Commentary

Will New FTC Restrictions Really Transform Facebook's Practices?

As reported yesterday in Digital News Daily, the Federal Trade Commission has officially hit Facebook with a $5 billion fine for running afoul of its consumer-privacy rules.

In addition, Facebook has agreed to submit to new restrictions and a modified corporate structure. The FTC commissioners who supported the agreement (two commissioners dissented), say it will serve to hold the tech titan accountable for the decisions it makes about users’ privacy.

“Despite repeated promises to its billions of users worldwide that they could control how their personal information is shared, Facebook undermined consumers’ choices,” said FTC Chairman Joe Simons. “The magnitude of the $5 billion penalty and sweeping conduct relief are unprecedented in the history of the FTC. 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.”

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In April, Facebook announced it expected to be fined billions of dollars by the FTC. The agency has been investigating the company since the Cambridge Analytica scandal erupted last year.

Mark Zuckerberg addressed the agreement with FTC at a company-wide event on Wednesday.

“The agreement will require a fundamental shift in the way we approach our work, and it will place additional responsibility on people building our products at every level of the company,” asserted the Facebook cofounder-CEO. “It will mark a sharper turn toward privacy, on a different scale than anything we’ve done in the past.”

“The accountability required by this agreement surpasses current U.S. law, and we hope will be a model for the industry,” Zuckerberg added. ‘It introduces more stringent processes to identify privacy risks, more documentation of those risks, and more sweeping measures to ensure we meet these new requirements.”

Going forward, Zuckerberg asserted, the company’s approach to privacy controls will parallel its approach to financial controls, with a "rigorous design process and individual certifications intended to ensure our controls are working."

Of particular interest to the FTC was the question of whether Facebook violated a 2012 consent decree regarding the sharing of user data.

Analysts have speculated about the effects on Facebook since Facebook issued the warning about the expected fines.

In addition to the billions in fines, “any settlement with the FTC may impact the ways advertisers can use the platform in the future,” eMarketer principal analyst Debra Aho Williamson suggested at the time.

But some policymakers and consumer advocates maintain that Facebook is getting off far too easily.

“This fine is a fraction of Facebook’s annual revenue,” Rep. David Cicilline (D-Rhode Island), chairman of the House Judiciary antitrust subcommittee, tweeted earlier this month. “It won't make them think twice about their responsibility to protect user data.” (See today's news story for more on critics' objections to the Facebook settlement.)

During the first quarter, Facebook raked in more than $15 billion in revenue, while the company's total worth currently falls somewhere in the range of $580 billion.
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