FTC fines Facebook $5 billion and orders policy changes

Facebook faces huge fallout from Cambridge Analytica fallout

On Wednesday, the Federal Trade Commission (FTC) revealed that it’s ending its Facebook investigation and will levy a $5 billion fine against the social network. Furthermore, the agency is forcing the corporation to submit its new products to a third-party assessor for review. The regulator is also directing the firm to change its biometric data collection policy.

The FTC’s $5 billion sanction marks its largest tech industry fine and its second-largest overall. In 2016, the Commission slammed Volkswagen with a $14.7 billion penalty for deceiving consumers about its vehicles’ emission standards.

FTC Settlement Breakdown

In 2011, the FTC investigated Facebook for not abiding by its privacy policy. The agency ended its inquiry after the Big Tech giant accepted a consent order vowing to protect its users’ data. However, the organization asserted that the corporation violated the order by failing to protect consumers from having their data mined by Cambridge Analytica.

The agency also looked into the company’s biometric data gathering practices and alleged misuse of users’ phone numbers.

Following protracted negotiations, Facebook has agreed to pay the FTC $5 billion for violating the consent order. In its settlement announcement, the agency noted that the penalty represents nine percent of the corporation’s 2018 revenue and 23 percent of its net profits.

The firm has also consented to present its new offerings to the FTC and an independent administrator for a privacy compliance review.

Moreover, the FTC is directing Facebook to gain affirmative consent before collecting scans of users’ faces. Furthermore, the service must now obtain purpose and use certifications from third-party developers before giving them access to consumer information.

In response to the record-breaking sanction, Facebook stated that the FTC agreement would prompt a “fundamental shift” in the way it does business.

What Could Have Been

While the FTC’s announcement frames its settlement with Facebook as a “historic victory for American consumers,” not all commissioners are happy with the way things shook out.

FTC Commissioner Rohit Chopra wrote a dissenting opinion arguing that the settlement would be ineffective at changing Facebook’s offending business practices. For instance, the company can still share unlimited amounts of user data with outside firms.

Similarly, FTC Commissioner Rebecca Kelly Slaughter took issue with the settlement because it doesn’t hold Facebook’s leadership accountable. She also called the agency’s civil penalty “insufficient,” given the company’s size and the scope of its wrongdoing. Indeed, the firm told investors that it would absorb a $5 billion FTC fine without difficulty in April.

A recent Washington Post article details the reason behind the two commissioners’ discontent with the record-breaking sanction.

The publication notes that the FTC considered fining Facebook tens of billions of dollars and holding Mark Zuckerberg personally responsible for the firm’s actions. Because Cambridge Analytica’s data-mining efforts affected 87 million consumers, the organization had the authority to levy an eleven-figure fine.

However, the social network’s lawyers “fiercely resisted” accepting those severe penalties and the regulator ultimately settled on its current sanction.

The Post attributed the FTC’s move to conclude its 16-month investigation with a comparatively small settlement agreement to legal and budgetary concerns. The newspaper reported that Facebook’s annual revenue is 200 times the agency’s budget. It also argued that America’s lack of consumer data protection laws keeps it from handing down more effective punishments.

A Questionable Message

Market analysts predict that Facebook will report second-quarter revenues of $16.51 billion. Former FTC Bureau of Consumer Protection Director Jessica Rich told the Post that the agency’s record-setting fine “sends a message.”

As the regulator’s sanction represents less than a month of the corporation’s revenue, the message it’s sending is questionable.