Federal regulators fine Facebook $5B
FTC institutes new limits, oversight on social media firm
WASHINGTON — Federal regulators have fined Facebook $5 billion for privacy violations and are instituting new oversight and restrictions on its business. But they are only holding CEO Mark Zuckerberg personally responsible in a limited fashion.
The fine is the largest the Federal Trade Commission has levied on a tech company, though it won’t make much of a dent for a company that had nearly $56 billion in revenue last year. Two of the five commissioners opposed the settlement and said they would have preferred litigation to seek tougher penalties. Privacy advocates worry the settlement will do little to force Facebook to rein in its data-collection practices.
As part of the agency’s settlement with Facebook, Zuckerberg will have to personally certify his company’s compliance with its privacy programs. The FTC said that false certifications could expose him to civil or criminal penalties.
Some experts had thought the FTC might fine Zuckerberg directly or seriously limit his authority over the company.
Facebook isn’t admitting any wrongdoing. The company’s top lawyer, Colin Stretch, said the company’s FTC settlement will lead to more rigorous management of user privacy — including more technical controls to better automate privacy safeguards.
FTC Chairman Joe Simons said the settlement is “unprecedented in the history of the FTC” and is designed “to change Facebook’s entire privacy culture to decrease the likelihood of continued violations.”
The FTC opened an investigation into Facebook last year after revelations that data mining firm Cambridge Analytica had gathered details on as many as 87 million Facebook users without permission. The agency said Wednesday that Facebook “repeatedly used deceptive disclosures and settings to undermine users’ privacy preferences.”
The agency is also launching a case against Cambridge Analytica over the privacy violations and has settled with its former CEO Alexander Nix and an outside researcher, Aleksandr Kogan, who developed the Facebook app that harvested people’s personal information. Cambridge Analytica filed for bankruptcy and hasn’t settled the allegations, but Kogan and Nix have agreed to restrictions on how they conduct business in the future. The settlement requires them to delete or destroy all personal information gathered.
Facebook will pay a separate $100 million fine to the Securities and Exchange Commission to settle charges it made misleading disclosures about the risk of misuse of Facebook user data. The SEC said Facebook presented misuse of data as a hypothetical for two years even though it had known since 2015 that the third-party developer had actually misused user data.
Stretch said Facebook’s handling of the Cambridge Analytica affair was “a breach of trust between Facebook and the people who depend on us to protect their data.”
Three Republican commissioners voted for the settlement while two Democrats opposed it, a clear sign that the restrictions on Facebook don’t go as far as critics and privacy advocates had hoped. That wish list included specific punishment for Zuckerberg, strict limits on what data Facebook can collect.
“The proposed settlement does little to change the business model or practices that led to the recidivism,” Commissioner Rohit Chopra wrote in his dissenting statement.
Ashkan Soltani, a former FTC chief technologist, said the settlement “amounts to essentially a get-out-of-jail free card for Facebook,” by indemnifying the company from government prosecution for all claims before June 12.
But despite the record fine and all the public flogging, Facebook is worth more than it was before the blowback began. The company’s stock closed Wednesday at $204.66, up $2.30 or 1.14%.
The FTC said Facebook’s deceptive disclosures about privacy settings allowed it to share users’ personal information with thirdparty apps that their friends downloaded but the users themselves did not give permissions to.
The agency also found that Facebook misrepresented the extent to which users could decline, or opt out of, facial recognition technology used to identify people in pictures and videos and that it failed to disclose that phone numbers collected for a security feature known as two-factor authentication could also be used for targeted advertising.
Privacy advocates have pushed for the FTC to limit how Facebook can track users — something that would likely cut into its advertising revenue, which relies on businesses being able to show users targeted ads based on their interests and behavior. The FTC did not specify such restrictions on Facebook.