12 Jul Facebook gets its $5 billion slap on the wrist. Now will it change its ways?
The Federal Trade Commission voted to approve a $5 billion settlement with Facebook as a final point on an investigation into the company’s missteps in handling user data, according to the Wall Street Journal. That doesn’t seem to bother anyone, perhaps because the settlement had the potential to be much more onerous (the two Democrats on the panel voted against the deal, saying it wasn’t enough of a penalty). At market close, Facebook’s stock was up nearly 2%.
Facebook was being investigated for allowing the data of tens of millions to seep through to Cambridge Analytica, the data analytics firm that President Trump used during his 2016 campaign.
It is the largest fine that the FTC has ever levied. The next largest was one for $22.5 million slapped on Google in 2012. But as my colleague Mark Sullivan pointed out earlier this year, such a fine is still a pittance for a company that can bring in $15 billion in advertising revenue in a single quarter; it represents a mere 9% of Facebook’s 2018 revenue. Both the company and its investors were expecting a fine around $5 billion, so this shouldn’t come as a shock. From a penalty perspective, it remains unclear exactly what problem this fee solves—other than netting the government some extra cash.
After all, the reason the fine is so large is that Facebook was already on probation for bad behavior in 2011. Already this year the company has shown that it continues to mishandle data (hello to all those user passwords stored in a readable format).
Once the FTC hands down the formal settlement, there will be other provisions that Facebook has to abide by. The question is: Will they be strong enough to change the company’s ways?
Source: Fast Company