By Ryan Tracy in Washington and Jeff Horwitz in San Francisco
Facebook Inc. is moving closer to settling a privacy probe by
its main U.S. regulator, but the massive fine it has prepared to
pay is unlikely to get the social-media giant out of the political
hot seat in Washington.
The Federal Trade Commission has voted to fine the company
roughly $5 billion for violations of its previous promises to
protect users' privacy, The Wall Street Journal reported Friday,
citing people familiar with the matter. The FTC vote on the deal
was split 3-2 along party lines at the Republican-controlled
agency, the people said, a signal that Democratic commissioners
didn't feel the settlement was sufficiently tough.
Facebook's other political and regulatory issues are in earlier
stages. Next week, the social-media giant is sending executives to
two Capitol Hill oversight hearings: one examining whether action
is needed to rein in the market power of big tech companies, and
another focused on Libra, the cryptocurrency Facebook is planning
to launch with other corporate partners.
Last week, President Trump criticized social-media companies at
a White House event and suggested regulatory proposals may be
coming. Abroad, Ireland's privacy regulator alone is pursuing 10
investigations related to Facebook's gathering and processing of
personal data.
U.S. lawmakers of both parties have already signaled they would
view a $5 billion payment sent to the U.S. Treasury as too weak,
and early reaction to the FTC deal suggests it won't stem momentum
behind policies aimed at Facebook and other large tech firms.
"I don't want to pooh-pooh a $5 billion settlement, but this is
a company that generates multiples of that per quarter," said Sen.
Mark Warner (D., Va.) in an interview, referring to Facebook's
revenue, which was $15.08 billion in the first quarter of the
year.
Mr. Warner said structural changes are needed to improve how
Facebook and other large tech companies operate with respect to
personal data, the spread of misinformation and other issues.
"FTC fines may or may not change behavior, and they sure as heck
don't change incentives."
Republicans such as Sens. Josh Hawley (R., Mo.) and Marsha
Blackburn (R., Tenn.), have in recent weeks raised a concern about
Facebook's privacy practices and urged the FTC to take action to
protects users' data. Lawmakers have also called on Congress to
consider new privacy limits as well, though no legislative
proposals appear likely to pass soon.
The settlement is expected to impose other requirements on
Facebook but the details of those terms aren't yet known. The
agreement hasn't been formally announced and may not be for
weeks.
Both Facebook and the FTC declined to comment.
Maureen Ohlhausen, a former FTC commissioner who was its acting
head until April of last year, said criticism of the deal reflected
more political battle lines around Facebook than any facts of the
case.
Democrats who voted against the settlement "get to shake the
spear and say they'd be even tougher without having to deal with
there's not certainty the FTC would win in litigation," she
said.
Facebook sought to move beyond the scrutiny with a series of
announcements earlier this year. Chief Executive Mark Zuckerberg
said Facebook would focus on providing tools for private
communication and support privacy legislation world-wide along the
lines of Europe's general data-protection regulations.
Privately, senior Facebook employees have argued that the
allegations that sparked the FTC probe have left Facebook unfairly
holding the bag for tech industrywide concerns about privacy,
misinformation and behavioral advertising.
In conversations with both employees and outsiders, Facebook
executives have blamed media coverage of a scandal arising from
data harvested by a personality prediction app -- fueled by fear of
foreign election interference -- for obscuring the company's
broader efforts to safeguard user data.
The FTC probe began after disclosures last year that the owner
of a quiz app scraped personal data on tens of millions of Facebook
users and their friends, and shared it with political consulting
firm Cambridge Analytica. The app had violated Facebook's policies,
but the event highlighted lax controls over Facebook apps.
Cambridge Analytica used personal data to help political
campaigns influence voters. It worked for several Republican
campaigns in 2016, including President Trump's. It has since shut
down amid questions about its tactics and handling of data -- and
about whether its services were effective.
After the Cambridge Analytica fiasco, Facebook also disclosed
other missteps, including a hack last year that exposed millions of
accounts.
The company already has a privacy team that is supposed to vet
all significant new products before their public rollout, and under
a 2011 FTC consent decree it agreed to ongoing privacy audits by
PricewaterhouseCoopers LLP.
Those audits found no sign of trouble at Facebook -- and PwC's
2017 conclusion that Facebook's internal privacy controls were
operating with sufficient effectiveness was widely dismissed by the
company's critics. The roughly $5 billion FTC fine is expected to
cite violations of the earlier 2011 agreement.
"Five billion is literally the cost of doing business," said
Marc Rotenberg, head of the Electronic Privacy Information Center,
which has long pushed for greater regulatory scrutiny of Facebook's
privacy practices.
"If they get some serious new privacy obligations, that would be
interesting. If they got governance reform, that would be
interesting. What would not be interesting is additional
third-party reporting, because that was already established in the
2011 consent decree."
Ms. Ohlhausen, the former FTC commissioner, didn't discount the
possible significance of tightening the specifics of the 2011 deal.
Now a lawyer for Baker Botts, which represents Facebook in
intellectual-property litigation, she said the FTC has been
demanding stricter oversight terms for consent decrees in recent
years.
Concluding the FTC investigation won't end ongoing scrutiny of
Facebook's past privacy missteps in both the U.S. and European
Union. But it prevents the awkward prospect of Mr. Zuckerberg
calling for greater global oversight of privacy while
simultaneously fighting the primary American privacy regulator.
Write to Ryan Tracy at ryan.tracy@wsj.com
(END) Dow Jones Newswires
July 13, 2019 14:51 ET (18:51 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
Meta Platforms (NASDAQ:META)
Historical Stock Chart
From Aug 2024 to Sep 2024
Meta Platforms (NASDAQ:META)
Historical Stock Chart
From Sep 2023 to Sep 2024