Facebook will pay an unbeatable $ 5 billion penalty for privacy violations
The settlement resolves a formal complaint from the FTC claiming that Facebook "used misleading disclosures and settings" that eroded the user's privacy and violated a prior agreement Facebook signed with the commission in 2012. Facebook also violated the law, the FTC allegedly by abusing phone numbers obtained for account security purposes to also target ads to users. And the company was allegedly deceived "tens of millions of users" by suggesting that a face recognition feature on the service had not been enabled by default, when it had actually done so.
"The magnitude of the $ 5 billion penalty and the relief of sweeping behavior is outstanding in the history of the FTC," said chairman Joseph Simons in a statement. "The relief is designed not only to punish future violations, but more importantly, to change Facebook's privacy culture to reduce the likelihood of continued breach."
Separately, on Wednesday, the Securities and Exchange Commission announced that Facebook had agreed to pay $ 1[ads1]00 million to settle "charges … for having given misleading disclosures regarding the risk of abuse of Facebook user data."
Facebook did not respond immediately to a request for comment.
The FTC settlement – which also covers Facebook subsidiaries Instagram and WhatsApp – could set the tone for a wave of further action by decision makers around the world as they seek to rein in the most powerful players in Silicon Valley.
In addition to civil criminal liability, Facebook also agreed to accept greater supervision of privacy. Under the FTC agreement, Facebook's board will form a privacy committee consisting of independent members who cannot be fired by CEO Mark Zuckerberg alone. That committee will be prosecuted for appointing other officials who must periodically confirm that Facebook complies with the FTC agreement or risk becoming personally liable. Zuckerberg will also be required to do the same certifications, FTC said.
"False certifications would expose Mr. Zuckerberg and [designated compliance officers] to personal liability, including civil and criminal fines," Simons said in a statement written with the commission's two other Republican members, Christine Wilson and Noah Phillips.
The FTC also required regular third-party reviews of Facebook's privacy practices not to rely on corporate material, but rather on the auditor's actual findings.
The FTC voted 3-2 to approve the settlement, with the agency's two democrats disagreeing because they believed the measure did not go far enough. In dissent, commissioners Rohit Chopra and Rebecca Slaughter said they thought the fines were far too small and that the FTC wrongly gave Zuckerberg and Facebook's CEO Sheryl Sandberg a passport.
"Failure to keep them accountable only encourages other officers to be similarly neglected to fulfill their legal obligations," Chopra wrote. "In my view, it is appropriate to charge officers and directors personally when there is reason to believe that they have meaningfully participated in illegal behavior, or negligently turned the blind eye to the fact that their subordinates did the same."
With Wednesday's announcement, the FTC attempted to demonstrate its determination as the country's top policeman, attempting to show that it is a robust and reliable enforcer at a time when tech dominates almost every aspect of modern life, from advertising to communication and entertainment.
For more than a year, the FTC study gained increasing importance as a test of Washington's commitment and ability to regulate Silicon Valley. It marked a sharp deviation from the Obama era, as Silicon Valley engineers and entrepreneurs were frequent visitors to the White House and in many cases filled important management positions. Now, at a time when technology companies are undergoing scrutiny from Congress and on the receiving end of President Trump's social media jabs, analysts say the FTC was under pressure to seek out a tough deal from Facebook.
But the settlement, which must still be approved by a judge, proved much weaker than any commissioner had hoped. Chopra and Slaughter both said that the far-reaching consequences of Facebook's error occurred demanding more aggressive action.
The federal government should have taken Facebook to court to deter it from breaking the law in the future, Slaughter wrote in his dissent. [19659003] "Litigation would have given public openness and accountability to the company, its leaders and the commission," she wrote. "It would send a message to the market and the public that the Commission is willing to go to the mat to ensure that the orders are met."
The settlement does not require Facebook to spins Instagram and WhatsApp; antitrust experts have said that a breach would probably require a separate lawsuit claiming that Facebook violated the country's competition law, as opposed to a previous settlement settlement.
Separately, the FTC said on Tuesday that it had brought complaints – and reached settlement with – Cambridge Analytica, its former CEO Alexander Nix, and app developer Aleksandr Kogan for his alleged roles in abusing Facebook user data. The settlements will limit Nix and Kogan's ability to "run any business in the future," the FTC said.
The FTC announcements this week may put pressure on Congress to give the agency more power or to develop a national privacy law, some analysts said.
"There is a need and demand for legislation regardless of this settlement [Facebook]," said Hal Singer, an economist at George Washington University's Institute of Public Policy.
Such a bill can have far-reaching effects and potentially touch every corner of the economy as technology constantly finds its way into new areas. But the progress of legislation has been slow, and many political experts privately say that they are increasingly doubting that a bill can be adopted this year.
"These issues of trust and privacy are not limited to Google and Facebook," said Todd McKinnon, managing director of the cloud service company Okta. "If you're a laundry and have a mobile app that gets your customers in there, you're a technical company – so technology will affect your laundering. It sounds funny, but it's true."
Republicans as Senator Marsha Blackburn (R-Tenn.) Have also called for greater limits on technology companies. In a recent speech to the US Chamber of Commerce, Blackburn said it is too early to consider breaking up major tech platforms, but companies like Facebook have shown that they can no longer regulate themselves.
However, Wednesday's settlement is not. It will probably deter states looking closer to Silicon Valley.
Several state attorneys have suggested that they can team up with their own investigations or lawsuits against technical industry. In December, Karl Racine, State Prosecutor of the District of Columbia, became the first time his office sued Facebook over the Cambridge Analytica debate.
And the FTC itself could open for further investigations, said Harold Feld, senior vice president of consumer public knowledge. For example, a newly established working group charged with reviewing prior technical mergers could attempt to determine whether Facebook's acquisition of WhatsApp or Instagram proved to be detrimental to the competition.
"It's very clear that the settlement is not the end of the game," said Feld.
