Facebook Facing $2 billion+ FTC Fine
February 14, 2019 (Washington, D.C.) Facebook and the Federal Trade Commission are negotiating a multibillion dollar fine to settle the agency’s investigation of the company’s privacy practice violations. As reported in the Washington Post, this would be the largest FTC fine ever imposed on a technology company.
The highest FTC fine ever imposed is a $22.5 million fine on Google over the firm’s Apple Safari user tracking in 2012. In 2012 Facebook also entered into an FTC consent decree pledging to no longer deceive their users by falsely telling them that particular profile information would be private.
Facebook confirmed it is in discussions with the FTC but declined to provide any other information. According to Los Angeles criminal defense attorney Tsion Chudnovsky of Chudnovsky Law, if the settlement talks break down, the FTC would likely take the matter to court and Facebook could face charges from the Department of Justice. A major court battle could bring dire potential legal and business consequences for Facebook.
The record setting fine would be serious punishment for Facebook after a series of privacy lapses that have likely put user details at risk. Lawmakers in several countries have blamed the company for not protecting user data and not cracking down of abuse of their data.
The FTC probe started last March when the Cambridge Analytica scandal was exposed. In one instance, hackers were able to access the private data of 29 million user accounts. Facebook’s behavior has enflamed privacy groups who are pushing for serious punishment. The Electronic Privacy Information Center, Color of Change and Open Market Institute wrote the FTC demanding that the FTC impose a fine of at least $2 billion. They may get their wish.
Experts warn that the impact of a fine alone will not likely remedy the situation. Given Facebook’s past behavior, new legal restrictions on how Facebook collects and processes user data will be needed. Privacy watchdogs and lawmakers are monitoring the FTC’s investigation to see if the U.S. agency is going to take the data protection lead back from the European Union. In July of last year, the European Union imposed a massive $5.1 billion fine on Google for breaching EU antitrust laws.
A multi-billion fine would be a dramatic escalation of the dispute between the government and U.S. technology industry. The government has struggled to rein in lawless behavior in the booming technology industry and years of privacy missteps.
The FTC Facebook probe started March 2018 when the Cambridge Analytica scandal broke. Facebook mis-steps allowed the political consultant improperly gathered data on 87 million Facebook users. The FTC investigation is focused on whether Facebook’s conduct is a breach of their 2011 agreement.
The FTC agreement required Facebook notify users before sharing their personal data with any outside parties. In the order, Facebook pledged to not deceive users about privacy practices and regularly conduct audits on the ways it uses data. The FTC rules give the agency authority to seek large fines if Facebook violates the agreement.
Facebook is likely to be able to easily absorb any fine given it’s $50 billion in cash and a market cap exceeding $465 billion. But it is likely to put up a fight on any restrictions to how it is able to use it’s consumer data to sells ads. Given Facebook’s shrinking user base, the stock market would likely react strongly to restrictions that impact it’s ability to monetize data as the revenue impact could be substantial.
