The Federal Trade Commission announced Wednesday it had reached a settlement with Facebook after months of negotiations over user privacy violations. As retribution for “deceiving users about their ability to control the privacy of their personal information” the tech giant will have to pay a $5 billion penalty and will submit to rigorous new privacy protection standards.
In a press conference at FTC headquarters, FTC Chairman Joe Simons described the penalty as unprecedented in its severity: the fine is 200 times greater than the largest privacy penalty previously imposed in the U.S. and makes up 23% of Facebook’s 2018 profits. In addition, the new restrictions will force Facebook to restructure itself to ensure privacy protection. In a statement, Facebook said “the agreement will require a fundamental shift in the way we approach our work.”
Facebook has been spending a lot of time in Washington these days, thanks in part to its planned involvement with the blockchain cryptocurrency, Libra through a digital wallet called Calibra. Earlier this month, lawmakers from both sides of the aisle grilled David A. Marcus, head of Calibra during hearings with the U.S. Senate Committee on Banking, Housing and Urban Affairs and the House Financial Services Committee.
When asked how the settlement might affect congressional oversight of Libra, Juliana Gruenwald from the FTC’s office of public affairs told Reviews.com that “because the coverage of the FTC’s new order is broad, it is likely that certain provisions may apply but it’s too soon to say.”
One such provision may be the FTCs requirement that Facebook comply with a number of information flows designed to protect users’ privacy. This would ensure that if there was a data breach within Calibra and more than 500 users were affected, Facebook would have to submit an incident report in a timely manner.
But it’s also possible congress will derail Calibra before it even has the chance to suffer a data breach. Congresswoman Maxine Waters, chairwoman of the House Financial Services committee, was one of the first public officials to speak out against Calibra’s development. Less than a month after Facebook announced Calibra, her committee drafted a bill titled the “Keep Big Tech Out of Finance Act” that would bar any tech companies with more than $25 billion in assets from providing any financial services. Facebook’s global revenue in 2018 was $55.8 billion. The bill specifically mentions digital assets, defined as “an asset that is issued and transferred using distributed ledger or blockchain technology” – aka a cryptocurrency such as Libra.
If the bill passed after Calibra had already been released, Facebook would have to shut down the operation within a year to avoid penalty. Oversight channels from the FTC could put even more pressure on Facebook to comply with such a bill.
The FTC’s announcement is important because it signals a growing wariness of Facebook’s power. During the press conference, FTC Chairman Joe Simons pointed out that this settlement is “all the more remarkable” given the FTC’s limited power to propagate general privacy regulations. They maintained that their goal was to remedy legal violations they believed Facebook made, but other tech companies should still consider prioritizing privacy issues – a timely reminder when it seems that more and more tech companies are offering financial services.
In the press conference, FTC commissioner Christine S. Wilson expressed contempt for Facebook’s CEO Mark Zuckerberg. “In his own words, [he] prefers to move fast and break things. And so for this reason, it was clear we needed to erect speedbumps requiring both Mr. Zuckerberg and Facebook to slow down and take care with consumer privacy.”
“We do not have the legal authority to remove Mr. Zuckerberg from the driver’s seat, but we have imposed a robust system of check and balances that extinguishes his ability, unilaterally, to chart the path for consumer privacy at Facebook,” said Wilson, indicating that the FTC hopes this settlement will change the way Facebook operates for the foreseeable future. Whether or not that future will hold Calibra is yet to be understood.
Image: A ‘like’ sign stands at the entrance of Facebook headquarters May 18, 2012 in Menlo Park, California. The eight-year-old social network company listed their initial public offering on NASDAQ Friday morning at $38 a share and a valuation of $104 billion, making its IPO the third largest in U.S. history after General Motors and Visa. (Photo by Stephen Lam/Getty Images)