The FTC And Facebook: Why The $5 Billion Fine Is Both Too Little And Too Much

from the pointless-gestures dept

By now, you've certainly heard the news that was very likely leaked by Facebook late on Friday that the FTC, by a narrow 3 to 2 party line vote, had approved a $5 billion fine for Facebook for violating its earlier consent decree in the way it allowed an app to suck up lots of data that eventually ended up in Cambridge Analytica's hands. Most of the reaction to this fine (by far, the largest in the FTC's history) is anger.

Many people focused on one key point to argue that the fine wasn't enough: Facebook's stock jumped upwards after the news broke, to the point that Facebook's valuation probably went up more than the amount of the fine itself (never mind the difference between the value of equity and actual cashflow...). However, I wouldn't read too much into the stock jump. After all, Facebook had already said back in April that it was expecting a $5 billion fine, meaning that Wall Street had already priced in exactly that. If the $5 billion fine had come out of the blue it might have been a different story. The bump, then, could be explained by investors reacting to the end of any uncertainty and the fear that the fine might have been larger.

That said, there are good arguments for why this is a really significant fine. And for that, I'll turn to the former acting-CTO of the FTC, Neil Chilson, who knows a thing or two about how the FTC works, and points out that this sort of thing is extremely aggressive (and this part is important): given the FTC's mandates and powers. As he notes:

The FTC is using an extremely general law intended to stop or redress practices that harm consumers. It is reportedly getting a settlement that is 225x larger than the prev. record. And it got this for practices where AFAIK no consumer lost a penny. Laws have meaning. There is only so far an agency can push the commands of Congress before a court will slap them back (as has happened to the FTC a few times recently.) This settlement is, I think, probably at the bleeding edge of the FTC's litigation risk. If you're angry about this settlement, calling the FTC a "co-conspirator" is ridiculous. The FTC has been an aggressive privacy enforcer using a statute that isn't specifically intended to protect privacy. That's on Congress. If you don't like it, talk to your lawmaker.

In short, given the FTC's powers and the details of what happened with Cambridge Analytica, where the "harms" are not directly quantifiable (you can argue harms against democracy, but that would require a bit more actual evidence and is not the FTC's mandate...), a $5 billion fine is quite a lot. So, frankly, attacking it as "an embarrassing joke" or "a tap on the wrist" or even "a victory for Facebook" seems to be missing the point.

That said, what I think all this anger is getting at -- and which I mostly agree on -- is that we still have not figured out a way to adequately deal with privacy in a digital age. And people are (partly reasonably, partly irrationally) very mad at Facebook for that. Part of the problem here, however, is expecting that a single FTC action is somehow magically going to fix all of that. It can't. No amount would have done that, and it's quite unlikely that any restrictions the FTC puts forth as part of this agreement are going to fix that either. So, I can totally understand the anger and annoyance at this particular settlement -- but it's not as if anything the FTC would have done here would have satisfied most people.

And, of course, this one FTC action is hardly the end of the line. The EU and other countries are still likely to come down hard on Facebook, and the company is still facing antitrust questions as well. And, then there's Congress. At some point, Congress will put forth various privacy bills (and various states may follow California's dubious lead in doing so as well).

In short: this is a significant fine, given the FTC's mandate and the issue at hand. And if you think it's "not enough" because it won't hobble Facebook, well, then you're correct. But the FTC's mandate isn't to randomly hobble companies because people are angry at them.

Facebook is going to be facing a long line of angry regulator and legislators, and that seems unlikely to change as a result of this fine (indeed, it appears to have inspired many to increase their efforts to "do something").

Filed Under: consumer harms, data, fines, ftc, privacy, punishment
Companies: facebook


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  • icon
    JoeCool (profile), 15 Jul 2019 @ 10:58am

    Angry legislators

    That's because they aren't paying them enough. If they cough up the dough like telecoms, the legislators would be all smiles and apologies.

    reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 15 Jul 2019 @ 11:16am

      Re: Angry legislators

      maybe not in Facebook's case. Facebook has angered many Republicans (and pleased many Democrats) with its left-leaning policies and not-so-secret partisan political goals. Now Facebook has paid a price for that. Not officially, of course, but it's not hard to figure out why this was a purely party-line vote in the FTC, and from parties that have historically voted the other way around.

      reply to this | link to this | view in chronology ]

      • icon
        Mike Masnick (profile), 15 Jul 2019 @ 11:31am

        Re: Re: Angry legislators

        Facebook has angered many Republicans (and pleased many Democrats) with its left-leaning policies

        Maybe get out of your echo chamber.

