Facebook to pay hefty price for lax privacy controls

The Federal Trade Commission slapped social media giant Facebook with a huge fine as part of a long-running investigation into the company’s privacy practices. According to reports in several media outlets, including the Wall Street Journal and The New York Times, the FTC voted to approve a $5 billion settlement of claims arising from the so-called Cambridge Analytica scandal.

The settlement, which would be the largest ever involving the FTC, still must be approved by the Department of Justice, the reports noted. The FTC declined to respond to The Green Sheet’s request for confirmation. But Facebook made clear in an earnings report earlier this year that it expected the FTC’s investigation would result in a $3 billion to $5 billion hit. To put the proposed fine into perspective, Facebook reported earnings of just over $15 billion for the first quarter of 2019. Immediately following reports of the settlement Facebook’s stock price rose by almost 2 percent.

Facebook’s privacy practices came under government scrutiny in 2018 when it was revealed that the firm Cambridge Analytica had harvested information on as many as 87 million Facebook users without their consent and used it to inform targeted political advertisements during the 2016 elections. This would appear to violate a 2011 consent decree Facebook entered into with the FTC promising to beef up privacy protections around user information. Among other things, Facebook agreed then to obtain the consent of users before sharing their private information with third-party organizations.

Congress may up the pressure

The reported settlement, while large, is being derided by Democratic lawmakers. “The FTC just gave Facebook a Christmas present five months early,” complained Representative David N. Cicilline, D-R.I. Cicilline, chairman of the House Judiciary Antitrust Subcommittee, said in June that panel would be investigating Facebook and other digital platforms with an eye toward curbing potential anti-competitive practices.

“It’s very disappointing that such an enormously powerful company that engaged in such serious misconduct is getting a slap on the wrist,” Cicilline said, noting that the fine represents just “a fraction” of Facebook’s annual revenues. The fine, he said “won’t make them think twice about their responsibility to protect data. … If the FTC won’t protect consumers, Congress surely must.”

Senator Mark Warner, D-Va., struck a similar chord. “Given Facebook’s repeated privacy violations, it is clear that fundamental structural reforms are required,” he said. “With the FTC either unable or unwilling to put in place reasonable guardrails to ensure that user privacy and data are protected, it’s time for Congress to act.” Warner co-authored several bipartisan bills addressing data security and privacy issues involving big tech and social media platforms. One, the DASHBOARD Act, co-authored by Senator Josh Hawley, R-Mo., would require data harvesting companies like social media platforms to tell consumers and financial regulators exactly what data they are collecting from consumers and how it is leveraged for profit. Sen. Warner, in a June 12 statement, said he would be introducing additional legislation addressing data privacy and security issues around big tech in coming weeks.

Senator Elizabeth Warren, D-Mass., said the fine represented just “a drop in the bucket” of Facebook earnings. “The FTC should break Facebook up, plain and simple,” Warren, who is seeking the Democratic Presidential nomination, tweeted. “Enough is enough.”

Whether you want to upgrade your POS offerings, find a payment gateway partner, bone up on fintech regs or PCI requirements, find an upcoming trade show, read about faster payments, or discover the latest innovations in merchant acquiring, The Green Sheet is the resource for you. Since 1983, we've helped empower and connect payments professionals, starting with the merchant level salespeople who bring tailored payment acceptance and digital commerce tools, along with a host of other business services to merchants across the globe. The Green Sheet Inc. is also a proud affiliate of Bankcard Life, a premier community that provides industry-leading training and resources for payment professionals.

Notice to readers: These are archived articles. Contact information, links and other details may be out of date. We regret any inconvenience.