some videos slip through the cracks without proper identification.

Reality check: Age verification online is tricky, and many platforms and publishers have struggled to adhere to disparate protocols.

• YouTube itself agreed to pay $30 million to settle a similar children's privacy lawsuit last month.
• In 2019, it agreed to pay $170 million to settle an FTC children's privacy violation complaint. As part of that settlement, the FTC at the time said it would follow up with investigations of the content providers on YouTube. 
• Fortnite maker Epic Games agreed to pay a $275 million penalty over COPPA violations in 2022.
• TikTok, Microsoft and many others have all been subject to COPPA fines over the past few years.

What to watch: Children's privacy activists have pushed for new ways to tackle age verification online, whether at the publisher, platform or device-maker level. Many new laws have been introduced at the state level, but have faced First Amendment challenges in court.

• The Supreme Court earlier this year upheld an online age verification ruling, prompting calls for Congress to pass a federal standard. One proposed bill, the Kids Online Safety Act (KOSA), was reintroduced earlier this year after failing to pass last year.
• YouTube itself has acknowledged the importance of age verification. Its CEO Neal Mohan told Axios in 2023 that "Ultimately, YouTube is responsible for making sure that we are doing everything to keep young people on our platform safe."
• In July, YouTube said it will start testing new age estimation tools for certain logged-in users.

Editor's note: This article has been updated to reflect that YouTube declined to comment.