Regulators approve $5b. Facebook settlement over privacy issues

The FTC has been investigating allegations Facebook inappropriately shared information belonging to 87 million users with the now-defunct British political consulting firm Cambridge Analytica.

By DAVID SHEPARDSON, DIANE BARTZ
July 14, 2019 02:30
1 minute read.
Regulators approve $5b. Facebook settlement over privacy issues

Facebook 3D logo. (photo credit: REUTERS/DADO RUVIC/ILLUSTRATION/FILE PHOTO)

 
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The US Federal Trade Commission approved a roughly $5 billion settlement with Facebook this week over its investigation into the social media company’s handling of user data, a source familiar with the situation said on Friday.

The FTC has been investigating allegations Facebook inappropriately shared information belonging to 87 million users with the now-defunct British political consulting firm Cambridge Analytica. The probe has focused on whether the data sharing violated a 2011 consent agreement between Facebook and the regulator.

Investors cheered news of the deal and pushed Facebook shares up 1.8%, while several powerful Democratic lawmakers in Washington condemned the proposed penalty as inadequate.

The FTC is expected to include in the settlement other restrictions on how Facebook treats user privacy, according to The Wall Street Journal, which also said that the agency vote was along party lines, with three Republicans voting to approve it and two Democrats opposed.

The settlement would be the largest civil penalty ever paid to the agency.

The FTC and Facebook declined to comment.

Rep. David Cicilline, a Democrat and chair of a congressional antitrust panel, called the $5b. penalty “a Christmas present five months early.”

“This fine is a fraction of Facebook’s annual revenue. It won’t make them think twice about their responsibility to protect user data,” he said.

Facebook’s revenue for the first quarter of this year was $15.1b. while its net income was $2.43b. It would have been higher, but Facebook set aside $3b. for the FTC penalty.

While the deal resolves a major regulatory headache for Facebook, the Silicon Valley firm still faces further potential antitrust probes as the FTC and Justice Department undertake a wide-ranging review of competition among the biggest US tech companies.

It is also facing public criticism from President Donald Trump and others about its planned cryptocurrency Libra over concerns about privacy and money laundering.

The Cambridge Analytica missteps, as well as anger over hate speech and misinformation on its platform, have also prompted calls from people ranging from presidential candidate Sen. Elizabeth Warren to a Facebook co-founder, Chris Hughes, for the government to force the social media giant to sell Instagram, which it bought in 2012, and WhatsApp, purchased in 2014.

But the company’s core business has proven resilient, as Facebook blew past earnings estimates in the past two quarters.

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