UNITED STATES OF AMERICA v. Google, Inc.

Filing 30

ORDER APPROVING STIPULATED ORDER FOR PERMANENT INJUNCTION AND CIVIL PENALTY JUDGMENT 3 (Illston, Susan) (Filed on 11/16/2012)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA

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UNITED STATES OF AMERICA,

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Plaintiff,

United States District Court
For the Northern District of California

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No. CV 12-04177 SI
ORDER APPROVING STIPULATED
ORDER FOR PERMANENT
INJUNCTION AND CIVIL PENALTY
JUDGMENT

v.
GOOGLE INC.,

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Defendant.

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On August 8, 2012, the United States filed a complaint alleging that Google Inc. (“Google”)

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violated a consent order with the Federal Trade Commission (“FTC”). The next day, Google and the

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United States filed a Proposed Stipulated Order for Permanent Injunction and Civil Penalty Judgment

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(“Proposed Order”). The Court granted amicus curiae Consumer Watchdog leave to file a brief

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opposing the Proposed Order, and to file supplemental briefing. On November 16, 2012, the Court

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heard argument on the Proposed Order. Having carefully considered the arguments of counsel and the

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papers submitted, the Stipulated Order for Permanent Injunction and Civil Penalty Judgment is

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APPROVED, for the reasons set forth below.

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BACKGROUND
1.

Factual Background

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This action arises from Google’s alleged violation of a previous consent order with the FTC.

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In the prior action, the FTC alleged that when Google launched its social networking tool, Google Buzz,

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it used Gmail users’ private information despite telling those users it would only use that information

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for Gmail services. Complaint ¶¶ 6-7. The FTC also alleged that Google misrepresented to its Gmail

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users that it would not automatically enroll them in the Buzz network and that they could control what

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information would be public on their profiles. Id.

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In October 2011, the FTC settled its Buzz investigation with Google through a consent order that

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prohibited Google from future misrepresentations regarding: (1) its collection and use of private

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information and its customers’ control over that information; and (2) its membership and compliance

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with privacy or security programs. Id. at ¶ 8.
In the instant case, the FTC alleges that Google violated the first part of the Buzz consent order

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through the placing of cookies on users’ computers without their knowledge. Google uses cookies to

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collect information from users’ web browsing activity, and uses this information to tailor its

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United States District Court
For the Northern District of California

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advertisements. Id. at ¶¶ 17-22. Google allows users to opt out of these cookies through an “opt-out

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button” they can click in their preferences, or through downloading an “opt-out cookie” plugin. Id. at

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¶ 33. Google does not offer the plugin to users of the Safari internet browser, but it assured users that

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the Safari default settings would block cookies. Id. at ¶¶ 36-40. The FTC alleges that Google overrode

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the Safari software that blocked cookies, and secretly collected cookies from Safari users. Id. at ¶¶ 41-

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48. The FTC alleges that the misrepresentations of collecting private information and using targeted

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advertisements violated the first part of the Buzz consent order. Id. at ¶¶ 49-54.

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The FTC also alleges that Google violated the second part of the Buzz consent order. Google

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represents that it is a member of the Network Advertising Initiative (“NAI”), and in compliance with

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NAI’s self-regulatory code of conduct. Id. at ¶¶ 15-17. NAI’s code requires that members post notices

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specifying its data collection processes. Id. The FTC alleges that Google’s use of Safari cookies

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without informing its users violated the NAI code, and thus violated the second part of the Buzz consent

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order. Id. at ¶ 55-57.

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2.

The Proposed Order

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In the Proposed Order, Google and the United States stipulate that the Court has jurisdiction and

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that venue is proper. Google “denies any violation of the FTC Order,” and states that it stipulates to the

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Proposed Order “freely and without coercion.” The Proposed Order outlines three requirements for

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Google. First, Google must pay a civil penalty of $22.5 million. Second, until February 15, 2014,
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Google must maintain systems that delete Google cookies from Safari browser users. Third, Google

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must report to the FTC within twenty days of February 15, 2014, setting forth how it is in compliance

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with the Proposed Order.

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Amicus curiae Consumer Watchdog made three objections to the Proposed Order: (1) the

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injunction is inadequate and not “permanent;” (2) the civil penalty of $22.5 million is too small; and (3)

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Google should be forced to admit liability.

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LEGAL STANDARD
Approval of a proposed consent decree is within the discretion of the Court. United States v.

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United States District Court
For the Northern District of California

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Oregon, 913 F.2d 576, 580 (9th Cir. 1990). A court reviews a consent decree to determine whether it

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is “fundamentally fair, adequate and reasonable.” Id. While a consent decree “must conform to

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applicable laws . . . [it] need not impose all the obligations authorized by law.” Oregon, 913 F.3d at

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580.

