Google will pay $22 million to the Federal Trade Commission – the largest fine ever levied against a defendant for violating an existing consent order.

In April 2011, Google reached a settlement with the agency over charges that it allegedly used deceptive tactics and violated its own privacy policy when it launched its social networking feature, Buzz. When Buzz launched, Google’s privacy policy stated that “When you sign up for a particular service that requires registration, we ask you to provide personal information. If we use this information in a manner different than the purpose for which it was collected, then we will ask for your consent prior to such use.” Despite this promise, roughly 31.2 million Gmail users had their information shared without advance permission, the agency said.

The consent order broke new ground for the agency when it required that Google implement a comprehensive privacy program that, among other things, compelled the company to obtain prior consent from users before sharing information with third parties. In addition, Google was barred from future misrepresentations about its privacy or confidentiality policies. Thereafter, Google represented to its users that Safari would block the installation of all tracking cookies.

After that promise was made, a graduate student revealed last fall that Google was monitoring user browsing habits by using hidden code to install cookies and circumvent Safari’s no-tracking browser settings. Although the installation of the cookie itself was arguably not a deceptive practice, the FTC argued that the failure to honor that statement constituted a violation of last year’s consent decree.

According to the agency’s complaint, Google also deceived its users by stating in its policy that it was a member of the Network Advertising Initiative and had complied with its self-regulatory code, which requires members to disclose how they collect and store data.

Google agreed to pay the record fine, the largest penalty ever for violation of a Commission order, although it denies that it violated the terms of the 2011 settlement. According to a report in The Wall Street Journal, the $22.5 million fine was calculated by aggregating the number of iPad, iPhone, and Mac users at a rate of $16,000 per day.

“This settlement is intended to provide a strong message to Google and other companies under order that their actions will be under close scrutiny and that the Commission will respond to violations quickly and vigorously,” four of the Commissioners said in an accompanying statement.

To read more about the settlement, including the FTC’s complaint, the proposed settlement, and statements from the Commission and dissenting Commissioner Rosch, click here.

Why it matters: The large settlement sum is a reminder that defendants must abide by the terms of consent decrees and settlements. “The record-setting penalty in this matter sends a clear message to all companies under an FTC privacy order,” Jon Leibowitz, Chairman of the FTC, said in a press release about the fine. “No matter how big or small, all companies must abide by FTC orders against them and keep their privacy promises to consumers, or they will end up paying many times what it would have cost to comply in the first place.” But the consent decree also fanned the flames of the current controversy over whether defendants can deny liability in agreements with federal agencies. Commissioner Thomas J. Rosch issued a dissenting statement, bemoaning Google’s denial of liability in the consent decree. “Condoning a denial of liability in circumstances such as these [imposing a record fine] is unprecedented,” he said. “It arguably cannot be concluded that the consent decree is in the public interest when it contains a denial of liability.”