“Facebook’s infringements of the 2011 consent decree and its pattern of violating user trusts have been both vast and brazen.” – Letter to FTC from Sen. Ed Markey (D-Massachusetts), Sen. Richard Blumenthal (D-Connecticut), Sen. Josh Hawley (R-Missouri)
The Senators are reacting to word that’s leaked out that Facebook will by hit with a record $5 billion fine to settle allegations it violated a consent decree with the FTC (Federal Trade Commission). The proposed fine, as reported in the Wall Street Journal, goes back to the Cambridge Analytica scandal after the company harvested data from more than 80 million Facebook users. This may have violated the consent decree from 2011 that prohibits FB from making users’ information available to third-parties without clear consent.
87 million people had personal information accessed by Cambridge Analytica during the run-up to the last Presidential election, which Facebook admits was improper.
“It is clear that a $5 billion fine alone is a far cry from the type of monetary figure that would alter the incentives and behavior of Facebook and its peers,” said the Senators in a joint letter
If the proposed fine comes to pass, it will be the largest fine the FTC has ever levied against a tech company.
The Senators aren’t the only ones questioning whether the fine is big enough.
“Facebook’s $5 billion FTC fine is an embarrassing joke,” wrote Nilay Patel in The Verge. “Facebook gets away with it again.”
The fine would represent roughly one month of Facebook’s revenue. It’s a big number no matter how you slice it. As Patel and others have pointed out, the fine actually increases CEO Mark Zuckerberg’s net worth. The stock price, upon the announcement of the pending fine, rose $3.54 a share, hitting its highest point in a year.
$5 Billion Fine = $10 Billion Increase in Market Value
Despite a potential $5 billion fine, and another reported $3 billion in legal fees, Facebook gained $10 billion in market value. Although the price has come down a bit since the announcement, it’s still well above pre-announcement levels.
Other On-Going Probes Into Tech Companies
The entire tech industry is under the microscope right now.
- The Department of Justice (DOJ) is looking at an anti-trust investigation of Google.
- Google’s also facing scrutiny from India, Ireland, Italy, and even its own employees.
- The Federal Trade Commission (FTC) is said to be considering a close look at Amazon’s competitive (or potentially anti-competitive) practices.
- Facebook may also be facing potential SEC and FBI probes
- DOJ also has been given jurisdiction for a potential anti-trust probe against Apple.
Facebook is also looking at substantial fines from UK regulators in the wake of the Cambridge Analytica scandal that could top a billion dollars.
Google was hit with a $57 million fine by French data protection authority officials for processing personal data for advertising purposes with valid authorization. That may be just the beginning of fines for tech companies. There are multiple investigations underway for violations of the GDPR (General Data Protection Regulations) enacted in the EU last year. So far, 59,000 data breaches have been reported and 91 fines handed out. The Wall Street Journal reported that “large GDPR fines are imminent.”
Amazon and Google have been under the microscope from consumer advocates that claim the companies favor their own products over competitors. Google has now been fined more than $9 billion in three separate actions by the EU.
Apple, Amazon, Facebook, and Google all face more complaints and probes in Europe.
Apple’s been hit by regulators before as well. A $450 million fine from the FTC was levied against Apple for alleged price fixing for eBooks. There’s also another antitrust case against Apple that revolves around allegedly monopolistic practices in the App store and pricing. That case is before the U.S. Supreme Court while a similar complaint against Apple has been filed in the EU by Spotify.