Facebook will pay a record $5bn penalty to settle charges by the Federal Trade Commission (FTC) it violated a 2012 FTC order and will face new requirements aimed at improving user privacy. But there’s doubt the fine was big enough and disappointment the settlement releases Facebook CEO Mark Zuckerberg from liability.
The $5 billion penalty, announced b the FTC on Wednesday, dwarfs previous penalties in the FTC’s privacy enforcement history, but two of five Commissioners are not happy with the settlement for letting Facebook and Zuckerberg off too lightly.
Separately, the FTC is suing defunct political consultancy, Cambridge Analytica, the firm that acquired millions of Facebook users’ details to target voters ahead of the 2014 and 2016 US elections.
FTC Chairman Joe Simons, who supported Facebook’s settlement, said the financial penalty and new restrictions 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,” said Simons in a statement.
While Facebook’s Cambridge Analytica scandal was central to the FTC’s charges, the settlement also addresses other ways Facebook violated the 2012 order, which it was handed for lying to users about their ability to control the privacy of their personal information.
Among the new measures include a ban on Facebook using phone numbers it gains to enable two-factor authentication for advertising as it was caught doing last year. It also needs to tell you users when it is using facial recognition and obtain affirmative consent to do so, establish a data security program, and encrypt user passwords.
The FTC ordered the company to establish a privacy program for WhatsApp, Instagram and Facebook under which it must conduct a privacy review of every new or modified product and document its decisions about user privacy.
FTC Commissioners Rohit Chopra and Rebecca Kelly Slaughter for different reasons believe the settlement won’t do anything to change Facebook’s behavior.
“The settlement imposes no meaningful changes to the company’s structure or financial incentives, which led to these violations,” said Chopra. “Nor does it include any restrictions on the company’s mass surveillance or advertising tactics. Instead, the order allows Facebook to decide for itself how much information it can harvest from users and what it can do with that information, as long as it creates a paper trail.”
Chopra and Slaughter argue that the $5bn fine is far too small, given Facebook’s multiple violations of the 2012 order.
“Even though this settlement is historic, in order to support it I would have to be confident that its combined terms would effectively deter Facebook from engaging in future law violations and send the message that order violations are not worth the risk. I do not believe that is the case,” said Slaughter.
“Rather than accepting this settlement, I believe we should have initiated litigation against Facebook and its CEO Mark Zuckerberg,” she added.
A major concern was that the settlement includes a term that resolves “any and all claims that Defendant, its officers, and directors, prior to June 12, 2019, violated the Commission’s July 27, 2012 order.”
Chopra believes the $5 billion penalty does not reflect the financial gains it made by flouting the 2012 order. In Google’s Safari case, the FTC secured a penalty in 2012 that was five times the company’s unjust gains in 2012, but the FTC failed to measure this in deciding the amount.
As Slaughter notes, Facebook’s gross annual revenue grew 1,000 percent to $55 billion from the time the 2012 order was imposed. The company now brings in $5bn a month.
Former Facebook chief security officer Alex Stamos said the settlement was “fantastic” for Facebook and that it would ultimately harm competition because it can use the FTC’s restrictions to prevent third-parties from accessing user data and building on its platform.
“Facebook already has ~2.5B users. It has the world's second largest ad network. It never again needs data from anybody else to make money or third parties to facilitate growth. This order doesn't include the word competition or include any balancing tests. It's fantastic for FB,” wrote Stamos.
“Facebook paid the FTC $5B for a letter that says "You never again have to create mechanisms that could facilitate competition,” he continued.
“If the FTC offered to "order" Amazon to help consumers save money by offering house branded options in every top category, [Amazon CEO Jeff] Bezos would leap across the table with a $10B check and a massive grin.”
Facebook CEO commented on the FTC settlement in a post on the social network, noting that it gives the company "clear requirements moving forward."