Would $3B fine hurt Facebook, but help privacy issues?
You’ve heard of too big to fail. Well, now there is too big to fine.
The Federal Trade Commission is expected to slap a fine on Facebook of $3 billion to $5 billion, according to the company’s last earnings call. That’s a lot of money to you and me. But it’s peanuts to the Menlo Park, Calif., social media giant.
Facebook just posted revenue of $15 billion for the last quarter, ahead of Wall Street expectations. The company says it has set aside $3 billion for the fine, roughly 6% of its cash and marketable securities on hand.
Much of that revenue is from selling ads to companies that, with its users’ personal data, can be targeted at those most receptive.
Apparently users don’t care that their own data is being used to target them or don’t have a problem with trading privacy for free services. Facebook added 48 million daily active users in the first quarter to hit 1.449 billion, up 3.42%.
Facebook’s stock was up more than 8% in after-hours trading after the social media company announced the allocation for the FTC fine.
The FTC’s probe has sought to determine if Facebook’s entanglement with political consultants Cambridge Analytica and other actions violated a 2011 agreement with the U.S. government to improve its privacy practices, according to the Washington Post.
The fine would be the largest privacy fine levied in the U.S. The next largest was levied on Google in 2012, when the Mountain View, Calif., company had to pay $22.5 million to settle charges that it misrepresented to users of Apple’s Safari Internet browser that it would not place tracking “cookies” or serve targeted ads to those users.
In Europe, regulators have been more active, slapping Google and other U.S. firms with major fines. Google now owes almost $10 billion in such penalties for alleged anticompetitive behavior. EU watchdogs also hit Apple with a back -taxes bill of more than $15 billion.
Fines in the U.S. are not levied because of specific privacy law. The U.S. has no nationwide privacy law, although a proposed one has been floating around Congress. Every day it is not acted on leaves the horse out of the barn longer.
The FTC fine could come with new restrictions on how Facebook collects or uses data, the Verge reported.
“At the core of these hypothetical arguments is the large question of not only how to regulate Facebook but of how to conceptualize an entity that operates largely without meaningful competitors and collects troves of information on more than two billion human beings,” wrote Charlie Warzel in The New York Times.
Indeed.