The Federal Trade Commission on Wednesday slapped Facebook with a record $5 billion fine for mishandling consumer data, but privacy analysts and Washington lawmakers were quick to say the tech giant deserves even more punishment.
The fine, one of the largest in U.S. history, requires the Silicon Valley-based social network to adopt stricter privacy and security measures over which CEO Mark Zuckerberg will have no control.
It is the result of an expansive FTC investigation of Facebook launched in 2018 after allegations surfaced that the British political consulting firm Cambridge Analytica improperly obtained the data of as many as 87 million Facebook users.
The FTC statement Wednesday said Facebook repeatedly misled its 2.2 billion users on a host of data privacy issues, including how advertisers, app developers and others gained access to personal data, including content “liked” and the stored phone numbers used for verification purposes.
“Despite repeated promises to its billions of users worldwide that they could control how their personal information is shared, Facebook undermined consumers’ choices,” FTC Chairman Joseph J. Simons said.
Mr. Simons said the fine was designed “to change Facebook’s entire privacy culture to decrease the likelihood of continued violations.”
Wall Street was unfazed by the historic size of the FTC fine. Facebook shares closed Wednesday at $204.66, up more than 50% since the year’s start.
Facebook later reported better-than-expected earnings and revenue for the second quarter, with a profit of $1.99 cents per share after an expected profit of $1.88 per share.
In a Facebook post, Mr. Zuckerberg said the FTC action would mean that his company must deploy “hundreds of engineers and more than a thousand people across our company to do this important work.”
Criticism from Capitol Hill was scathing as lawmakers from both parties slammed the punishment as a pittance for a company that notched nearly $56 billion in revenue last year.
Sen. Josh Hawley, Missouri Republican, said the FTC fine “utterly fails to penalize Facebook in any effective way.”
“The FTC is sending the message that wealthy executives and massive corporations can rampantly violate Americans’ privacy and lie about how our personal information is used and abused and get off with no meaningful consequences,” said Sen. Ron Wyden, Oregon Democrat.
The 3-2 vote by FTC commissioners broke along party lines, with Republicans supporting and Democrats opposing the fine.
Commissioner Rohit Chopra, one of the dissenting Democrats, said the newly announced privacy preventions, which include creating an independent board to oversee Facebook’s privacy policies, are too vague and would do little to alter the company’s business model, which he said relies on “surveillance and manipulation.”
“When reviewed carefully, it becomes apparent that Facebook is essentially allowed to decide for itself the extent to which it will protect user privacy,” Mr. Chopra said in a statement.
The commission’s other Democrat, Rebecca Slaughter, was critical of the FTC’s inability to hold Mr. Zuckerberg more personally responsible for the company’s inability to be transparent about personal prelacy.
She said that information unearthed during the FTC investigation “more than justified initiating litigation against Facebook and Mr. Zuckerberg” and suggested could be referred to the Department of Justice to pursue the 35-year-old CEO, who is worth approximately $75.5 billion.
Privacy analysts noted that any litigation would have to involve new allegations. Under terms of the settlement, Facebook is not required to admit any guilt for its transgressions. The FTC also did not require any significant structural changes to how the social media platform collects and monetizes user data.
“It’s unfortunately pretty commonplace for large companies like Facebook to settle with the FTC without an admission of guilt,” said Ashkan Soltani, former chief technologist of the Federal Trade Commission.
Mr. Soltani noted that no admission of guilt shields companies from “follow on actions by other regulators and plaintiffs’ firms seeking redress, while still allowing them to avoid a court battle.”
“If this were a game of chess, Facebook just checkmated FTC, flipped the board so it couldn’t be played again, and covered the whole thing up with a blanket,” he said.
Specifically, the FTC’s 20-year settlement mandated that Facebook establish a “privacy committee” independent of Facebook in a bid to remove “unfettered control” by Mr. Zuckerberg.
Facebook also must encrypt all user passwords and file a quarterly report to the FTC showing compliance with its new privacy requirements, which also cover Facebook–owned services WhatsApp and Instagram.
The new system of corporate and external checks and balances also requires Facebook to offer protections for biometric data including opt-in consent for facial recognition.
Separately Wednesday, the Securities and Exchange Commission announced it had fined Facebook $100 million over claims that the firm misled investors about the misuse of customer data. Facebook neither admitted nor denied the SEC claims.
On Tuesday, the Department of Justice announced that it had officially launched an antitrust investigation into how the nation’s massive online platforms — such as Facebook, Google, Apple and Amazon — could be abusing their market power to shut down competition.
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