SAN FRANCISCO -- A federal judge on Friday approved a legal settlement in which Google (GOOG) agreed to pay a record fine of $22.5 million to resolve federal allegations of privacy violations, despite objections from a consumer group that argues the penalty is too weak.
Hours after holding a brief hearing in San Francisco's federal court, U.S. District Judge Susan Illston ruled that the negotiated agreement is "fair, adequate and reasonable."
The Federal Trade Commission had touted the penalty, negotiated last summer, as the largest fine it has ever assessed in a case of this kind. The settlement stems from an FTC investigation which found that Google's advertising service used software "cookies" to track the Web pages visited by people who used Apple's (AAPL) Safari Web browser, after promising that it would not do so.
Google, which has maintained that the tracking was inadvertent, did not admit to any legal violation but agreed to disable the cookies. Attorneys for both Google and the FTC spoke in favor of the settlement in court, while an attorney for the nonprofit Consumer Watchdog group opposed the agreement as ineffective.
"It doesn't seem to police Google very well," said the attorney, Gary Reback, who is also advising several Google competitors that have accused the Internet giant of violating antitrust law, in a separate case that's also under FTC investigation.
The commission is close to deciding whether to file a lawsuit in the antitrust case. Reback said outside the courtroom that he agreed to work with Consumer Watchdog in part because of privacy concerns but also because he wanted to show that negotiated settlements are inadequate -- and that the FTC should deal with Google more sternly in the antitrust investigation by taking that case to trial.
But Friday's court hearing focused only on the privacy case. The judge began the hearing by saying she was inclined to approve the settlement, although she asked attorneys several questions about whether Google would be allowed to use the data that it improperly collected from Safari users.
The FTC's investigation found that Google created a program that changed the default privacy settings on the Safari browser in a way that allowed Google's ad network to track users. Google, however, said the change was meant to let Safari users recommend products or websites on its social network; the company said it hadn't intended for other tracking to occur.
In challenging the settlement, Consumer Watchdog had argued that the $22.5 million fine was a pittance in comparison with the $9.7 billion in profit that Google reported last year. Attorneys for the FTC, however, called the fine "fair and reasonable" after estimating that Google only collected about $4 million in profit from the Safari tracking.
FTC attorneys also said it wasn't necessary for Google to admit wrongdoing and argued that a settlement was preferable to spending government resources on a lengthy trial.
Illston sided with the government attorneys on both counts, saying in court that she believed the size of the fine was reasonable and that the law does not require Google to admit wrongdoing.
Reback also argued that the settlement should include a permanent injunction against further wrongdoing. But Illston agreed with the government's argument that it has adequate authority to monitor Google under a 20-year consent decree from an earlier case involving Google's now-defunct Buzz social networking service. Technically, the settlement approved Friday resulted from the FTC's allegation that the Safari episode amounted to a violation of the Buzz order.
In her questions, Illston seemed most interested in Reback's argument that the settlement would allow Google to continue using the wrongly obtained Safari data, since there is no requirement for deleting that information.
But in her ruling, the judge said she was satisfied with government attorney Adrienne Fowler's statement that the FTC had concluded the data is now outdated and has "negligible value." Google attorney David Kramer agreed and added that the company has a policy of "anonymizing" user data after nine months.
Contact Brandon Bailey at 408-920-5022; follow him at Twitter.com/BrandonBailey.