The US Federal Trade Commission (FTC) has slapped a US$5 billion fine on Facebook. it is the largest fine ever imposed on any company, anywhere, anytime. But to Facebook, the fine is just petty cash – less than 9% of last year’s revenue.
In anticipation of the fine Facebook took a one-time balance sheet charge of $3 billion from last year’s revenue. Now that the matter is over its shares soared – go figure. And it hardly makes a dent in Zuckerberg’s $75 billion personal worth!
It is not clear if Facebook will appeal the fine, but commentators suggest it knows it got off lightly. Facebook has already said, “At no point did Mark or any other Facebook employees knowingly violate the company’s obligations under the FTC consent order.” Mark probably would not look too bad in prison grey!
Despite the mammoth fine, many sectors are not happy with the FTC’s light slap on the wrist.
Democratic Sen. Mark Warner said,
“Given Facebook’s repeated privacy violations, fundamental structural reforms are required. With the FTC either unable or unwilling to put in place reasonable guardrails to ensure the protection of privacy and data, it’s time for Congress to act.”
And Congress likely will.
In a bipartisan move, Republican Congressman David Cicilline said,
“The settlement is a slap on the wrist. This fine is a fraction of Facebook’s annual revenue. It won’t make them think twice about their responsibility to protect user data.”
It is not over yet!
The fine was for one transgression – Cambridge Analytica, and it is from the US FTC. Cambridge Analytica was a turning point in terms of people understanding the business model around monetisation of their personal data.
Now that the precedent has been set for other ongoing privacy investigations from
- The European Union (about GDPR breaches) with a potential fine of 4% revenue (capped at 20 million euros)
- The EU has more than a dozen separate investigations into Facebook and its companies – WhatsApp, Instagram, Messenger etc
- The UK levied the maximum permissible fine of 500,000 pounds over the Cambridge Analytica scandal and has smelt blood looking at wider fines
- The Belgian and German privacy bodies are investigating Facebook data collection practices
- An Irish Data Protection Commission (DPC) investigation about a breach of “hundreds of millions” of Facebook and Instagram user passwords stored in plaintext on its servers
- Office of the Privacy Commissioner of Canada will take Facebook to federal court to force the company to correct its “serious contraventions” of Canadian privacy law for over 600,000 of its citizens
- New York attorney general Letitia James is looking into the recent “unauthorised collection” of 1.5 million user email addresses, which Facebook used for profile verification, but inadvertently also scraped their contact (friends) lists.
And unrelated to privacy is
- The publication of terror and hate videos/messages that could lead to an unworkable restriction on its posts
- Anti-discrimination, equal opportunity and human rights legislation as Facebook allows demographic and other profiling that can exclude ‘groups’ with razor-like precision from receiving advertisements (US Department of Housing and Urban Development but many are on that bandwagon).
- A US House Judiciary Committee is probing competition in digital markets as part of an investigation with both Republicans and Democrats expressing bipartisan concern about the power exercised by FAANG (US Anti-trust issues) and is closely being looked at by the EU as well
- The FBI has an ongoing investigation that may be related to the Securities Exchange Commission investigations
- Australia has an ongoing investigation into the undue influence of digital platforms
- Then there is US Presidential candidate Elizabeth Warren that FAANG (Facebook, Amazon, Apple, Netflix and Google – an acronym for all Big Tech) must be broken up. GadgetGuy has US expert Sam Bocetta’s take here.
And that is the tip of the iceberg. Most cases address similar issues – privacy or monopoly power.
Potential Bottom line for Facebook
- More huge fines coming from a raft of global authorities over privacy issues
- Potential jail time for Facebook senior management
- Increasing #DeleteFacebook pressure
- Revelations that a huge percentage of Facebooks 2.4 billion users are fake are proven true
- More damaging evidence that questions the integrity and trustworthiness of Facebook and by inference Big Tech
- More legislation that could severely restrict Facebook’s business model – the product is you
- Increasing blacklisting by advertisers that want to avoid a Titanic moment
- And breaking up of Big Tech