US regulators approve $5bn Facebook fine over privacy issues

The US federal trade commission (FTC) approved a roughly $5 billion (€4.4 billion) settlement with Facebook Inc this week over its investigation into the social media company's handling of user data, a source familiar with the situation said on Friday.

The FTC has been investigating allegations that Facebook inappropriately shared information belonging to 87 million users with the now-defunct British political consulting firm Cambridge Analytica.

The investigation has focussed on whether the sharing of data and other disputes violated a 2011 consent agreement between Facebook and the regulator.

Shares of Facebook rose after the news was reported by the Wall Street Journal earlier on Friday and closed up 1.8 per cent.

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Facebook earlier this year said it had set aside $3 billion to pay for what it said it expected to be a $3 billion to $5 billion penalty.

Facebook declined to comment on the story, which said the 3-2 vote broke along party lines, with Republicans in support and Democrats in opposition to the fine.

The FTC declined to comment.

The settlement still needs to be finalised by the US justice department’s civil division and a final announcement could come as early as next week, the source said.

The fine would be the largest the FTC has levied on a technology company.

Facebook’s revenue for last year hit nearly $56 billion.

The Wall Street Journal report did not say what else the settlement includes beyond the fine, though it is expected to include limits on how Facebook treats user privacy.

Criticism

Representative David Cicilline, a Democrat and chair of a congressional antitrust panel, called the $5 billion penalty “a Christmas present five months early.”

“This fine is a fraction of Facebook’s annual revenue. It won’t make them think twice about their responsibility to protect user data,” he said.

Facebook’s revenue for the first quarter of this year was €13.2 billion ($15.1 billion) while its net income was €2.15 billion ($2.43 billion). It would have been higher, but Facebook set aside (€2.65 billion)$3 billion for the FTC penalty.

While the deal resolves a major regulatory headache for Facebook, the Silicon Valley firm still faces further potential antitrust probes as the FTC and the US justice department undertake a wide-ranging review of competition among the biggest US tech companies.

It is also facing public criticism from US president Donald Trump and others about its planned cryptocurrency Libra over concerns about privacy and money laundering.

The Cambridge Analytica missteps, as well as anger over hate speech and misinformation on its platform, have also prompted calls from people ranging from presidential candidate US senator Elizabeth Warren to a Facebook co-founder, Chris Hughes, for the government to force the social media giant to sell Instagram, which it bought in 2012, and WhatsApp, purchased in 2014.

But the company’s core business has proven resilient, as Facebook blew past earnings estimates in the past two quarters.

Responsibility

While details of the agreement are unknown, in a letter to the FTC earlier this year, Senators Richard Blumenthal, a Democrat, and Josh Hawley, a Republican, told the agency that even a €4.4 billion ($5 billion) civil penalty was too little and that top officials, potentially including founder Mark Zuckerberg, should be held personally responsible.

FTC Commissioner Rohit Chopra, a Democrat, has said the agency should hold executives responsible for violations of consent decrees if they participated in the violations. Chopra did not respond to requests for comment on Friday.

The settlement still needs to be finalised by the US justice department’s civil division and a final announcement could come as early as next week, the source said.

A source knowledgeable about the settlement negotiations had said in May any agreement would put Facebook under 20 years of oversight. – Reuters, PA