Facebook to be slapped with $7 billion fine for privacy lapses

Facebook CEO Mark Zuckerberg. Photo / AP

The FTC has voted to approve a fine of about US$5 billion ($7.4b) for Facebook over privacy violations, the Wall Street Journal reported Friday. The report cited an unnamed person familiar with the matter.

Facebook and the FTC declined to comment. The Journal said the 3-2 vote broke along party lines, with Republicans in support and Democrats in opposition to the settlement.

In most cases the Justice Department's civil division will review settlements by the FTC, and it is unclear how long the process would take. A Justice Department spokeswoman declined to comment on the Facebook matter.

The fine would be the largest the FTC has levied on a tech company. But it won't make much of a dent for Facebook, which had nearly US$56b in revenue last year. Facebook has earmarked US$3b for a potential fine and said in April it was anticipating having to pay up to US$5b.

The report did not say what else the settlement includes beyond the fine, though it is expected to include limits on how Facebook treats user privacy. Some have called on the FTC to hold Facebook CEO Mark Zuckerberg personally liable for the privacy violations in some way, but based on the party line vote breakdown experts said this is not likely.

Marc Rotenberg, president of the nonprofit online privacy advocacy group Electronic Privacy Information Center, said he was "confused" as to why the Democratic commissioners didn't support the settlement and said he suspects, without having seen the actual settlement, that this was due to the Zuckerberg liability question.

"But I thought that was misguided," he said, adding that EPIC instead supports more wholesale limits on how Facebook handles user privacy.

Since the Cambridge Analytica debacle erupted more than a year ago and prompted the FTC investigation, Facebook has vowed to do a better job corralling its users' data. That scandal revealed that a data mining firm affiliated with President Donald Trump's 2016 campaign improperly accessed private information from as many as 87 million Facebook users through a quiz app.

Other leaky controls have also since come to light. Facebook acknowledged giving big tech companies like Amazon and Yahoo extensive access to users' personal data, in effect exempting them from its usual privacy rules. And it collected call and text logs from phones running Google's Android system in 2015.

Wall Street appeared unfazed at the prospect of the fine. Facebook's shares closed at US$204.87 on Friday and added 24 cents after hours. The stock is up more than 50 percent since the beginning of the year.

"This closes a dark chapter and puts it in the rearview mirror with Cambridge Analytica," said Wedbush analyst Daniel Ives. "Investors still had lingering worries that the fine might not be approved. Now, the Street can breathe a little easier."

Rep. David Cicilline, a Democrat from Rhode Island, said in a statement that the fine gives Facebook "a Christmas present five months early. It's very disappointing that such an enormously powerful company that engaged in such serious misconduct is getting a slap on the wrist. This fine is a fraction of Facebook's annual revenue."

Cicilline leads the House Judiciary subcommittee on antitrust, which is pursuing a bipartisan investigation of the big tech companies' market dominance.

- AP