FTC Hits Facebook with $5 Billion Fine and New Regulations

FTC Hits Facebook with $5 Billion Fine and New Regulations

The US Federal Trade Commission has formally levied a historic $5 billion fine against Facebook for violating a 2012 FTC order related to user privacy, concluding a lengthy investigation that began in the wake of the Cambridge Analytica scandal. The FTC determined that Facebook had been misleading its users and sharing personal information with third party apps, even when those users had not given their informed consent to the practice.

“Despite repeated promises to its billions of users worldwide that they could control how their personal information is shared, Facebook undermined consumers’ choices,” said FTC Chairman Joe Simons, in a press release that noted that Facebook repeatedly failed to disclose key details of its data sharing policies.

The FTC’s fine also comes with a slew of other terms and conditions as part of a 20-year settlement with Facebook. The company must establish an independent privacy committee of its Board of Directors, and hire compliance officers who will be accountable to that privacy committee rather than CEO Mark Zuckerberg or any other Facebook employee.

Facebook will have to make regular reports to an independent assessor, and terminate its relationship with third party apps that are not in compliance with Facebook policies. It is also expected to display more transparency to achieve more explicit, informed consent when using technology like facial recognition.

While the $5 billion price tag is eye-catching (and 20 times larger than any previous privacy penalty), it’s unclear if it will force Facebook to change its behavior in any meaningful way, even with greater FTC oversight. Facebook’s stock went up when the fine was first revealed, largely because the announcement removes any lingering ambiguity and Facebook had already set aside money to pay the fine. The company generated $16 billion in revenue in the second quarter of 2019.

The hefty but manageable fine ultimately highlights the challenge of regulating a company at the scale of Facebook. It also demonstrates why it’s so important when billions of users trust the social media giant with their personal information.