The Federal Trade Commission has approved a fine of roughly $5 billion against Facebook for mishandling users’ personal information, according to three people briefed on the vote, in what would be a landmark settlement that signals a newly aggressive stance by regulators toward the country’s most powerful technology companies.
The much-anticipated settlement still needs final approval in the coming weeks from the Justice Department, which rarely rejects settlements reached by the agency. It would be the biggest fine by far levied by the federal government against a technology company, easily eclipsing the $22 million imposed on Google in 2012. The size of the penalty underscored the rising frustration among Washington officials with how Silicon Valley giants collect, store and use people’s information.
It would also represent one of the most aggressive regulatory actions by the Trump administration, and a sign of the government’s willingness to punish one of the country’s biggest and most powerful companies. President Trump has dialed back regulations in many industries, but the Facebook settlement sets a new bar for privacy enforcement by United States officials, who have brought few cases against large technology companies.
In addition to the fine, Facebook agreed to more comprehensive oversight of how it handles user data, according to the people. But none of the conditions in the settlement will impose strict limitations on Facebook’s ability to collect and share data with third parties. And that decision appeared to help split the five-member commission. The 3-to-2 vote, taken in secret this week, drew the dissent of the two Democrats on the commission because they sought stricter limits on the company, the people said.
Until now, the biggest fines and restrictions against tech companies have come from Europe. Officials there have imposed several charges of antitrust and privacy laws against Amazon, Apple, Facebook and Google. Last year, the European Union fined Google $5.1 billion for abusing its large market share in the mobile phone industry. More recently, numerous officials and lawmakers around the world have rushed to regulate Facebook.
The F.T.C.’s investigation was set off by The New York Times and The Observer of London, which uncovered that the social network allowed Cambridge Analytica, a British consulting firm to the Trump campaign, to harvest personal information of its users. The firm used the data to build political profiles about individuals without the consent of Facebook users.
The agency found that Facebook’s handling of user data violated a 2011 privacy settlement with the F.T.C. That earlier settlement, which came after the company was accused of deceiving people about how it handled their data, required the company to revamp its privacy practices.
American regulators and lawmakers of both parties have also taken a more combative stance toward the tech giants in recent weeks. Congress started an antitrust investigation into how the biggest tech companies have harmed consumers and impeded competition. The Justice Department and the F.T.C. divvied up responsibility for potential antitrust investigations into several of the companies.
On Thursday, Mr. Trump took shots at Facebook and other social media companies, accusing them of being biased against conservatives. He also took to Twitter to criticize Facebook’s latest initiative into cryptocurrency — a project called Libra, which is still in its early stages — saying that Facebook’s proposed coin would never usurp the dollar. David Marcus, the Facebook executive in charge of Libra, is scheduled to appear before Congress next week to explain and defend the initiative.
The commissioners agreed many months ago to pursue a substantial penalty against the company, in an effort to show the agency’s teeth, according to several people briefed on the discussions. But they were split on the size and scope of the tech company’s punishment. One of the most contentious issues was whether Mark Zuckerberg, Facebook’s chief executive, should be held personally liable for any violation of the 2011 agreement.
The internal debate mirrored the larger debate in Washington over just how far the government should go to regulate Big Tech.
Many Democrats and Republicans have thrown their support behind privacy regulations. But some Democrats, including presidential candidates like Senator Elizabeth Warren of Massachusetts, have called for breaking up some of the biggest companies.
Lawmakers urged the F.T.C. to be aggressive in its investigation of Facebook. The agency oversees deceptive and unfair business practices. It is also the main watchdog for the internet industry that protect users privacy by policing companies for misleading users on how their personal data is collected and shared.
New revelations of privacy violations reported throughout the year added to evidence of problems at the company but also complicated the ability of the F.T.C. to conclude its inquiry.
Republicans said little about the F.T.C. vote on Friday. But numerous Democrats said the agency did not go far enough.
“The F.T.C. just gave Facebook a Christmas present five months early,” Representative David Cicilline, Democrat from Rhode Island, said in a statement. “It’s very disappointing that such an enormously powerful company that engaged in such serious misconduct is getting a slap on the wrist.”
Senator Richard Blumenthal, Democrat of Connecticut, said in an interview that meaningful enforcement of Facebook would have included deep structural reforms. Without that, he said, “the message to the world is that, sadly, American consumer privacy protection is a hollow paper tiger, which is deeply disappointing.”
Despite all the criticism of the company, it has continued to do well financially. The social network reaped more than $55 billion in revenue in 2018 — 10 times the amount of the fine approved by the commission — as the digital advertising industry has consolidated to increasingly drive dollars to a handful of tech companies.
In April, Facebook reported a record first quarter of revenue of nearly $15 billion. And the company is sitting on more than $40 billion in cash reserves.
Shares of Facebook rose to $205.27 — the stock’s highest price in the past year — in after-hours trading on Friday after news of the vote became public.
Some privacy and consumer advocates pointed to the company’s value on Wall Street as proof that the settlement would not curb the company’s behavior.
“It’s a bad sign that markets are reacting to Facebook’s settlement with the F.T.C. by jumping the value of the company’s stock,” Robert Weissman, the president of Public Citizen, a consumer interest group, said in a statement.
Source - NYT
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