The US Federal Trade Commission has approved a roughly $US5 billion ($7.1 billion) settlement with Facebook over its investigation into the social media company’s handling of user data.
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 data sharing violated a 2011 consent agreement between Facebook and the regulator, a source told Reuters.
Investors cheered news of the deal and pushed Facebook shares up 1.8 per cent, while several powerful Democratic lawmakers in Washington condemned the proposed penalty as inadequate.
The FTC is expected to include in the settlement other restrictions on how Facebook treats user privacy, according to the Wall Street Journal.
The settlement would be the largest civil penalty ever paid to the agency.
Representative David Cicilline, a Democrat and chair of a congressional antitrust panel, called the $5 billion penalty “a Christmas present five months early.”
“This fine is a fraction of Facebook’s annual revenue. It won’t make them think twice about their responsibility to protect user data,” he said.
It’s very disappointing that such an enormously powerful company that engaged in such serious misconduct is getting a slap on the wrist.
— David Cicilline (@davidcicilline) July 12, 2019
Facebook’s revenue for the first quarter of this year was $US15.1 billion ($21.5 billion) while its net income was $US2.43 billion ($3.46 billion). It would have been higher, but Facebook set aside $US3 billion ($4.27 billion) for the FTC penalty.
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 US 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.
Facebook made $5 billion in profits in just the first three months of last year. The company is too big to oversee, and this drop-in-the-bucket penalty confirms that. The FTC should break Facebook up, plain and simple. Enough is enough.
— Elizabeth Warren (@SenWarren) July 12, 2019
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.