U.S. authorities are showing they can crack the whip at Big Tech.
Enforcers sought on Wednesday to make a cautionary tale of Facebook, imposing a record $5 billion in civil penalties over the social media company’s handling of consumers’ data, and holding it up as an emblem of unchecked technocracy. The 10-digit fine came just a day after the Justice Department said its antitrust division would step up its enforcement against anti-competitive practices by “market-leading online platforms.”
But it remains to be seen just how Washington, D.C.’s new, more aggressive posture will ultimately force change at the platforms and companies that fashion is relying on to reach consumers.
“Big Tech is in the crosshairs of both parties these days,” said Michael Carrier, co-director at the Rutgers Institute for Information Policy and Law. “There seems to be an unease with their size and the power they exercise over our lives.”
The Federal Trade Commission’s action represents the largest-ever monetary penalty by the agency, according to its spokeswoman. The settlement is the culmination of a more than yearlong investigation into the company, which has been accused of surreptitiously sharing users’ information with third parties, and not being transparent about data violations.
The U.S. Securities and Exchange Commission revealed its own $100 million settlement against Facebook on Wednesday, accusing it of concealing its knowledge that the now-shuttered political data analysis company Cambridge Analytica had gained access to Facebook users’ data. Cambridge Analytica obtained information including users’ names, locations, birthdays and their professed interests, which it then used to target political advertisements, according to the SEC.
Facebook struck a contrite message in its own statement Wednesday.
“We have heard that words and apologies are not enough and that we need to show action,” the company said. “By resolving both the SEC and the FTC investigations, we hope to close this chapter and turn our focus and resources toward the future.”
But the FTC settlement also shows some of the weaknesses of agencies taking on targets whose resources easily outmatch theirs. A $5 billion dollar penalty for Facebook amounts to barely a tenth of the tech giant’s more than $55 billion revenues in 2018, and less than a quarter of its profits last year. In its aftermarket earnings update, Facebook said its advertising revenues topped $16.6 billion in the second quarter. More than 2.1 billion people use Facebook and its platforms including Instagram, WhatsApp and Messenger.
Agencies could potentially win larger settlements or even trial awards by taking companies to court. But the risks of litigation, often a question of time and expenses as much as the merits of the case, change the calculus.
“As an FTC chair, you want a victory under your belt,” said Robert Lande, a professor at the University of Baltimore School of Law, who has worked at the FTC’s Bureau of Competition.
“Government officials become risk averse, and want a deal to be finalized under their watch, not under their successor’s,” he said.
Still, the actions show the government is now energized and actively pursuing big tech companies, which have often used their size and resources to elude regulators, attorneys said. Facebook wound up in hot water partly by violating a 2012 consent order with the FTC. The company breached that order in a number of ways, including by sharing users’ information with third parties such as app developers, even as it told users they had control to restrict how their information was shared, FTC chairman Joseph Simons said.
The move shows the agency inclined to hold companies to their word, privacy attorneys said.
“They’re trying to show they can be a strong enforcer here, and that this is a very strong remedy that they imposed in this case,” said Maureen Ohlhausen, former acting chairman of the FTC until May 2018, and the chair of Baker Botts LLP’s antitrust and competition law practice.
“Strong enforcement is something they’re trying to signal,” she said.
Though the settlement doesn’t penalize individual executives, its terms indicate the agency may step up enforcement by singling out company leadership in the future, attorneys said.
For instance, the settlement requires Facebook to create a privacy committee within its board of directors and for chief executive officer Mark Zuckerberg to assure the FTC that the company is upholding its privacy obligations under the settlement, with the threat of personal criminal liability for false statements. Such conditions show that seeking individual accountability is on the FTC’s radar, said Mary Hildebrand, chair of the privacy and cybersecurity group at Lowenstein Sandler LLP.
“Companies involved in the collection and processing of consumer data — and using that data for advertising purposes, or monetizing them more broadly — should be really mindful of the terms of the consent order the FTC imposed on Facebook,” Hildebrand said.