Facebook and the FTC have settled their differences — for now.
On Friday, the FTC approved a $5 billion fine of Facebook (FB – Get Report) for violations related to the Cambridge Analytica scandal, the WSJ reported. The FTC’s probe had centered around whether Facebook violated a 2012 consent decree mandating that the social network better protect users’ personal information.
Facebook shares jumped about 1.4% on news of the settlement, which came in at the high end of the range of $3 billion to $5 billion that was originally reported. For investors, the penalty likely signals some closure around a dark Cambridge Analytica chapter. Facebook notified investors in April that it had set aside $5 billion in the settlement negotiations.
Financially, the penalty doesn’t amount to much for a company like Facebook — $5 billion is a fraction of its annual revenue, which was $55.8 billion in 2018. It’s still by far the largest fine ever levied by the FTC against a tech firm, and could represent a turning point as regulators step up scrutiny of privacy violations.
“$5 billion will get everyone’s attention — even if Facebook can easily absorb it,” said Dimitri Sirota, CEO of the data privacy firm BigID. “This fine signals that regulators are ratcheting up the pressure. It shows the rest of the industry (and world) that the FTC has a big stick and are prepared to use it.”
Data privacy experts expect that, both in the U.S. and Europe, regulators will increasingly consider stiffer penalties for violations of existing privacy laws and decrees. Lawmakers are expected to deliver some version of a national privacy law in the foreseeable future, as well.
“Failing to keep consumer data safe, either through breaches or improper use, will carry increasingly stiff penalties here in the U.S. and around the world,” added Andrew Burt, chief privacy officer at Immuta.”New laws have been enacted at the state level, new bills are being proposed at the federal level, and regulators like the FTC are looking to use the tools they already have to make this point clear.”