It is being heralded as the biggest fine levied by the Federal Trade Commission.
On Wednesday, the FTC approved a $5 billion fine against Facebook Inc. as a resolution of various privacy violations.
Another part of the settlement is directing the company to create an independent committee within Facebook’s board of directors that deal strictly with privacy.
The settlement also directs Facebook CEO Mark Zuckerberg to certify the company’s compliance with new privacy regulations quarterly. Civil and criminal penalties could be levied against Zuckerberg if those certifications prove to be false.
“Despite repeated promises to its billions of users worldwide that they could control how their personal information is shared, Facebook undermined consumers’ choices,” said FTC Chairman Joe Simons, in a statement by the FTC. “The magnitude of the $5 billion penalty and sweeping conduct relief are unprecedented in the history of the FTC. The relief is designed not only to punish future violations but, more importantly, to change Facebook’s entire privacy culture to decrease the likelihood of continued violations. The Commission takes consumer privacy seriously, and will enforce FTC orders to the fullest extent of the law.”
But, while the FTC beats its chest on this being the largest fine it has levied, the fact of the matter is the overall implications of fine will be limited, at best.
That is great and all, but $5 billion doesn’t account for a whole lot in terms of Facebook’s overall value.
According to Zacks Investment Research, Facebook’s second-quarter revenue is expected to rise by 24.3% from the same period a year ago. Zachs expects Facebook to beat its earnings by 0.61% when those earnings are announced Wednesday.
Keep in mind, Facebook reported almost $56 billion in revenue in 2018.
While the finances are likely not going to make much of a dent, the interesting part of this decision is the FTC adding some responsibility on Zuckerberg on oversight of privacy.
But, while this is new ground, it could have been much more.
The FTC could have fined Zuckerberg personally or even suggested his overall oversight of the company be limited because of the Cambridge Analytica privacy breach.
Also of note: Former Cambridge Analytica CEO Alexander Nix and app developer Aleksandr Kogan have also agreed to a settlement with the FTC “on how they conduct any business in the future,” according to the FTC.
But, back to Facebook.
The FTC had a chance to make a huge statement on how user data should be protected by companies entrusted to hold said data.
Instead, it offered a mere slap on the wrist while touting “a record-breaking” penalty.
Instead of telling Zuckerberg to pare back his overall control of the company, the FTC only suggested his oversight of user privacy be limited.
Rather than sending a message that there should be a third-party group overseeing user data privacy across all companies, the FTC only suggested Facebook do it … internally.
The independent committee members are within the purview of the Facebook board of directors and can be fired only … by the board of directors.
Foxes guarding the hen house, anyone?
In fact, former FTC chief technologist Ashkan Soltani called the settlement and fine “essentially a get-out-of-jail free card for Facebook,” and that it indemnifies the company from government prosecution for all claims prior to June 12, which he says is highly unusual.
You can’t swallow the company line on this. The FTC had the opportunity to really sink its teeth into protecting our user data and privacy in the wild, wild west known as the internet.
Instead, it showed how toothless it really is.