Earlier this year it was reported Facebook expected to face a $3 to $5 billion fine from the U.S. Federal Trade Commission for potential violations of its 2011 consent decree over the Cambridge Analytica revelations. After months of whispers and speculation, the agency approved a $5 billion fine of the social media giant, according to a Wall Street Journal report published last Friday afternoon.Â
The FTC approved the settlement by a 3-2 vote, which was then leaked to the press. The Republican commissioners voted in approval while the two Democratic commissioners objected to the settlement. The U.S. Department of Justice Civil Division will now review the deal, and no timetable is expected for the settlement to be finalized. Neither Facebook nor the FTC has commented publicly.
One major point of contention for officials at the FTC was the extent to which Facebook CEO Mark Zuckerberg should personally be held responsible or made accountable for the violations. Sen. Ron Wyden, D-Ore., who recently proposed a privacy bill that would hold corporate executives liable for egregious data privacy issues, tweeted, “No level of corporate fine can replace the necessity to hold Mark Zuckerberg personally responsible for the flagrant, repeated violations of Americans’ privacy.”Â
The Wall Street Journal also reports the fine issued by the FTC was higher than any total the European Union could have sought under the EU General Data Protection Regulation. The $5 billion penalty will also be the highest ever issued by the agency. The previous record was a $22.5 million fine against Google in 2012.
After the announcement was made, U.S. lawmakers on the Democratic side of the aisle took turns reacting to the deal. Nearly all of them felt the Facebook settlement was not much more than a slap on the wrist.
â€œGiven Facebookâ€™s repeated privacy violations, it is clear that fundamental structural reforms are required,” Sen. Mark Warner, D-Va., said in a statement. “With the FTC either unable or unwilling to put in place reasonable guardrails to ensure that user privacy and data are protected, itâ€™s time for Congress to act.â€�
Rep. David Cicilline, D-R.I., said on Twitter the FTC gave Facebook “a Christmas present five months early.” He added the fine represents a fraction of Facebook’s annual revenue and joined Warner in calling for Congress to address the matter.
Sens. Richard Blumenthal, D-Conn., and Ron Wyden, D-Ore., were among the voices who felt the FTC penalty did not go far enough. Blumenthal said the settlement was “chump change for a company that makes tens of billions of dollars every year,” with Wyden calling it a “mosquito bite to a corporation the size of Facebook.” Both senators called for FTC oversight hearings and tougher privacy legislation following the news.
Former FTC Acting Chairman Maureen Ohlhausen said criticisms of the deal were less about facts and more toward drawing political battlelines around Facebook. She added Democrats who voted against the settlement â€œget to shake the spear and say theyâ€™d be even tougher without having to deal with the fact that thereâ€™s no certainty the FTC would win in litigation.â€�
Adding another wrinkle to the discussion was Facebook’s shares increasing to their highest prices of the day shortly after the settlement story broke.Â
â€œItâ€™s a bad sign that markets are reacting to Facebookâ€™s settlement with the F.T.C. by jumping the value of the companyâ€™s stock,â€� Public Citizen President Robert Weissman said in a statement.
In an op-ed for The New York Times, Kara Swisher wrote for all of the news Facebook has made with its privacy practices, the company is still trending upward.
“While there are some states waging legal challenges against Facebook, as well as other federal agencies poking around, the F.T.C. is the big dog here. So for that money, Facebook will essentially get its sloppy slate wiped clean,” Swisher writes. “Thatâ€™s why its stock rose significantly after the news of the potential fine, leaping upward after an earnings report that showed strong increases in users and advertising revenue. In other words, the privacy concerns raised loudly by politicians and the media have not hurt Facebookâ€™s growth.”
New York University Marketing Professor and Swisher’s podcast co-host Scott Galloway said, “Put another zero on it and then we can start talking.â€�
Despite the response from lawmakers and pundits who feel Facebook may have gotten off easy with the FTC, the tech company still faces its fair share of challenges in the months ahead. The $5 billion fine may not impact Facebook’s bottom line; however, it may harm its ability to instill trust with users as it attempts to launch its Libra cryptocurrency.
Speaking of Libra, Facebook will send executives to Capitol Hill for a hearing on the cryptocurrency. It will also have representatives at a separate antitrust hearing on the same day to determine whether action is needed to rein in the market power of big tech companies.
Facebook also faces investigations from state attorneys general and regulators in Europe and Canada, as well as countries such as Australia, Japan, India, New Zealand and Singapore that have passed or are considering rules against big tech. Facebook’s FTC settlement may not be the end of one story, however, as the company has a lot on its plate moving forward.