FTC Approves Roughly $5 Billion Facebook Settlement
FTC Approves Roughly $5 Billion
Facebook Settlement
FTC commissioners broke along party lines, 3-2, with
the Republican majority lining up to support the pact while Democratic
commissioners objected
The Federal Trade Commission voted this week to approve a
roughly $5 billion settlement with Facebook Inc. over
a long-running probe into the tech giant’s privacy missteps, according to
people familiar with the matter.
The 3-2 vote by FTC commissioners broke along party lines,
with the Republican majority lining up to support the pact while Democratic
commissioners objected, the people said. The matter has been moved to the
Justice Department’s civil division and it is unclear how long it will take to
finalize, the person said. Justice Department reviews are part of the FTC’s
procedure but typically don’t change the outcome of an FTC decision.
A settlement is expected to include other government
restrictions on how Facebook treats user privacy. The additional terms of the
settlement couldn’t immediately be learned.
An FTC spokeswoman declined to comment, as did a Facebook
spokesman.
Facebook
said April 24 that it was expecting to pay up to $5 billion to settle the
probe. A resolution was bogged down by a split between Republicans and Democrats
on the FTC, with the Democrats pushing for tougher oversight of the
social-media giant.
The FTC investigation began more than a year ago after
reports that personal data of tens of millions of Facebook users improperly
wound up in the hands of Cambridge Analytica, a data firm that worked on
President Trump’s 2016 campaign. The FTC investigation centered on whether that
lapse violated the 2012 consent decree with the agency in which Facebook agreed
to better protect user privacy.
Since the Cambridge Analytica affair, other privacy
missteps have come to light, adding to Facebook’s headaches.
The settlement would easily exceed the previous record
penalty for violating an FTC order, a $22.5 million fine against Google Inc. in
2012. The commission has limited powers to impose fines for first-time privacy
violations but has broad latitude to sanction repeat offenders.
Facebook shares gained slightly more than 1% on the news,
despite the amount being $2 billion more than the company had reserved for the
settlement.
The party-line decision could
expose Republicans to criticism by Democrats and diminish its
impact for the FTC, which has sometimes been criticized for being toothless on
privacy in the past. After Facebook set aside billions of dollars to pay the
fine, some Democrats criticized the amount as too little.
Facebook and other large tech companies are under an
increasingly harsh spotlight in Washington, D.C., including at a “social media
summit” hosted by the White House on Thursday in which President Trump
repeatedly bashed Silicon Valley as being unfair to conservatives. Facebook
wasn’t invited to attend, nor were other tech companies, and they have
previously said they police their platforms without regard to political
ideology.
Facebook is also gearing up for potential scrutiny of its
competitive practices. The Wall Street Journal reported last month that the
Justice Department is gearing up for an
antitrust probe of Alphabet Inc. ’s
Google and has authority to look into Apple Inc. while
the FTC has taken jurisdiction for possible antitrust probes of Facebook and Amazon.com.
Facebook is also preparing for congressional hearings next
week related to its proposed cryptocurrency
Libra, which has drawn skepticism from President Trump and many
regulators.
With the dollar amount approved this week, the FTC
obtained a financial penalty higher than what European Union could have sought
under its privacy law.
Facebook’s first FTC settlement, finalized in 2012,
resolved commission allegations that the company repeatedly broke its privacy
promises to the site’s users, including by sharing their data with advertisers
and other third parties.
For example, Facebook-based apps like a television-show
quiz could find a user’s relationship status or photos, the FTC said at the
time—even though Facebook said it wouldn’t share unnecessary personal details
with apps. Facebook settled the case in part by promising not to further
deceive users.
In 2017, Facebook said a personality-prediction app had
gathered data from tens of millions of users and shared it with a political
consulting firm, Cambridge Analytica. The FTC re-opened the case, this time
armed with its significant power to punish repeat offenders.
The big-ticket fine is unlikely to satisfy Facebook’s
staunchest critics, much as multibillion-dollar penalties against big banks
after the 2008 financial crisis did little to reduce anger at Wall Street.
Lawmakers in both parties are working on new privacy rules
for large tech firms, while many Democratic presidential candidates want to
investigate Facebook’s market power. Sen. Elizabeth Warren (D., Mass.) is
calling to break up the company, a position recently backed by Facebook
co-founder Chris Hughes.
—John
McKinnon contributed to this article.
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