Eleven months after the story first broke, Facebook is still dealing with the aftermath of the Cambridge Analytica scandal. In fact, a Feb. 14 report about the Federal Trade Commission’s investigation into the company’s recent scandals suggests things are getting worse before they get better.
It’s been confirmed that Facebook and the FTC are negotiating a potential settlement that will end the government’s inquest. But the settlement will require the Menlo Park-based corporation to potentially pay a multibillion-dollar fine.
The FTC has been investigating Facebook since March 2018 when it was first reported that a British political consulting firm, Cambridge Analytica, accessed the personal data of millions of the platform’s users.
The FTC’S 11-month investigation has to determine whether or not Facebook violated a 2011 agreement with the FTC. The consent decree required the social media company to get users’ express permission before sharing their information with a third party.
It’s been reported that Cambridge Analytica accessed the personal information of 87 million Facebook users.
Why Facebook’s FTC Fine Might be Massive
To date, the largest fine the FTC has issued was $22.5 million in 2012. The consumer protection agency levied that civil penalty against Google for misrepresenting its data monitoring practices. However, the potential Facebook fine could blow that number out of the water due to a few recent developments.
One is that the FTC increased its maximum civil penalty to $41,484 per violation in January 2018. Two, the unprecedented scale of Facebook’s alleged consent decree violation. And three, the additional revelations that have come out about the social media platform in the time since the Cambridge Analytica scandal occurred.
In December 2018, it was reported that Facebook has been sharing private user messages with companies like Netflix and Spotify. When the news broke, Facebook argued that users had agreed to the data sharing.
Nevertheless, the disclosure was yet another black mark on the corporation’s reputation. And in January, a study found that a slew of popular Android apps sends Facebook user data with consent.
As a result, there has been increasing pressure from consumer groups to hit Facebook with a penalty commensurate to the size of its violation. Based on previous FTC penalties, it’s been estimated that Facebook’s fine could be in excess of $2 billion.
If the FTC assessed a measly $1,000 per violation, Facebook would be looking at an $87 billion fine. And in the unlikely event that the agency chose to hit the social media platform with the maximum penalty, the fine would be more than $3.6 trillion.
Is this is End of Facebook?
As of Feb. 15, Facebook’s market capitalization was $467.77 billion dollars. If the FTC chooses to really bring the hammer down, the platform would be at serious risk of becoming defunct. Even at the $2 billion level, the stock market fallout could be worse than the $15 billion tumble the company experienced last July.
If the FTC’s terms seem untenable, Facebook’s executives might walk away from the negotiating table and fight the FCC in court. But there’s no guarantee the company could beat the government in court. And the damage from a prolonged court battle would be devastating in the corporation’s current condition.
Even though Facebook outpaced Q4 2018 performance expectations, the company has been inundated with bad news recently. In addition to its privacy woes, it has also faced criticism for worsening the mental health of its users and not doing enough to stem the spread of fake news.
Even if the company’s long-time PR head hadn’t just quit, it’s hard to imagine how Facebook could spin its current situation.
While the platform’s ubiquity makes it feel like an institution, it’s worth remembering that Facebook is only 15 years old. At this point, there’s ample evidence to suggest that it won’t be around for another 15. At least not without some significant changes to its leadership structure and the way it does business.