FTC $5 billion fine doesn't spell closure for Facebook
A Facebook user scrolls through the app in this undated file photo. (bombuscreative/IStock.com)
Barbara Ortutay, The Associated Press
Published Saturday, July 13, 2019 9:56PM EDT
Last Updated Wednesday, July 24, 2019 8:57AM EDT
Facebook may be close to putting a Federal Trade Commission investigation behind it. But it faces a variety of other probes in Europe and the U.S., some of which could present it with even bigger headaches.
While the $5 billion fine from the FTC, which Facebook has been expecting, is by far the largest the agency has levied on a technology company, the real worries for Facebook -- and its investors and the companies that use it to advertise on its service -- are the other restrictions and government oversight that might come with it. This goes for the other investigations as well, which span the globe from the European Union, Germany, and Belgium to New York, Canada and elsewhere.
"This fine signals that regulators are ratcheting up the pressure," said Dimitri Sirota, the CEO of BigID, a business data privacy company, in an email. He said that the FTC action, together with recent European fines on British Airways and Marriott, shows that regulators around the world are getting bolder in cracking down on data privacy violations. Facebook may think the fine is easily affordable, he said, but it hurts its image and trustworthiness.
Beyond the regulatory investigations, Cowen analyst John Blackledge noted that Facebook and other big companies also face broader antitrust concerns .
Facebook has enjoyed more than a decade of unfettered growth as Silicon Valley's golden child, trusted to regulate itself and keep its 2.4 billion users' interests at heart.
Then came Russian meddling in the 2016 elections, fake news and the Cambridge Analyticascandal, in which a political data mining firm affiliated with the 2016 presidential campaign of Donald Trump improperly accessed the personal data of as many as 87 million users.
Regulators, mainly in Europe but also in the U.S., perked up. And now Facebook faces the prospect of not only billions more in fines, but additional restrictions on its business.
-- Irish Data Protection Commission
Ireland's data regulator has launched an investigation of Facebook over the Cambridge Analytica data leak last year. At issue is whether the company complied with strict European regulations that went into effect in May 2018 covering data protection. Under the new rules, companies could be hit with fines equal to 4 per cent of annual global turnover for the most serious violations.
The probe could potentially cost Facebook more than $2.3 billion in fines based on its 2018 revenue, or more if it makes more money this year, which is all but certain. The commission, which handles online data regulation for the European Union, has nearly a dozen open investigations on Facebook that include its subsidiaries WhatsApp and Instagram, which could carry additional . Facebook says it is co-operating with the investigations.
-- U.S. Housing and Urban Development
The U.S. government charged Facebook with high-tech housing discrimination in March for allegedly allowing landlords and real estate brokers to systematically exclude groups such as non-Christians, immigrants and minorities from seeing ads for houses and apartments.
The civil charges filed by the Department of Housing and Urban Development could cost the social network millions of dollars in penalties. More important, they're already affecting the company's business model -- its ability to target ads with near-surgical precision. By its nature, this sort of targeting excludes some people and includes others. And that's not always legal.
The charges came despite changes Facebook announced just a week earlier to its ad targeting system. The company had agreed to overhaul its targeting system and abandon some of the practices singled out by HUD to prevent discrimination, not just in housing listings but in credit and employment ads as well. The move was part of a settlement with the American Civil Liberties Union and other activists. But HUD didn't join the settlement. Facebook says it continues to work with civil rights experts on the issues.
-- Canada's privacy czar
In more fallout from Cambridge Analytica, Canada's privacy head announced in April that he is taking Facebook to court after finding that lax privacy practices allowed personal information to be used for political purposes.
A joint report from privacy commissioner Daniel Therrien and his British Columbia counterpart said major shortcomings were uncovered in Facebook's procedures. It called for stronger laws to protect Canadians. Facebook says it is taking the investigation seriously.
-- U.K., Belgium, Germany
In October, British regulators slapped Facebook with a fine of 500,000 pounds ($644,000) -- the maximum possible -- for failing to protect the privacy of its users in the Cambridge Analytica scandal. The company said it is appealing the fine, so the matter is still, technically, unresolved.
The Belgian Data Protection Authority and Germany's Federal Cartel office are also looking into Facebook's data collection practices.
-- Washington D.C., state attorneys general
If the federal investigations weren't enough, Facebook also faces local government bodies. Attorneys general for Washington, D.C. , and California are looking into Cambridge Analytica, while the New York attorney general is investigating the company's unauthorized collection of 1.5 million users' contact lists. Facebook said that it is working with the New York attorney general's office and that the collection was unintentional. It also says it is co-operating with the other attorneys general in their probes.
-- FBI, SEC
Though the scope of their involvement with the FTC investigation is unclear, Facebook has confirmed that it has received questions from the FBI and the Securities and Exchange Commission over Cambridge Analytica and that it is co-operating with the inquiry.