US regulators on Wednesday slapped Facebook with a record $5 billion fine for data protection violations in a wide-ranging settlement that calls for revamping privacy controls and oversight at the social network.
The Federal Trade Commission said the penalty was the largest ever imposed on any company for violating consumers’ privacy and one of the largest penalties ever assessed by the US government for any violation.
However, two Democratic members of the five-member FTC dissented, arguing the agreement failed to go far enough to rein in Facebook business practices that endanger consumers.
As part of the deal, Facebook will be required to create a privacy committee within its board of directors to be appointed by an independent nominating committee.
This would end “unfettered control” of decisions on privacy by Facebook’s chief executive Mark Zuckerberg, the FTC statement said.
FTC Chairman Joe Simons said the penalty was appropriate to address concerns over Facebook’s misuse of personal information.
“The magnitude of the $5 billion penalty and sweeping conduct relief are unprecedented in the history of the FTC,” Simons said in a statement after the agency voted 3-2 along party lines to approve the settlement.
“The relief is designed not only to punish future violations but, more importantly, to change Facebook’s entire privacy culture to decrease the likelihood of continued violations.”
Under the agreement, Facebook’s CEO and staff must submit to FTC regular certifications that the company is in compliance with the privacy program.
Facebook also will be required to conduct a privacy review of every new or modified product, service or practice before it is implemented, including for its WhatsApp and Instagram services.
“We’ve agreed to pay a historic fine, but even more important, we’re going to make some major structural changes to how we build products and run this company,” Zuckerberg said in a statement.
“We have a responsibility to protect people’s privacy. We already work hard to live up to this responsibility, but now we’re going to set a completely new standard for our industry.”
– Not far enough? –
FTC commissioner Rohit Chopra rejected the settlement, saying it “does little to change the business model or practices that led to the recidivism,” while the second dissenting commissioner, Rebecca Slaughter, said the government should have instead taken Facebook to court.
Neema Singh Guliani of the American Civil Liberties Union called the settlement “woefully inadequate.”
“While there is no way to adequately provide restitution to the over 87 million people whose rights were violated, this settlement doesn’t even come close to preventing such violations from occurring again,” she said in a statement.
Joseph Jerome of the Center for Democracy & Technology said the FTC “should have gone further” but that its options were limited based on the US legal framework.
“The real takeaway from this decision should be to understand the very real limitations that the FTC faces when it comes to policing privacy,” said Jerome, arguing of the need for tougher US privacy laws.
The probe into Facebook comes as sentiments in Washington appear to be shifting against Silicon Valley firms.
This week, US antitrust enforcers said they would review major online platforms to determine if they have stifled competition, without signaling any specific action.
The FTC last year reopened its investigation of Facebook, which reached a 2011 settlement on handling private data, after further revelations that it mishandled personal information.
The move came after Facebook acknowledged data on tens of millions of users had been hijacked by Cambridge Analytica, a consultancy working on the 2016 Donald Trump campaign.
– Earnings lift stock –
Facebook later in the day reported profits slumped nearly 50 percent to $2.6 billion in the past quarter in an earnings report that was largely better than expected.
Total revenues grew 28 percent from a year earlier to $16.9 billion as Facebook’s global monthly active users rose to 2.41 billion.
“This company has repeatedly shown that it can grow both its ad revenue and its user base, even in the face of enormous challenges,” said Debra Aho Williamson of the consultancy eMarketer.
In a separate settlement with stock market regulators, Facebook agreed to pay a $100 million penalty for making “misleading disclosures regarding the risk of misuse of Facebook user data” in the investigation on Cambridge Analytica.
The FTC meanwhile announced it had reached a settlement on the Cambridge Analytica case that calls for its app developer Aleksandr Kogan and former Cambridge Analytica CEO Alexander Nix to delete or destroy any personal information they collected.
The agreement comes as Facebook, which has more than two billion users worldwide, shifts away from its role as a “digital town square” to focus on private connections and small groups, based on a new vision outlined by Zuckerberg.
Facebook is also seeking to launch its own digital currency called Libra, which has raised concerns among regulators.
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