View profile

Facebook braces for an FTC fine

In February, the Washington Post's Tony Romm reported that Facebook is negotiating a settlement with
April 24 · Issue #321 · View online
The Interface
In February, the Washington Post’s Tony Romm reported that Facebook is negotiating a settlement with the Federal Trade Commission. The company signed a consent decree with the FTC in 2011 in which it promised to improve its privacy practices. The settlement, he reported, would include a multibillion-dollar fine. At the time, Facebook had no comment. But in an unusual move today, the company essentially confirmed the report as part of its quarterly earnings statement.
Nick Statt reports:
The company posted first quarter earnings today for 2019, highlighting its continued monthly and daily active user increases and a 26 percent increase in year-over-year sales, up to $15.1 billion and ahead of Wall Street expectations. But Facebook also says it is setting aside $3 billion, or roughly 6 percent of its cash and marketable securities on hand, for the FTC fine that is coming down the pipeline at some point, likely later this year.
“In the first quarter of 2019, we reasonably estimated a probable loss and recorded an accrual of $3.0 billion 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,” the company writes in its earnings statement. “We estimate that the range of loss in this matter is $3 billion to $5 billion. The matter remains unresolved, and there can be no assurance as to the timing or the terms of any final outcome.”
On an earnings call, the company said the $3 billion figure was at the low end of its expectations for a fine. Ashkan Soltani, who used to work at the FTC, suggested that Facebook might have taken the unusual step of pre-announcing a fine as a negotiating tactic — anchoring the price at a level that the company finds acceptable, while discouraging regulators from asking for any more.
In The Information, Ashley Gold compares a potential $3 billion fine to some of the other big speeding tickets issued against tech companies. It would be exponentially bigger than the biggest fine issued by the FTC to date — $22.5 million, against Google in 2012. But it would be smaller than European actions against Big Tech. The EU issued a $15.3 billion fine against Apple in 2016, for tax evasion; and a $5 billion fine against Google last year, for antitrust issues. And it would pale next to fines levied against banks — such as the $16.7 billion fine the Justice Department issued against Bank of America in 2014 for defrauding consumers during the financial crisis.
Some lawmakers expressed dismay that the proposed fine against Facebook seemed rather low. “A predicted $3 billion seems paltry compared to $15 billion in profits last quarter,” Sen. Richard Blumenthal (D-CT) tweeted. Investors, on the other hand, were excited: Facebook stock rose after reporting a very good quarter, and added $40 billion or so to its market capitalization.
All of which raises the question: what would be an appropriate enforcement action for the US government to take against Facebook over the Cambridge Analytica data privacy scandal, which precipitated this latest inquiry? ’
As best as I can tell, the FTC rarely lays out a rationale for how it arrives at fines. And the Cambridge Analytica scandal was deeply strange, as I never tire of reminding people. Most of its details had been known for the better part of two years when the story broke; Facebook had long since shut down the API access that Cambridge Analytica abused; and the resulting harm to consumers was unclear. (The idea that Cambridge Analytica’s ill-gotten psychographic profiles of voters swayed the election, while explosive, doesn’t seem to have swayed many political scientists.)
But the FTC’s inquiry is taking place at a time when a vocal minority of Americans are calling for tech platforms to face real consequences after years of data leaks and breaches. The agency is also facing pressure to act from Congress, who have rightly slapped the agency for its institutional bias toward inaction.
On the surface, a $3 billion fine looks like a win to both the FTC and Facebook. For the agency, the move will inspire a round of headlines about its “largest fine ever,” and allow it to push back on the idea that it’s an office full of empty suits. For Facebook, those same headlines will convey a welcome sense that the company is being held accountable for its past misdeeds, while simultaneously costing it a meaningless amount of money.
It’s also possible that the fine could come with new restrictions on how Facebook collects or uses data, but I would be surprised if any of them required the company to change how it does business. The 2011 consent decree was, in essence, a pinky promise that the company would do better to protect our privacy. And then predictive technology got so good that companies can now infer our behavior while knowing almost nothing about us, rendering many 2011-era privacy concerns quaint.
In such a world, a trivial fine over what is essentially a moot point can’t help but look a little ridiculous. Some day, tech companies may face accountability for real. In the meantime, what they’re facing looks a lot like theater.

Twitter Is Not America
Indian court moves to lift ban on Chinese video app TikTok
Facebook Says First-Person Christchurch Video Foiled AI System
NZ and France seek to end use of social media for acts of terrorism
In Push for 2020 Election Security, Top Official Was Warned: Don’t Tell Trump
Sri Lankans Adapt to Social-Media Shutdown as Government Holds the Line
Misinformation doesn’t have to be altered to go viral
The Dirty Dozen 2019 (PDF)
You might hate it, but Facebook Stories now has 500M users
Facebook while black: Users call it getting 'Zucked,' say talking about racism is censored as hate speech
The Gentle Side of Twitch
Bumble’s ‘private detector’ AI will automatically detect and blur lewd images
I Used to Work for Google. I Am a Conscientious Objector.
And finally ...
Mark Zuckerberg has a podcast now
Talk to me
Send me tips, comments, questions, and FTC fines:
Did you enjoy this issue?
If you don't want these updates anymore, please unsubscribe here.
If you were forwarded this newsletter and you like it, you can subscribe here.
Powered by Revue