Sunday, 14 July 2019 14:56

Facebook to pay US$5b for privacy violations

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In a 3-2 decision, FTC Commissioners voted to impose a fine of approximately US$5 billion on Facebook for a variety of privacy issues.

The dissenters were Democrats, while Republicans held the majority position on the Commission. The dissenters sought significantly stricter limits on the company than did the Republican majority.

The FTC opened its investigation into Facebook's privacy posture following the Cambridge Analytica scandal in March of 2018. 

Many have argued that Facebook has been in near-continuous breach of its 2012 FTC settlement and perhaps the Cambridge Analytica issue along with another loss of some 50 million database records finally brought the FTC to action.

There have been rumours for some months that a penalty of this magnitude was on the cards, with observers noting that Facebook's accounts included a provision for a US$3.5 billion penalty.

After the announcement of the penalty was made late on Friday (US time), Facebook shares rose by 1.8%, suggesting that investors were largely happy with the magnitude of the fine and lack of other operating restrictions.

Of course the US Department of Justice still has to review the settlement prior to it becoming final, but changes at this late stage are very rare. Of some interest is that this fine dwarfs any previous penalty imposed by the FTC – the previous largest being US$22.5 million levied against Google in 2012.

Political commentary has largely come from the Democrats:

Senator Richard Blumenthal (D-Conn.) described the penalty as a "tap on the wrist," while Senator Elizabeth Warren (D-Mass.), budding presidential candidate, called the settlement a "victory for Facebook." Senator Mark Warner (D-Va.) said that 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".

This penalty is far from the end for Facebook. Various US state Attorneys also have pending actions, along with other countries around the world. Further, some presidential candidates have called for the break-up of the larger tech companies, particularly Facebook and Google.

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