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The Court’s review of the proposed consent decree is informed by the public policy favoring

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settlement. See United States v. Comunidades Unidas Contra La Contaminacion, 204 F.3d 275, 280

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(1st Cir. 2000). The Court also grants additional deference where the decree has been negotiated by a

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governmental agency that is an expert in its field and must act on behalf of the public interest. United

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States v. Chevron, 380 F. Supp. 2d 1104, 1111 (N.D. Cal. 2004). However, when reviewing a proposed

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consent decree, the Court must independently evaluate its terms and avoid giving a “rubber stamp

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approval.” United States v. Montrose Chem. Corp. of Cal., 50 F.3d 741, 747 (9th Cir. 1995) (quoting

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City of Detroit v. Grinnell Corp., 495 F.2d 448, 462 (2d Cir. 1974)).

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In applying the “fair, adequate and reasonable” standard, courts examine both procedural and

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substantive fairness. United States v. Montrose Chem. Corp. of California, 50 F.3d 741, 746 (9th Cir.

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1995); United States v. Cannons Eng’g Corp., 899 F.2d 79, 86 (1st Cir.1990); Chevron, 380 F. Supp.

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2d at 1110-11. With regard to procedural fairness, courts determine whether the negotiation process was

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“fair and full of adversarial vigor.” United States v. Telluride Co., 849 F. Supp. 1400, 1402 (D. Colo.

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1994) (citations and internal quotations omitted). If the decree was the product of “good faith,

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arms-length negotiations,” it is “presumptively valid and the objecting party has a heavy burden of
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demonstrating the decree is unreasonable.” Oregon, 913 F.2d at 581. However, “the district court must

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ensure that the agreement is not . . . a product of collusion . . . .” United States v. Colorado, 937 F.2d

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505, 509 (10th Cir.1991).

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With respect to substantive fairness, the district court does not determine whether “the settlement

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is one which the court itself might have fashioned, or considers ideal.” Cannons Eng’g Corp., 899 F.2d

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at 84. Instead, the “court’s approval is nothing more than an amalgam of delicate balancing, gross

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approximations and rough justice.” Oregon, 913 F.2d at 581 (internal quotations omitted). “The court

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need only be satisfied that the decree represents a reasonable factual and legal determination.” Id.

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(internal quotation omitted).

United States District Court
For the Northern District of California

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Consumer Watchdog argues that the Court’s review must consider not just whether the

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settlement is “fair, adequate, and reasonable,” but also, in regulatory settlements, whether the settlement

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promotes the public’s interest. It cites to the FTC Act, which was amended to expressly empower the

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Commission to protect the public interest. See H.R. Rep. No. 75-1613 at 3 (1937); see also Johnson

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Products Co. v. FTC, 549 F.2d 35, 38 (7th Cir. 1977) (“The Commission, unlike a private litigant, must

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act in furtherance of the public interest.”). The only case that Consumer Watchdog relies on for its

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proposition that there should be a separate public interest inquiry is a district court case from the Second

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Circuit, FTC v. Circa Direct LLC, CIV. 11-2172 RMB/AMD, 2012 WL 2178705 (D.N.J. June 13,

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2012). However, the Second Circuit’s law on the public interest prong is still in flux, and is currently

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not as broad as envisioned by the Circa Direct court. See U.S. S.E.C. v. Citigroup Global Markets Inc.,

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673 F.3d 158, 163 n.1 (2d Cir. 2012) (finding that the district court should consider only whether the

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terms of the injunctive provisions do not harm the public interest, not whether the terms of the entire

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settlement harm the public’s interest). More importantly, the Court finds that the law in the Ninth

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Circuit does not include a separate public interest inquiry. The Ninth Circuit has held that, even if a

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federal agency is required to serve the public’s interest, the district court erred when it conditioned

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approval of a consent decree “on what it considered to be the public’s best interest.” S.E.C. v. Randolph,

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736 F.2d 525, 529 (9th Cir. 1984) (emphasis in original). It found that “[i]nstead, the [district] court

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should have deferred to the agency’s decision that the decree is appropriate and simply ensured that the

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proposed judgment is reasonable.” Id.
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DISCUSSION
1.

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Procedural Fairness
For the procedural fairness prong, the Court looks to whether the consent decree was the product

of “good faith, arms-length negotiations.” Oregon, 913 F.2d at 581.
Here, the FTC conducted an independent investigation into Google’s conduct before it began

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any settlement discussions. Declaration of Megan A. Bartley (“Bartley Decl.”) ¶ 2. It was the FTC, not

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Google, which drafted the initial Proposed Order. Id. at ¶ 3. The FTC and Google engaged in extensive

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negotiations that lasted over two months, and they debated the details of the settlement almost daily.

