Earlier this month, the FTC approved a settlement with a developer of popular apps for purported violations of the Children’s Online Privacy Protection Act (COPPA). The Commissioners voted 4-1 to authorize the Department of Justice to file the complaint and the stipulated final order resolving the matter. Under the stipulated final order, the company was ordered to pay a $4 million civil penalty (although all but $150,000 of it was suspended for inability to pay). The lone dissent came from Commissioner Noah Phillips who issued a dissenting statement criticizing the “recent push to heighten financial penalties . . . without clear direction other than to maximize the amount in every case.”
Commissioner Phillips made the case, as he has before, that harm should be the starting point when fashioning a penalty. Steeped in economic theory, he argued that “basing penalties on harm forces defendants to internalize the costs their behavior imposes on others, orienting conduct in a socially beneficial fashion.” Chairman Simons also issued a statement, contending that starting with harm is “inapposite” when Congress explicitly prohibits practices and directs the agency to impose penalties.