Facebook said on Wednesday that it is setting aside $3 billion during the first quarter to pay down an expected Federal Trade Commission fine resulting from an investigation of the company’s privacy practices.
The announcement came as the Menlo Park, California-based social media giant released better-than-expected first quarter financial results, which showed earnings of 85 cents per share including the $3 billion charge. The company, which said it had 2.38 billion monthly active users in the quarter, said it expects the legal expense “related to the ongoing US Federal Trade Commission matter” to run as high as $5 billion.
Wired reports this will be by far the largest-ever FTC fine of a tech company, although EU regulators have fined Google more than $8 billion on three occasions for for various antitrust and privacy violations over the past four years. The current record for an FTC fine is $22.5 million, levied against Google in 2012 for misrepresenting privacy settings in Apple’s Safari browser.
Facebook has been at the center of numerous high-profile privacy cases in recent years. The FTC has been investigating whether the company violated the terms of a 2011 settlement in which the agency found that Facebook “deceived consumers by telling them they could keep their information on Facebook private, and then repeatedly allowing it to be shared and made public.”
In March 2018, the FTC began examining Facebook’s conduct relating to the case of Cambridge Analytica, a UK-based political consulting firm hired by Donald Trump’s presidential campaign. Specifically, regulators investigated whether Cambridge Analytica gained unauthorized access to tens of millions of Facebook users’ data. Last April, Facebook Chief Technology Officer Mike Schroepfer admitted that the data of as many as 87 million users “may have been improperly shared with Cambridge Analytica.”
Last April, Facebook co-founder and CEO Mark Zuckerberg was called before Congress to face tough questioning on how his company handled user data and efforts to undermine the integrity of the 2016 elections. Zuckerberg apologized, saying, “I started Facebook, I run it, and I’m responsible for what happens here.”
Lawmakers expressed their concerns about Facebook at the hearing. “If you and other social media companies do not get your act in order, none of us are going to have any privacy any more,” warned Sen. Bill Nelson of Florida, the senior Democrat on the Commerce, Science and Transportation Committee.
Since the Cambridge Analytica scandal, Facebook has improperly shared the data of some 14 million users, given other tech companies intrusive access to user data and accidentally made millions of users’ private photos available to as many as 1,500 apps over a 12-day period.
Last month, Zuckerberg announced that Facebook was focusing on becoming a “privacy-focused” platform, with a new emphasis on private, encrypted and ephemeral conversations across its products. “People want to use both private and public platforms,” Zuckerberg said on a March conference call reported by CNN. “Delivering this is both in the interests of our community and our business.”
Democratic presidential candidate Sen. Elizabeth Warren (D-MA) has joined online privacy advocates including the non-profit Electronic Privacy Information Center (EPIC), Ethics In Tech and others in calling for Facebook and other leading tech companies to be broken up. EPIC says Facebook should be forced to divest WhatsApp and Instagram, and that the parent company should be regulated like a public utility.
“We urge the Commission to either restore the right of Facebook users to have meaningful input into the company’s decisions or to recommend to Congress that Facebook be regulated as a public utility,” EPIC wrote. “Facebook has operated for too long with too little democratic accountability. That should now end.”
Following the release of the latest earnings report, Zuckerberg was upbeat despite the looming prospect of a massive fine.
“We had a good quarter and our business and community continue to grow,” he said. “We are focused on building out our privacy-focused vision for the future of social networking, and working collaboratively to address important issues around the Internet.”
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