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Id. at ¶ 4; see United States v. Pac. Gas & Elec., 776 F. Supp. 2d 1007, 1025 (N.D. Cal. 2011)

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United States District Court
For the Northern District of California

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(upholding procedural fairness when negotiations lasted 90 days). The FTC negotiated over every

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substantive provision based on what it determined was in the public’s best interest. Bartley Decl. ¶¶ 5,

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7-8.

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Because of the length and vigor of the negotiations and the arms-length process in which they

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were conducted, the Court finds that there was procedural fairness in the negotiation of the Proposed

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Order.

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2.

Substantive Fairness

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If the court finds that there was procedural fairness, then the consent decree is “presumptively

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valid and the objecting party has a heavy burden of demonstrating the decree is unreasonable.” Oregon,

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913 F.2d at 581. Consumer Watchdog attacks the substantive fairness of the Proposed Order, arguing

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that the injunction is inadequate, the civil penalty is too small, and that Google should be forced to admit

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liability.

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A.

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Consumer Watchdog argues that the injunction in the Proposed Order is inadequate for several

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reasons. First, it argues that Proposed Order is inadequate because it fails to include a “permanent

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injunction,” since the final remedial relief lasts only until February 15, 2014. However, a “permanent

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injunction” is merely an injunction that occurs after a final hearing on the merits, as distinguished from

Adequacy of the Injunction

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a preliminary injunction. Black’s Law Dictionary 855 (9th ed. 2009) (“Despite its name, a permanent

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injunction does not necessarily last forever.”).

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Second, Consumer Watchdog argues that Google should be enjoined from further violating the

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Buzz consent order. However, such an injunction is unnecessary and duplicative. The Buzz consent

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order already prohibits Google future misrepresentations regarding its customers’ private information.

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The FTC has shown that it can enforce violations of the Buzz consent order, as it is doing in the instant

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action. Because Google remains subject to the Buzz consent order, an injunction to prohibit future

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violations of that order is unnecessary.
Third, Consumer Watchdog argues that the injunction is inadequate because it allows Google

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United States District Court
For the Northern District of California

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to continue to profit from the information it has gathered from the Safari cookies. The injunction

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requires Google to “expire” the cookies it set for Safari users in alleged violation of the Buzz consent

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order. Consumer Watchdog argued in its supplemental reply brief1 that the expiration of a cookie does

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not necessarily delete the information contained on the cookie. Thus, although Google is enjoined from

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collecting new information, it may still keep and use the information it has previously collected from

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the Safari cookies.

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At the hearing, both the FTC and Google asserted that these concerns had been considered and

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dismissed in the course of negotiating the settlement. The parties state that Google would be unlikely

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to use the information from the Safari cookies for several reasons. First, because the data is old, it

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contains dated – or outdated – information of very low value. Further, Google has now “anonymized”

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the IP addresses, and therefore the data cannot reliably be linked to individuals. More generally, the

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FTC considered and rejected many more stringent injunctions because the risk that they would hamper

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Google’s ability to protect consumers from data security and malware vulnerabilities outweighed the

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benefits to the public. Bartley Decl. ¶ 7. The FTC determined that the injunction it crafted “sufficiently

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protects consumers from ongoing harm without exposing them to additional risks.” United States’

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Response to Consumer Watchdog’s Amicus Curiae Brief 8. In such situations, “the courts should pay

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deference to the judgment of the government agency which has negotiated and submitted the proposed

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Because this argument was first included in the reply brief, neither the United States nor
Google had a chance to respond in briefing.
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judgment.” Randolph, 736 F.2d at 529 (citations omitted); see also Chevron, U.S.A., Inc. v. Natural

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Resources Defense Council, Inc., 467 U.S. 837, 866 (1984).

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The Court finds that the injunction is fair, adequate and reasonable. With the Buzz consent order

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in place, the injunction need only address the specific harm from the Safari cookies. Here, the

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injunction specifically requires Google to maintain systems to expire Safari cookies and creates a

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compliance reporting mechanism.

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B.

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Consumer Watchdog argues that the civil penalty of $22.5 million is an insufficient amount to

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United States District Court
For the Northern District of California

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enforce compliance with the Buzz consent order. It argues that this is a de minimis amount of Google’s

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advertising revenues. It also argues that the statutory maximum would be $16,000 for each violation,

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and thus could far exceed the $22.5 million. See Revised Reply Memorandum of Points and Authorities

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in Opposition to the Entry of [Proposed] Stipulated Order for Permanent Injunction and Civil Penalty

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7 (“Even if one-tenth of one percent of Safari users saw the misrepresentation, the statutory penalty

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would exceed $3 billion.”).

