FTC could have fined Facebook significantly more than $5 billion

[nanoguy]

Why it matters: Facebook, a company that made $55 billion in revenue last year, is set to receive a hefty fine from the FTC as early as this Wednesday, when it will report its earnings for Q2 2019. The company is apparently too big to fail, which is why the underfunded agency has settled for less than what it should have -- highlighting its inability to properly punish tech giants.

Earlier this month, news broke that Facebook had reached an agreement with the FTC to pay $5 billion for its history of privacy and data breaches. It's the biggest fine the agency has fired at a tech company (by far), but everyone from critics to lawmakers have been questioning its effect on the company's bottom line and its ability to deter others. Even more so after Facebook's value shot up as a result of the news, negating the effect of the punitive action and even making it richer as a result.

Now, a new report from The Washington Post reveals a disturbing tale of an agency that was in an excellent position to set a precedent and deter other companies from being as careless as Facebook, but then it didn't. The FTC is said to finalize the settlement for the 16-month investigation in the next few days, with Facebook planning to form a specialized team focused on privacy oversight.

Apparently, the agency had initially hoped to slam Facebook with a much bigger fine, in the tens of billions of dollars -- more comparable with its annual turnover in 2018. It also would've liked to hold Zuckerberg accountable for his mistakes, especially as his company's shareholders want him replaced but are seemingly unable to do so.

WP says Facebook's team of lawyers vehemently opposed the FTC's proposal to place Zuckerberg under orders, going to great lengths to protect him from being singled out by the agency, who wanted to call him out for his public statements on privacy and how Facebook would deliver that to its users.

The company's legal team was prepared to go to court to protect the CEO, and the Commission feared it lacked the funding to take on the social media giant, so it settled for less as a compromise. In the meantime, Facebook remains a social monopoly of sorts and is fighting for a chance to launch Libra, its very own digital currency.

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https://www.techspot.com/news/81076-ftc-could-have-fined-facebook-significantly-more-than.html

 

[Uncle Al]

As said many, many times. Until those fines are based upon a percentage of gross revenue they are simply "the cost of doing business". Make they steadily increasing, say start with 25% increaseing in four steps to 100% and even an ***** will see the benefit of turning around their mistakes. Until then it is nearly meaningless.

 

[trparky]

They should have been fined for $50 Billion, which if you go by this web site's data they have $45.243 Billion on hand. Yep, sounds good to me.

 

[gusticles41]

Question - In suits like this, where do large chunks of money end up being allocated?

 

[ShagnWagn]

Step #2 is the government needs to show factual evidence of where all this money is being spent into.

 

[Lifeispossible]

Netflix's The Great Hack should have came sooner then people's opinions might change with the complete picture for what happened acquired likely even the politians stance that fined them.

 

[Lionvibez]

So they can outspend the Agency in court so they threw in the towel...

lol that will sure deter the rest of the big boys.

 

[Evernessince]

This is not remotely surprising. The IRS has the exact same problem. Republicans have gutted the funding to these agencies so that they can no longer afford to peruse landmark cases. The only people this benefits is the rich and corporations. Otherwise it makes zero sense for a government to cut funding to a department that turns returns thousands times more back in revenue.

 

[jpuroila]

As said many, many times. Until those fines are based upon a percentage of gross revenue they are simply "the cost of doing business". Make they steadily increasing, say start with 25% increaseing in four steps to 100% and even an ***** will see the benefit of turning around their mistakes. Until then it is nearly meaningless.

The very concept of "punishing" a corporation is fundamentally flawed. The punishments should be targeted directly at the people responsible whenever possible(in this case Zuckerberg and other Facebook executives).

 

[ShagnWagn]

As said many, many times. Until those fines are based upon a percentage of gross revenue they are simply "the cost of doing business". Make they steadily increasing, say start with 25% increaseing in four steps to 100% and even an ***** will see the benefit of turning around their mistakes. Until then it is nearly meaningless.

The very concept of "punishing" a corporation is fundamentally flawed. The punishments should be targeted directly at the people responsible whenever possible(in this case Zuckerberg and other Facebook executives).

Since their income is usually stock-based, I presume stock shares taking a dip from these fines should be a hard hit. I have no disagreement with your suggestion.

 

[jpuroila]

Since their income is usually stock-based, I presume stock shares taking a dip from these fines should be a hard hit. I have no disagreement with your suggestion.

The way I see it, if the crime is big enough to justify billions of dollars in fines, it's big enough to put a lot of people behind the bars for a long time. And I mean... if your net worth is measured in hundreds of millions if not billions, losing 10%(or even 90%, really) of your net value will have pretty negligible impact on your qualify of life.

Also, even if we are to assume that financial punishment is sufficient, in most cases the executives only own a small percent of the company(admittedly tech companies like Facebook are often exceptions), the majority of the "punishment" is going to hurt people who were not directly involved in the crime, and may not even have been aware that the crime was happening - not to mention that some people who suffer as a result may not even have benefited from the crime(namely, those who only purchased stock recently), while others who benefited will get away scot-free(those who recently sold stock). It's just a pretty poor solution all around in situations where better ones are available(obviously if you're trying to punish a foreign company, the options for punishing the executives/other people directly responsible may well be highly limited).