Facebook to pay $5B to settle FTC privacy investigation

by NCN Health And Science Team Posted on July 12th, 2019

San Francisco, California: The U.S. Federal Trade Commission approved a roughly $5 billion settlement with Facebook Inc (FB) this week over its investigation into the social media company’s handling of user data, a source familiar with the situation said on Friday.

The FTC has been investigating allegations Facebook inappropriately shared information belonging to 87 million users with the now-defunct British political consulting firm Cambridge Analytica. The probe has focused on whether the sharing of data and other disputes violated a 2011 consent agreement between Facebook and the regulator.

Shares of Facebook rose after the news was reported by the Wall Street Journal earlier on Friday and closed up 1.8%. Facebook earlier this year said it had set aside $3 billion to pay for what it said could be a $5 billion penalty.

The settlement would be the largest civil penalty ever paid to the agency.

The FTC and Facebook declined to comment.

While the deal resolves a major regulatory headache for Facebook, the Silicon Valley firm still faces further potential antitrust probes as the FTC and Justice Department undertake a wide-ranging review of competition among the biggest U.S. tech companies. It is also facing public criticism from President Donald Trump and others about its planned cryptocurrency Libra over concerns about privacy and money laundering.

The Cambridge Analytica missteps, as well as anger over hate speech and misinformation on its platform, have also prompted calls from people ranging from presidential candidate Senator Elizabeth Warren to a Facebook co-founder, Chris Hughes, for the government to force the social media giant to sell Instagram, which it bought in 2012, and WhatsApp, purchased in 2014.

But the company’s core business has proven resilient, as Facebook blew past earnings estimates in the past two quarters.

While details of the agreement are unknown, in a letter to the FTC earlier this year, Senators Richard Blumenthal, a Democrat, and Josh Hawley, a Republican, told the agency that even a $5 billion civil penalty was too little and that top officials, potentially including founder Mark Zuckerberg, should be held personally responsible.

The settlement still needs to be finalized by the Justice Department’s Civil Division and a final announcement could come as early as next week, the source said.

The FTC is expected to include other government restrictions on how Facebook treats user privacy, WSJ reported.

A source knowledgeable about the settlement negotiations said earlier any agreement would put it under 20 years of oversight.

Though a $5 billion payment would take a lump out of Facebook’s cash pile, investors reacted positively to the potential end of the long-running investigation. Shares in Facebook rose about 1.5 percent after news of the vote broke.

Sally Hubbard, the director of enforcement at the Open Markets Institute, a group that advocates for more aggressive antitrust enforcement, called the settlement “woefully insufficient.”

“The fine is a mere cost of doing business that makes breaking the law worth it for Facebook,” she said in a statement. It would be up to other authorities, including the attorneys general for New York state and the District of Columbia, to do more, she said.

Those two offices did not immediately respond to requests for comment Friday.

Facebook warned investors and Wall Street analysts in April that the FTC matter would cost the company up to $5 billion, and it set aside $3 billion at the time to begin to cover the anticipated penalty.

As of March 31, Facebook reported $45 billion in cash and cash equivalents and marketable securities.

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