        This fine was voted on 3 to 2 by the 3 Republican commissioners. The 2 Dem commissioners wanted a big fine.

        Meanwhile Democrat Elizabeth Warren is calling for breaking up Facebook.
        Democrat Mark Warner has called for strict regulations on Facebook.
        Democrat Ron Wyden has pushed for strict regulations against Facebook and said this fine "is a mosquito bite" and promised to introduce stronger regulations against Facebook.

        The idea that the GOP hates FB and Dems love it is... um... not supported by the evidence.

        reply to this | link to this | view in chronology ]

      • identicon
        Anonymous Coward, 15 Jul 2019 @ 1:29pm

        Re: Re: Angry legislators

        Maybe repubs are mad because they have anger issues, nahhh that cant be it.

        I would like to read the facebook policies that you consider to be left leaning, do you by chance have access to any of them?

        Facebook paid a price for what? Dumbass politicians looking to score some votes?

        Party line vote at the fcc - lol, yer funny.

        reply to this | link to this | view in chronology ]

  • icon
    crade (profile), 15 Jul 2019 @ 11:02am

    "If you don't like it, talk to your lawmaker"
    And / or you could also stop using facebook.

    reply to this | link to this | view in chronology ]

  • This comment has been flagged by the community. Click here to show it
    identicon
    Fiery Tesla Crash, 15 Jul 2019 @ 11:11am

    The Way is to DE-monetize the overall result of "monetizing".

    That said, what I think all this anger is getting at -- and which I mostly agree on -- is that we still have not figured out a way to adequately deal with privacy in a digital age.

    In short, TAX THE HELL OUT OF THE RICH so that no matter how far they go, don't profit inordinately from these borderline criminal, widely despised, computerized invasions of The Public's privacy.

    Facebook or any corporation is NOT entitled to do with us and our privacy as wish. We can't fight it as individuals: that's why gov't must act, or we'll be enslaved (indentured as Snowden put it just this weekend).

    Remove the assumptions that masnicks want as baseline: 1) Corporations free to act as "persons" with Rights -- they are BUSINESSES, subect to OUR control. And 2) That low taxes on The Rich is good for society: clearly The Rich keep getting richer, needlessly, and ONLY thing they have left to gain is our privacy and liberty.

    Just tax The Rich until they're reasonable. Worked until Reagan administration cut taxes, then falsely claimed that the boom after was result of tax cuts, not general progress esp in computers.

    reply to this | link to this | view in chronology ]

    • This comment has been flagged by the community. Click here to show it
      identicon
      Fiery Tesla Crash, 15 Jul 2019 @ 11:14am

      Re: The Way is to DE-monetize the overall result of "moneti

      Snowden Warns, Big Tech Will "Indenture Entire Populations Into Servitude" To Corps & Govts

      Tech giants such as Google or Facebook store vast amounts of personal data for their own gain but they are also "happy to hand over" this data to governments, making people vulnerable to persecution, Edward Snowden warned during an interview with RT.

      https://www.rt.com/news/464115-snowden-big-tech-indenture-servitude/

      The law simply has not caught up to the fact that a technological corporation now can indenture entire populations into servitude to the corporate good, rather than to individual or public good.

      Odd word choice: "indenture" implies some voluntary, which is true, but misses clear fascism by "laws" that empower corporations which directly feed surveillance.

      reply to this | link to this | view in chronology ]

      • This comment has been flagged by the community. Click here to show it
        identicon
        Fiery Tesla Crash, 15 Jul 2019 @ 11:18am

        Re: Re: The Way is to DE-monetize the overall result of &quo

        Hey, ya know what's really ODD, kids? That Snowden and Kim Dotcom agree with little old ME. -- Yet Masnick is for corporations!

