Facebook’s $5 Billion US FTC Fine Doesn’t Mark the End of Its TroublesOn July 25, 2019 by Anindita Ghosh
Facebook survived its latest brush with U.S. privacy regulators, at the cost of a record $5 billion fine and other restrictions imposed by the Federal Trade Commission. But it’s far from home free.
While the company looks set to prosper in the wake of the FTC case, it faces a series of other investigations into its privacy practices in Europe and across the US. Concerns over the limits of the just-settled probe could fuel efforts to craft tougher privacy laws at the state and federal level.
The social network is also gearing up to fight investigations into its allegedly anticompetitive behaviour, such as Facebook’s habit of buying would-be rivals like Instagram and blatantly duplicating features introduced by competing services.
The Department of Justice opened a broad antitrust probe focused on technology companies on Tuesday. On Wednesday Facebook disclosed that it also faces a fresh FTC investigation into alleged anticompetitive behaviour. It didn’t provide details of the scope or focus of the probe. Representatives of the FTC confirmed the antitrust investigation but offered no additional information.
The outcome of these investigations may well determine whether the world’s governments can actually rein in a transnational corporation that directly touches almost a third of the world’s population.
“There is a lot more to come on the regulatory front for Facebook,” said Debra Aho Williamson, analyst with the research firm eMarketer. To pre-empt this and do things on its own terms, Williamson said the company is “going to do whatever it can” to change its business model and change the way it gathers data.
The FTC penalties, viewed by some as a stunning rebuke to the social network, might well crush a smaller firm. But they seem unlikely to faze Facebook — the fine, for instance, amounts to less than 10% of Facebook’s annual revenue and not even a quarter of its annual profits. Some critics charge that the FTC didn’t deliver much more than a slap on the wrist.
“Facebook makes that much money in a couple of weeks,” said Siva Vaidhyanathan, a University of Virginia professor and author of “Antisocial Media: How Facebook Disconnects Us and Undermines Democracy.” The company is free to “get back to business as usual,” he said.
Wall Street seems to agree. Facebook’s stock price climbed higher Wednesday after the deal was announced. The company is worth much more than it was when its Cambridge Analytica privacy scandal erupted back in March 2018. On Wednesday, Facebook’s market value hovered around $575 billion — roughly $40 billion above where it stood before the news of the Cambridge abuses broke.
Ashkan Soltani, a former FTC chief technologist, said the settlement was effectively “a get-out-of-jail free card for Facebook.” The deal absolves Facebook of any consumer-protection claims prior to June 12 of this year, a highly unusual step that effectively wipes the slate clean where known historical privacy violations are concerned.
Soltani and other critics also note that the FTC settlement barely touches Facebook’s underlying business practices, which rely on the collection and analysis of its users’ activities and personal details to fuel the company’s lucrative advertising machine. In its formal legal complaint, the FTC used the word “deceptive” 14 times to describe Facebook’s practices and policies.
“There is a lot more to come on the regulatory front for Facebook,” said Debra Aho Williamson, analyst with the research firm eMarketer. To pre-empt this and do things on its own terms, Williamson said the company is “going to do whatever it can” to change its business model and the way it gathers data.
Facebook has already signaled that this is coming. Earlier this year, CEO Mark Zuckerberg unveiled a new “privacy focused” vision for the company that centers on private messaging and encrypted communications. The details are scant. But it shows that the company is thinking years into the future even as regulators are investigating and punishing it for years-past violations.