FTC will issue a record $5B fine for Facebook
Facebook will be fined more than $5 billion after a long-running investigation by the FTC into the company's privacy practices—a massive, record amount, but in the context of Facebook's scale, it's not much more than a parking ticket.
To be entirely honest, it seems like a bullshit fine designed to simply slap the company on the wrist and say "don't" without really inflicting actual pain.
We already knew that something like this was in the works, because Facebook hinted back in April that it expected to pay a fine of up to $5 billion when it reported earnings. What's crazy, however, is that $5B is a drop in the bucket—Facebook reported revenue of $55.8 billion last year, making the fine just 9 percent of those profits.
Wall Street's response to the news tells us everything we need to know: the Facebook share price jumped on the news arriving, rather than taking a hit. In other words, investors were pleased the fine was so low. Yes, it's a historic, record fine, but it feels like nothing more than a warning at best.
This investigation started after Facebook originally agreed in 2011 with the FTC to gain consent before accessing or sharing data about people. Under that agreement, Slate reported thatFacebook could have been fined $40,000 per day, per individual, which adds up to a potential fine of $2 trillion... but that's not what the FTC is doing.
So, now what? Well, We don't know all the details yet—and it hasn't been formally announced, just voted on by the FTC's members, making it official. From here it must be approved by the Department of Justice, but it's possible that the fine will come with oversight requirements, audits, or new rules about how it stores user data.
Some Democrats were frustrated by the news, with Senator Mark Warner saying that "Given Facebook’s repeated privacy violations, it’s clear the fundamental structural reforms are required" and continuing that "With the FTC either unable or unwilling to put in place reasonable guardrails to ensure that user privacy and data are protected, it’s time for Congress to act."
Others have called for more 'pain' at the company to entice it to change at its core, such as fining Mark Zuckerberg directly, but that seems incredibly unlikely, even if it would make a lot of sense to try and incentivize executives who profit from the company.
We should hear about the ruling officially in the coming days—and it's interesting timing given that today Facebook will also face a committee hearing on its cryptocurrency, Libra. With hostility being openly thrown around over both issues, the hearing is likely to be much more brutal, with resistance from across party lines in the U.S, and it's likely the company will be pressed on the fine there as well.
To tune in for that hearing, there will be a livestream available on the Senate website right here. It should be a wild ride! We'll have more on both Libra and this fine, as we learn more. If you want to read more, my favorite piece about this mess is this one: Facebook's $5 billion fine is an embarassing joke.
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