Just the Facts
Five Facts on the $5 Billion Facebook Fine
By No Labels
July 17, 2019 | Blog
The Federal Trade Commission (FTC) approved a $5 billion settlement with Facebook on Friday. The fine follows an investigation that began more than a year ago into the tech giant’s mishandling of their users’ private information. This investigation is one of many recent efforts by the government to crack down on big tech companies. Here are the facts.
The FTC investigation started after Facebook’s 2018 Cambridge Analytica scandal.
Cambridge Analytica, a British political data firm, began harvesting data from Facebook users in 2014. 270,000 Facebook users consented to share their private data with Cambridge Analytica when they took a personality survey administered by researchers. By consenting to sharing information from their profiles, the users also approved access to their Facebook friends’ private profile data. This expanded Cambridge Analytica’s access to 50 million Facebook profiles. The data firm created tools that could identify the personality types of these users based on what they “liked” on Facebook. The firm used this information to create targeted ads that influenced users’behavior.
The FTC investigated whether Facebook violated a previous consent agreement that it entered with the FTC in 2011.
The 2011 agreement was made after the FTC filed an eight-count complaint against Facebook for claims of unfair and deceptive privacy practices that violated federal law. Facebook agreed to settle with the FTC for deceiving its customers by repeatedly allowing their users’ information to be shared after telling users that their information would be kept private. The settlement required Facebook to create an extensive privacy program and to take steps to ensure that the company received clear consent from its users before sharing their data.
$5 billion is the largest fine to date that the U.S. federal government has issued against a technology company.
Before the $5 billion fine, the largest imposed on a tech company by the U.S. was issued in 2012 for $22.5 million against Google. The fine against Facebook is the first of its kind for the U.S., but Europe has previously issued larger fines against big tech companies. Google was fined $5.1 billion last year by the European Union.However, the European Union’s privacy law would not have allowed the EU to issue a financial penalty as high as the fine issued by the FTC against Facebook last week.
Facebook anticipated a $3-$5 billion fine.
In April, Facebook disclosed its first quarter earnings report for 2019 that showed record first quarter revenue of $15 billion and $40 billion in cash reserves. The April report also included a $3 billion anticipated charge from the FTC settlement, but the company estimated in April that the charge could reach up to $5 billion.
The settlement was decided by a 3-2 vote of FTC commissioners.
The vote was split down party lines. The three yes votes were made by Republican commissioners and the two who voted no were Democrats. The Democrats voted against the settlement believing that $5 billion was not a steep enough fine and that tougher oversight should be implemented against the tech company. The FTC commissioners do not have the final say. It is standard procedure for the Justice Department to review FTC decisions before they are finalized.