Facebook to Pay $5 Billion Fine for Privacy Practices

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Facebook has agreed to pay a record $5 billion in a settlement with the Federal Trade Commission after a yearlong investigation into the company’s privacy practices, according to multiple reports Friday.

Citing unnamed sources, The Wall Street Journal, The Washington Post and The New York Times reported that the FTC this week voted to approve the settlement, which was born out of last year’s Cambridge Analytica privacy scandal involving the personal data of Facebook users. If the reported amount is correct, it would be the biggest fine ever imposed by the United States on a tech company. It would dwarf a $22 million FTC fine on Google in 2012.

The FTC reportedly voted 3-2 on the settlement, with the agency’s Democratic commissioners opposing the deal because they were pushing for more restrictions on the company. Facebook has been under fire for years over how it protects and shares the data of its more than 2 billion users.

An FTC spokeswoman said Friday that the agency would have no comment. A Facebook spokeswoman said the company was not confirming the reports and would have no comment.

After the news last year that political data consulting firm Cambridge Analytica accessed the personal information of up to 87 million Facebook users without their explicit consent, the FTC opened an investigation into whether the Silicon Valley tech giant had violated a 2011 settlement regarding its privacy practices.

In April as it reported quarterly results, Facebook said it was setting aside $3 billion in anticipation of a fine, which it expected to reach up to $5 billion.

Facebook critics, including advocacy groups that have decried the company’s privacy and other policies, were quick to slam the reported deal.

“A fine — no matter how large — is not enough,” David Segal, executive director of Demand Progress Education Fund, said in a statement Friday. “It is clear that Facebook has too much power and is too big to manage. A Federal Trade Commission that was serious about its job would push for structural reforms — like spinning off Instagram and WhatsApp — that would create competition in the social media space and make Facebook more likely to respect its users.”

The privacy mess involving Cambridge Analytica — a now-defunct firm that was co-founded by Steve Bannon and used by the presidential campaign of Donald Trump — prompted Congress to summon Facebook CEO Mark Zuckerberg to Washington last year and shareholders to call for him to step down as chairman of the company’s board. The scandal sparked closer scrutiny and further criticism of the tech industry from advocacy groups, politicians and others, some of whom have called for breaking up Facebook, Google, Amazon and Apple. Last month, after reports that the federal government is considering antitrust investigations into tech giants, House lawmakers said they were also looking into possible anti-competitive behavior by the companies.

“Despite Republicans’ promises to hold big tech accountable, the FTC appears to have failed miserably at its best opportunity to do so,” said Sen. Ron Wyden, D-Ore., in a statement Friday. “The only way to assure Americans that our private data will be protected is to pass a strong privacy bill, like the one I plan to introduce in the coming weeks.”

But another advocacy group, the Center for Democracy and Technology, held off on criticizing the settlement, noting Friday that the deal could include more restrictions on how Facebook handles user data.

“The FTC has put all companies on notice that they must safeguard personal information,” said Nuala O’Connor, CDT president and CEO, in a statement. The group accepts funding from tech companies including Facebook.

Any settlement would need approval from the Department of Justice, which does not usually reject FTC decisions.

Shares of Facebook, which had closed Friday up 1.8% to $204.87, were up slightly in after-hours trading.

“This was expected by Wall Street,” said Laura Martin, analyst for Needham & Co., Friday.
Source: https://www.cpapracticeadvisor.com

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