Facebook's $5 billion fine adds $10 billion to company's value

Bubbajim

TechSpot Staff
Staff member

Yesterday, we reported that the Federal Trade Commission (FTC) had levied a $5 billion fine against Facebook as punishment for a string of breaches, scandals and controversies.

In almost any other context a $5 billion fine would be huge – not only as a punitive measure, but also in signalling just how poorly the business in question had behaved. But in the context of Facebook, given its size, reach and worth, $5 billion is little more than a slap on the wrist. So much so, that following news of the FTC’s decision, the social media giant’s stock price rose by 1.81%, adding $10.4 billion to their market valuation.

Markets have rewarded Facebook for getting off so lightly, covering the cost of the fine and adding another $5 billion to the company’s coffers.

Many have been quick to point out the flaw in this effort to hold such a mammoth company to account. Senator and Democratic Presidential candidate, Elizabeth Warren, called it a “drop in the bucket penalty,” tweeting our renewed calls for Facebook to be broken up.

There’s no question that $5 billion is a lot of money, but given that Facebook made $22 billion in profit last year, and another $15 billion in revenues last quarter, many people think that the punishment doesn’t fit the crime.

It should be said that the FTC’s decision wasn’t only monetary. The Washington Post reports that Facebook “may have to document every decision it makes about data before offering new products, keep closer watch over third-party apps that tap users’ information, and require its top executives, including CEO Mark Zuckerberg, to attest that the company adequately has protected privacy.” Though it seems reasonable to wonder why none of those things were mandatory to begin with.

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Cycloid Torus

Stone age computing - click on the rock below..
Cash is not paper gain or profit. To really understand requires knowledge of the timing of payment. Capping the penalty is a "good" thing for FB. Paying out $5B in hard cash in the next 60 days will be regarded as a "bad" thing. Watch for delays.

I would rather have $10 cash than a promise from FB for $20 or even $50 at some 'future time' - especially if there is any room for 'continued negotiation'.
 

FF222

TS Addict
All this means that the fines were not high enough. Fines will be only deterrent to future breaches of law if they're high enough to make the company actually lose money because of them.
 

Cycloid Torus

Stone age computing - click on the rock below..
This ^

Corporations are only so powerful because the government gives them that power. In this case, the immunity of individuals in a company from criminal offenses. This has been abused time and time again.
Good question...do we penalize the owners sufficiently with fines? Can the owners put criminal offenders in 'jail'? Should Directors go to jail?
 

Darth Shiv

TS Evangelist
"Though it seems reasonable to wonder why none of those things were mandatory to begin with."
EXACTLY. Basically you need an absolute catastrophe before capitalism will reign in predatory business practices. It's NEVER done proactively even when there is immense evidence pointing to a systemic issue.
 

quadibloc

TS Booster
The reason that those things weren't mandatory to begin with - documenting how their decisions affect privacy - is that America isn't a police state. People run businesses without constant government surveillance and supervision - unless they've been proven to have done something wrong. This is a system that usually works.
 

Eldritch

TS Addict
Just thought of a little joke.
<joke>
A farmer had a ranch full of sheep with whom he ran a successful wool business. However, the neighbor farm was breeding hunter dogs. Every once in a while the dogs will target a sheep and the sheep were angry. They lawyer and activist sheeps protested saying we have suffered so many casualties and damage due to hunter dogs. We demand justice!
The sheep farmer went to the neighbor farm. They negotiated a deal and the sheep farmer received $$$$ as compensation. The sheeps thought they will get a part of it.
</joke>
 

Markoni35

TS Addict
This ^

Corporations are only so powerful because the government gives them that power. In this case, the immunity of individuals in a company from criminal offenses. This has been abused time and time again.
Good question...do we penalize the owners sufficiently with fines? Can the owners put criminal offenders in 'jail'? Should Directors go to jail?
The answer is YES. The directors should go to jail. If an individual can go to jail for violation someone's privacy, then the corporate individuals, who violated privacy of billions of people, should go to jail too.