The Federal Trade Commission has reportedly reached a $5 billion settlement with Facebook over multiple incidents of privacy violations. The voting was done by a five-member commission, with three Republicans endorsing the fine and two Democrats objecting to it as they were keen on stricter regulations on the social media giant. The case is now pending with the Justice Department, which is more of a customary step and unlikely to overturn the decision. It is not known when the settlement will be finalized.
More than a year ago, the FTC began a probe into Facebook, after it emerged that the consultancy firm Cambridge Analytica harvested user data to build political profiles for the presidential campaign. The data of nearly 87 million users was shared by the now-defunct firm with its clients. Facebook's mishandling of user's personal information violated an earlier settlement with the FTC which required it to be vigilant about privacy.
In the year following the incident, numerous other reports brought to light the fact that Facebook is perhaps not as serious about protecting user data as it should be.
The social media company had already estimated that the fine could be as high as $5 billion and it had reportedly set aside $3 billion for the penalty. It is not known what else the company will be required to do as part of the settlement. However, this landmark settlement is expected to increase the government's restrictions on how Facebook handles user data. However, the decision is unlikely to affect how the company shares data with third parties. It is also not known if any of the clauses in the settlement directly apply to Facebook's CEO Mark Zuckerberg.
Neither FTC nor Facebook has officially said anything about the supposed settlement. Critics believe that the fine should be heftier since it will be peanuts for a company that reported $15 billion in revenue in the last financial quarter. In fact, the company's share popped on the report, which means the penalty wasn't seen as anything major by the market.
However, in the context of previous settlements, this is a record-breaking fine and can set a new precedent for the industry. The largest fine ever imposed before this in the U.S. was the $22.5 million penalty levied on Google in 2012. The Justice Department and the FTC are also investigating some other industry heavyweights right now including Amazon and Apple for antitrust violations.
Europe has a more hardline stance on tech companies such as Amazon, Facebook, Apple, and Google than the U.S. For instance, Google was asked to pay $5.1 billion for abusing its monopoly position in the smartphone industry last year by the European Union. Similarly, European officials have been calling for regulation of Facebook.
It now seems that American regulators are also taking inspirations from their European counterparts. Even when the FTC case is done with, Facebook will still face other challenges in the U.S. and abroad such as scrutiny from lawmakers, possible antitrust actions, and maybe even new digital taxes in France and the UK.
Recently, U.S. President Donald Trump bashed Facebook and other companies for being anti-conservative and also criticized the social media giant's upcoming Libra cryptocurrency.