Facebook will be asked to fork out $5bn in a settlement with America’s trade watchdog, the FTC, following last year’s Cambridge Analytica fiasco, it was reported Friday.
The proposed out-of-court deal will end an FTC probe into whether the antisocial network broke a 2012-era pledge to better protect its addicts’ privacy. Facebook was accused of running roughshod over that earlier pact by allowing Cambridge Analytica to harvest people’s personal information.
The multi-billion-dollar settlement, details of which were leaked to the US mainstream media ahead of any official word from the FTC or Facebook, will be the watchdog’s largest in its history, dwarfing the previous high of $22.5m levied against Google in 2012 over the ad-slinging business’s practice of putting tracking cookies into Safari.
If you think this payout is problematic for Facebook, think again.
If the reports of the deal are true, and if the settlement is accepted by both sides and approved, Facebook will have to cough up $5bn, which is at the upper end of what the US web giant was expecting. In its latest financial report, Zuck & Co set aside $3bn in anticipation, leaving the biz with $2.43bn in profit from $15bn of revenues during the first three months of the year. It warned investors it may have to dole out as much as $5bn.
So that’s one month of sales, or less than one per cent of its $585bn market cap. What’s more is that, according to the reports, Facebook won’t have to change any of its practices as part of this settlement: it just has to swear it won’t break that 2012 agreement to protect people’s privacy and allow them to opt into any tweaks to the platform.
No wonder Facebook’s share price is actually up right now, albeit just 0.2 per cent, to $205.28 apiece. Wall Street is seemingly relieved.
The FTC’s five commissioners were split along party lines, with the two Democratic members reportedly pushing for not only a big financial penalty but some form of regulation to stop the same thing happening again and again and again. The Republican side were all in favor of the reported proposed deal.
“Despite Republicans’ promises to hold big tech accountable, the FTC appears to have failed miserably at its best opportunity to do so. No level of corporate fine can replace the necessity to hold Mark Zuckerberg personally responsible for the flagrant, repeated violations of Americans’ privacy,” said Senator Ron Wyden (D-OR).
Facebook: Not saying we’ve done anything wrong but… we’re just putting $3bn profit aside for an FTC privacy fine
“That said, this reported fine is a mosquito bite to a corporation the size of Facebook. And I fear it will let Facebook off the hook for more recent abuses of Americans’ data that may not have been factored in to this inadequate settlement.”
Wyden will, we’re told, introduce a Consumer Data Protection Act [PDF] in the coming weeks to safeguard the online privacy of American citizens, and impose serious penalties, including fines of up to four per cent of revenues and threaten senior executives with jail time, if web giants play fast and loose with their customers’ personal data.
Those are the kinds of penalties that may make tech titans sit up and take notice, unlike today’s reported settlement proposal. Sure, no one likes to lose a few billion dollars, but it’s not the end of the world for Zuck, and if the share price rises enough the losses will be easily offset.
The proposed deal will now have to be approved by the US Department of Justice before it can go any further. Neither the FTC or Facebook had any comment to share at this time. ®