        This year the criminals who run the Deep State will be exposed. The shareholders profiting from war and chaos. The billionaires who turn democracy into an illusion. They own politicians, judges and all your data. They are the biggest pirates in history. Want to know who they are? - Kim Dotcom (@KimDotcom) January 5, 2019

        https://twitter.com/KimDotcom/status/1081684604954697728

        reply to this | link to this | view in chronology ]

        • icon
          Stephen T. Stone (profile), 15 Jul 2019 @ 11:53am

          Funny how you agree with Dotcom calling corporations “pirates” when you think corporations should have the right to clamp down on copyright infringers without so much as a trial to determine innocence or guilt.

          reply to this | link to this | view in chronology ]

          • identicon
            Anonymous Coward, 15 Jul 2019 @ 1:32pm

            Re:

            Well, I guess due process is only for some people and not everyone - even though the writings used to describe the country politics says everyone. Oh ... and justice is blind - lol.

            reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 15 Jul 2019 @ 2:18pm

      Re:

      In short, TAX THE HELL OUT OF THE RICH....

      Every time you bring up this idea, I ask you a few simple questions about it and unsuprisingly you NEVER answer them.

      1) What is your defintion of "too rich"? Where would the threshold be set and WHO gets to determine that threshold?

      2) How do you keep such a tax from being stigmatized as a "success tax".

      3) How do you prevent the system from being gamed? For example: I sell widgets and as I approach your arbitrary threshold I simply stop widget production, layoff my employees and wait until I have more breathing room under your threshold before continuing production. I still haven't paid your taxes, unemployment and welfare costs have increased, and less income taxes have been collected.

      reply to this | link to this | view in chronology ]

      • icon
        Gwiz (profile), 15 Jul 2019 @ 2:20pm

        Re: Re:

        Above comment is mine

        reply to this | link to this | view in chronology ]

      • icon
        Gwiz (profile), 15 Jul 2019 @ 2:30pm

        Re: Re:

        Thought of another question:

        4) How would you keep corporations approaching your threshold from simply moving to different country and how would you attract new businesses to this country with them knowing that they would be penalized for being too successful?

        reply to this | link to this | view in chronology ]

        • identicon
          Anonymous Coward, 15 Jul 2019 @ 3:51pm

          Re: Re: Re:

          I'll answer for our resident reject.

          Do away with tax write-offs and tax everyone on the same scale. We already have diminishing net returns built into our tax code but the rich are able to pay less taxes than the poor due to write-offs.

          It would cause a drop in charitable contributions but the huge pile of extra tax money collected could be used in part for grants to charitable institutions.

          reply to this | link to this | view in chronology ]

          • icon
            Stephen T. Stone (profile), 15 Jul 2019 @ 10:47pm

            tax everyone on the same scale

            “Flat tax” plans are bullshit, just so you know. A minimum wage earner can’t afford to put the same percent of their income into the public treasury that a millionaire could.

            reply to this | link to this | view in chronology ]

            • identicon
              Anonymous Coward, 16 Jul 2019 @ 9:18am

              Re:

              I said "scale", not "flat tax". We have a tax scale today that cranks up the tax owed as income increases. All I'm saying is keep to that scale and eliminate the things that allow the ultrarich to avoid paying their fair share.

              reply to this | link to this | view in chronology ]

        • identicon
          Anonymous Coward, 15 Jul 2019 @ 5:44pm

          Re: Re: Re:

          I'll believe that blue boy wants the rich to be taxed the hell out of when he calls for the RIAA and celebrities to be taxed.

          Until then, the scenario that he's surgically grafted to their collective scrotum is far more likely.

          reply to this | link to this | view in chronology ]

      • icon
        nasch (profile), 16 Jul 2019 @ 3:02pm

        Re: Re:

        For example: I sell widgets and as I approach your arbitrary threshold I simply stop widget production, layoff my employees and wait until I have more breathing room under your threshold before continuing production.

        That's generally not how income taxes work. Let's say the tax brackets are for $0-100 you pay nothing, 101-200 5%, 201-300 7%, etc. What that means is the first $100 is tax free. If I make $101 I don't pay $5.05, I pay $0.05. When I move up into the next tax bracket, only the income in that bracket is taxed at the higher level. So it's always in your interest to make more money, even if that additional money will be taxed at a higher rate.

