The Children’s Online Privacy Protection Act of 1998 (COPPA) is a United States federal law, located at 15 U.S.C. §§ 6501–6506.Wikipedia
The inspiration for this week came from a Facebook post:
COPPA is ruining everything. My youtube channel i watch for family friendly videos, has quit. My YouTube channel I rely on for toy unboxing and reviews, to buy gifts for my grandchildren, quit. My youtube channel that I rely on for gaming reviews, quit. The channels I subscribe to for Kids videos for my grandchildren, quit. People who don’t understand technology, have no business making the laws that govern, technology. So, now there will be no more child friendly videos on YouTube, so now if a child loads YouTube, their only option is adult content… WTG, congress, just when I thought you couldn’t be any more ignorant, you’ve proved me wrong… Idiots!!! ~END OF RANT
Point taken, but – knowing me – I now had to figure out the why. Why has a law that’s been on the books for some nineteen years suddenly causing angst for the masses? I mean, this was never an issue under prior administrations (Clinton, Bush II or Obama). So what gives? Well in September, YouTube was fined $170 million by the FTC because they “illegally collected personal information from children without their parents’ consent”. As part of the settlement, YouTube agreed to implement a system of checks and balances which puts much of the onus (and liability) on content creators. Felix ‘PewDiePie’ Kjellbergd, a top ranked YouTuber puts it this way, “content creators can be sued for violating COPPA regulations. “What? Why? That makes no sense… control your children please” he said, clearly disappointed with the fact he can be punished for children viewing his content, and for his content being automatically flagged as child-friendly even if they aren’t.”
So my response was, “It’s probably more appropriate blaming the FTC, not Congress. COPPA has been the law for almost 20 years. In 2019, the FTC decided to step up the enforcement actions, resulting in your turmoil.” This particular thread continued the rant blaming Congress or even Satan.
To be clear, the FTC consists of five members, three Republican and two Democratic – all appointed by President Trump and confirmed by the Senate in April 2018. These are the Chair, Joe Simons (R), Christine Wilson (R), Noah Phillips (R), Rohit Chopra (D) and Rebecca Slaughter (D). The FTC approved this action on a party line 3-2 vote. The nays were not altruistic – they only wanted stiffer penalties. As an aside, I don’t see ‘Satan’ being confirmed – unless as a euphemism for one (or both) of the parties.
The reality is that COPPA was effective April 21, 2000 almost five years prior to YouTube’s launch (February 14, 2005). Other than by regulation (rulemaking), I was unable to find any amendment or act to address or update the law given the technological advances over the past two decades. The most recent effort to update COPPA is S.748 introduced by Sen. Markey (D-MA) and co-sponsored by Sen. Hawley (R-MO). This bill remains in committee and unless amended, does not address this particular issue. A classic tale of technology outpacing intelligent oversight.
As the FTC is notoriously underfunded, one has to wonder if part of the motivation is collection of the fines. Regardless, to sew this up in a manner befitting a financial blog, this is not the first fine levied and probably won’t be the last. Companies targeted include, Devumi, LLC (falsifying social media influencer clout – involving LinkedIn, YouTube and Twitter), iBackPack of Texas, LLC (fraudulent acts involving Kickstarter and Indigogo), TicTok (COPPA violation) and more. Separately, EPIC (non-profit research center) conducts investigations and agitates for reform (includes the likes of Amazon, VTech, Mattel and others). The same logic is applicable to gaming and vLogs.
Bottom line – the differentiation between child targeting and child attractive is littered with many shades of gray. Possible examples being channels reviewing custodial accounts for minors or budgeting for children. Be prepared to lose advertising revenue if flagged as child appropriate or perhaps face consequences if classified improperly. Maybe the best course of action is to follow YouTube’s advice, “Consult a lawyer”.
From an investor’s point of view, the financial impacts are likely negligible – particularly if the ongoing risks are offloaded to the creators. The biggest downside I see are user discontent (evidenced by the Facebook post above) and headline risk if a content creator is fined by the FTC.