Facebook braces for $7.5b fine
It’s hardly surprising, is it? Facebook, a company that’s made headlines for all the wrong reasons these past few years, is now facing a fine from the FTC (Federal Trade Commission) for privacy violations.
And it’s ironic, too. A social network that makes billions of dollars from selling its users data, is now expecting a US$3 billion to $5b ($4.5b-$7.5b) bill for not keeping its users’ data private enough.
The fine doesn’t come as a surprise to the social network giant. It dates back to a 2011 consent agreement designed to safeguard users’ personal information.
We first learned that Facebook was at risk of being found guilty of failing to protect user data more than a year ago.
At the time, Jessica Rich, a former head of the FTC said: ‘‘If I had to bet, they will find violations . . . the penalty could potentially be huge.’’
She’s wasn’t wrong. However, back in March 2018 when she made those comments, she also suggested that ‘‘the FTC is unlikely to get billions’’ but it ‘‘could get hundreds of millions’’.
Here she is wrong. And we know this thanks to Facebook’s recent Q1 2019 earnings report.
The report lists the usual stuff, like daily active users being up
8 per cent year-on-year, and that the company managed a 26 per cent increase in sales.
And then, with no context at all, the report casually informs its investors about a potential $5b fine with the following 88 words:
‘‘In the first quarter of 2019, we reasonably estimated a probable loss and recorded an accrual of $3b in connection with the inquiry of the FTC into our platform and user data practices, which accrual is included in accrued expenses and other current liabilities on our condensed consolidated balance sheet.
‘‘We estimate that the range of loss in this matter is $3b to $5b. The matter remains unresolved, and there can be no assurance as to the timing or the terms of any final outcome.’’
Despite the record-breaking FTC fine, chief executive and founder Mark Zuckerberg still summarised ‘‘we had a good quarter and our business and community continued to grow’’.