The Federal Trade Commission is reportedly taking a hard look at YouTube, and the outcome could be a lawsuit. According to Bloomberg News, the regulator has been digging into Alphabet Inc.'s (NASDAQ:GOOG) (NASDAQ:GOOGL) video platform since last year and is now in the final stages of preparing a potential legal action.
The heart of the investigation? Whether YouTube misled users about its content policies when they signed up. The idea is that people were led to believe they could post certain content, only to have it yanked down or their accounts suspended later. That, the FTC suspects, might violate consumer protection laws.
Neither YouTube, Google, nor the FTC immediately responded to requests for comment. FTC spokesman Joe Simonson told Bloomberg that "leaks will never stop or slow a single law-enforcement investigation or litigation at the FTC," though he declined to comment specifically on the YouTube probe.
YouTube's Checkered History with Account Removals
This isn't YouTube's first rodeo when it comes to controversial account decisions. The platform removed President Donald Trump's account following the Jan. 6 attack on the U.S. Capitol, citing concerns that his posts could incite violence. That account was reinstated in 2023.
Then in 2024, YouTube removed channels and banned accounts for policy breaches, but it also restored some accounts that had been incorrectly flagged as spam. These actions show the delicate balance the platform tries to strike between enforcing rules and avoiding overreach.
Meta's $17B Settlement Looms Large
The reported probe into YouTube comes on the heels of a massive settlement involving Meta Platforms Inc. (NASDAQ:META). On Wednesday, Meta agreed to pay up to $17 billion to settle claims from 29 U.S. states that it designed Instagram and Facebook to be addictive to children, harming their mental health. That settlement underscores the growing regulatory pressure on Big Tech over how their platforms affect users.
For Alphabet, the news has had a modest impact on its stock. Class A shares closed 0.39% lower on Thursday at $340.65, and slipped another 0.06% in after-hours trading. Class C shares fared similarly, closing down 0.41% at $337.71 and falling 0.09% in extended trading.
Despite the regulatory cloud, Alphabet's Class C stock still holds strong fundamentals. Market data shows it has a Momentum score in the 80th percentile and a Growth score in the 88th percentile, suggesting investors remain optimistic about the company's long-term prospects.
As the FTC finalizes its investigation, the big question is whether YouTube's content moderation practices will be deemed deceptive. If the regulator moves forward with a lawsuit, it could set a precedent for how platforms communicate their policies to users. For now, YouTube and its parent company are keeping quiet, leaving the market to speculate on what comes next.