Adequacy of the Civil Penalty

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The FTC argues that the Commission’s determination of an appropriate civil penalty is not just

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based on revenue or statutory penalties, but is a multi-faceted analysis. See United States v. Danube

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Carpet Mills, Inc., 737 F.2d 988, 993 (11th Cir. 1984) (noting that the criteria for assessing the civil

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penalty should include “(1) the good or bad faith of the defendants; (2) the injury to the public; (3) the

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defendants’ ability to pay; (4) the desire to eliminate the benefits derived by the violations; and (5) the

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necessity of vindicating the authority of the FTC”). According to the FTC, the $22.5 million fine is the

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largest fine ever imposed on a company for violating an FTC order. Moreover, the complaint never

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alleged that consumers suffered any monetary harm or that the Safari cookies yielded significant

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revenues for Google. Consumer Watchdog’s citations to cases with larger penalties are unpersuasive

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to show that the proposed penalty is unreasonable. In Circa Direct, 2012 WL 2178705, the FTC’s $18

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million disgorgement order was based on consumer loss rather than a civil penalty, and the defendants

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were ordered to surrender all of their remaining assets because the FTC found that all of the company’s

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revenue was tied to the fraud. Similarly, in FTC v. Trudeau, 579 F.3d 754, 762 (7th Cir. 2009), the
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district court granted a monetary award of $37.6 million based on “a reasonable approximation of the

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loss consumers suffered as a result of defendant’s deceptive infomercials.” Unlike in Circa Direct or

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Trudeau, the instant case does not contain allegations of large amounts of consumer loss or Google

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profit.

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Accordingly, Court finds that the civil penalty is fair, adequate and reasonable.

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C.

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Finally, Consumer Watchdog argues that Google’s denial of liability in the consent decree

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contravenes the public’s interest. It alleges that the denial of liability allows Google to put its own spin

United States District Court
For the Northern District of California

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Google’s Denial of Liability

on the facts, which will confuse consumers relying on its statements when making privacy choices.

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However, Consumer Watchdog’s position that a consent decree requires an admission of liability

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is contradicted by legal history and precedent. See, e.g., Swift & Co. v. United States, 276 U.S. 311, 327

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(1928) (finding that the contention that a consent decree could not be upheld because there was no

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admission of guilt “ignores both the nature of injunctions, already discussed, and the legal implications

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of a consent decree”). More recently, the Second Circuit strongly disapproved of a district court’s

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rejection of a consent decree when that court’s primary basis for the rejection was the lack of an

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admission of liability. Citigroup, 673 F.3d at 163-65 (finding that in requiring an admission of liability,

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the district court prejudged the merits of the case, assumed that the SEC could win at trial or that

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Citigroup would be willing to settle if it admitted liability, did not give deference to the SEC’s policy

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judgment, and did not consider the agency’s discretionary assessment of its prospects or of the optimal

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allocation of its limited resources). Moreover, as the Second Circuit noted, “[r]equiring such an

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admission would in most cases undermine any chance for compromise.” Id. at 165.

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The only case that Consumer Watchdog cites in support of its argument that the Proposed Order

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must have an admission of liability is Circa Direct, which noted that learning the truth of the

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defendants’ alleged deceptive conduct may be an important matter of public concern. Circa Direct,

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2012 WL 2178705 at *6. However, the Circa Direct court later approved the consent decree without

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an admission of liability, relying on Citigroup and giving deference to the FTC’s determination that

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requiring admission of liability would force it to go to trial, which would result in a significant
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expenditure of time and resources without much gain. Fed. Trade Comm’n v. Circa Direct LLC, CIV.

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11-2172 RMB/AMD, 2012 WL 3987610 at *6-7 (D.N.J. Sept. 11, 2012). Moreover, as explained supra,

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the Circa Direct court based its reasoning on a separate public interest inquiry, which the Ninth Circuit

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does not follow. Indeed, courts in this circuit have upheld many agreements without an admission of

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wrongdoing, and Consumer Watchdog fails to cite a single case that does not. See e.g., Turtle Island

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Restoration Network v. U.S. Dept. of Commerce, 834 F. Supp. 2d 1004 (D. Haw. 2011) aff’d 672 F.3d

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1160 (9th Cir. 2012); S.E.C. v. Olins, 762 F. Supp. 2d 1193 (N.D. Cal. 2011); see also Maher v. Gagne,

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448 U.S. 122, 126 n.8 (1980) (noting that “[a]s is customary, the consent decree . . . explicitly stated that

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“[n]othing in this Consent Decree is intended to constitute an admission of fault by either party to this

United States District Court
For the Northern District of California

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action.”)
Accordingly, Court finds the Proposed Order with Google’s denial of liability to be fair,
adequate and reasonable.

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CONCLUSION

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For the foregoing reasons, the Court hereby finds that the Proposed Order is both procedurally

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and substantively fair, adequate, and reasonable. Accordingly, the Court APPROVES the Stipulated

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Order for Permanent Injunction and Civil Penalty Judgment. (Docket No. 3.)

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IT IS SO ORDERED.

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Dated: November 16, 2012
SUSAN ILLSTON
United States District Judge

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