        No non-idiot business owner would give up revenue and lay off employees to avoid a higher tax rate. They might do other things such as change the corporate structure, play accounting games, or relocate or something. I would guess the incentives to do that stuff could be reduced if the rates went up somewhat smoothly (even if at an accelerating rate) rather than just climbing a cliff at some point.

        reply to this | link to this | view in chronology ]

        • icon
          Gwiz (profile), 16 Jul 2019 @ 5:36pm

          Re: Re: Re:

          No non-idiot business owner would give up revenue and lay off employees to avoid a higher tax rate. They might do other things such as change the corporate structure, play accounting games, or relocate or something.

          Fair enough. I did think through some of those other examples too, but I wanted something simple as an example considering who I was responding to. The main point I was trying to get across is that any such system will be gamed somehow and I wanted to know how Blue would prevent that.

          I haven't discounted this idea as something not worth exploring, but the devil would be in the details and all Blue can ever do is scream "TAX THE RICH!" without ever explaining how he would implement such a tax.

          reply to this | link to this | view in chronology ]

  • icon
    ECA (profile), 15 Jul 2019 @ 11:45am

    This is stupid(me or them, or them)

    This is stupid for many reasons..
    We make laws after the fact, there really wasnt/isnt a law that says a Corp cant do, what a Corp does..
    Go look at WWII and tall me about GM/COKE/Others..
    This is NOT a company that resides ONLY in the USA. They dont need/want/cant Choose a side. THAT isnt democratic. They are on ALL sides.

    A nation that is worried about what others say...HAS PROBLEMS. Esp. with or Gov. isnt listening to the Citizens..
    Esp. when they keep removing Cit vs Corp rights and responsibilities..that have been around since the 70's..

    You are going to fine a corp for what it DOES, without doing the SAME to other corps in this nation?? And you think FB, will want to stay in this country? Forget it, he can move anywhere, make his Corp in any nation...and then you CANT do anything. Shut off the NET to FB...? REALLY? try it. you will get so many letters and direct emails, I think you MAY HEAR US...

    And if you dont get rid of Mr. Pai, I will start forwarding all my SPAM to my Gov. officials.. And if you dont understand that, I can send this to ANY group that dont understand that the CORPS dont care...they want the money.. the SAME money we Pay them, and the money they PAY our Gov. officials..
    If we all pas it around and give Email locations of our reps. Its nothing to AUTO FORWARD the crap to them..

    If these folks really want to be STUPID, up on the hill. This is the internet. Its Not SNAIL MAIL. they would have to Block each of us,and then we can Sue them, because they are SUPPOSED to listen. And if nothing, hte Gov. DOES HAVE many email locations.. BOMBS AWAY...

    And if they are going to do this, I want them to go back and evaluate ALL the crap thats happened from 1990 forward, and go back and FINE the spit out of other corps.. Get our many back and DROP our taxes.. From enron and others, to the banks and Others..

    reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 15 Jul 2019 @ 2:50pm

    Get rid of facebook as it seems to be at the corporate bleeding edge off the privacy killing knifeblade. That would be at least one huge victory for human privacy decency.

    reply to this | link to this | view in chronology ]

  • icon
    nasch (profile), 16 Jul 2019 @ 3:04pm

    How did they know?

    How did they know to expect a $5 billion fine? There could be legitimate reasons but that sounds strange. If the fine was decided months ago, was the whole process to arrive at the fine a sham? This was 220 times the previous record so it's not as though they could have gone by previous fines. I'm not a member of the tinfoil hat brigade but it seems a little fishy.

    reply to this | link to this | view in chronology ]

    • icon
      Mike Masnick (profile), 19 Jul 2019 @ 4:23pm

      Re: How did they know?

      How did they know to expect a $5 billion fine?

      I would assume that Facebook and the FTC have been discussing proposed settlement agreements for months now. So they knew what range they were in, and by April, I'm sure this deal was pretty close. This only came out now because the vote was taken.

      reply to this | link to this | view in chronology ]


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