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Facebook Fined $5 Billion and Ordered to Add Oversight of Data Practices Facebook Agrees to Extensive New Oversight as Part of $5 Billion Settlement
(about 3 hours later)
SAN FRANCISCO — Facebook on Wednesday was ordered to create new layers of oversight for its collection and handling of users’ personal data by the Federal Trade Commission, as the agency detailed a privacy settlement with the social network that signals Washington’s newfound interest in reining in powerful technology companies. SAN FRANCISCO — Facebook was ordered on Wednesday to create new layers of oversight for its collection and handling of users’ data by the Federal Trade Commission, as the agency detailed a privacy settlement with the social network that became a referendum on how aggressive American regulators would be against big tech companies.
As part of the agreement, the F.T.C. mandated the social network create an independently appointed privacy committee on its board; designate compliance officers to oversee a privacy program; undergo regular privacy audits that its chief executive, Mark Zuckerberg, and others must submit to; and appoint an outside assessor to monitor the handling of data. In addition, the F.T.C. fined Facebook $5 billion for violating a 2011 privacy settlement. Under the agreement, the F.T.C. mandated that the Silicon Valley company add new positions and practices to increase the transparency and accountability of how it treats people’s information. The agency also formally imposed a record $5 billion fine against Facebook for deceiving users about their ability to control the privacy of their personal data.
The measures, which the F.T.C.’s commissioners approved in a 3-to-2 vote this month, underline how aggressive regulators are aiming to be with Facebook and other behemoth tech companies. The fine was a record by the federal government against a tech company. And the conditions go further than the previous settlement between the F.T.C. and Facebook. Yet the measures, which the F.T.C.’s commissioners approved in a 3-to-2 vote this month, drew sharp criticism for not going far enough in curbing the data habits of the world’s largest social media company. Republican and Democratic lawmakers pilloried the settlement as a drop in the bucket for Facebook and said the F.T.C. failed to limit a core practice that has repeatedly raised privacy questions: the company’s gathering, sharing and use of people’s personal information.
But the agreement stopped short of more punitive measures that the F.T.C. had previously discussed against Facebook, including holding Mr. Zuckerberg personally liable for missteps and potentially taking the company to court. The fine was also a fraction of Facebook’s $56 billion in annual revenue. Most significantly, the settlement did not restrict the social network’s ability to gather, share and use people’s personal information — a core practice that has repeatedly raised privacy questions. That puts American regulators in a difficult position as authorities around the world have stepped up their actions to crimp the power of tech companies like Facebook, Google, Amazon and Apple. Over the past few years, the United States has been seen as a lesser force in tech regulation, especially compared with European officials who have passed laws and imposed a series of large penalties against the tech giants.
In a statement, the F.T.C.’s three Republican commissioners who voted to approve the settlement — including the agency chairman, Joseph J. Simons — said they were “proud” of the agreement. The measures “will provide significant deterrence not just to Facebook, but to every other company that collects or uses consumer data,” the statement said. The F.T.C. agreement “utterly fails to penalize Facebook in any effective way,” said Senator Josh Hawley, a Republican of Missouri.
The F.T.C.’s two Democratic commissioners disagreed, saying the settlement did not go far enough in checking Facebook. “I fear it leaves the American public vulnerable,” said Rebecca Kelly Slaughter, a Democratic commissioner. Senator Ron Wyden, an Oregon Democrat who is pushing for new federal privacy laws, said the settlement would not deter Facebook from further privacy violations.
Facebook, which is reporting its quarterly earnings later on Wednesday, did not immediately have a comment. “The F.T.C. is sending the message that wealthy executives and massive corporations can rampantly violate Americans’ privacy and lie about how our personal information is used and abused and get off with no meaningful consequences,” he said.
The F.T.C.’s unveiling of the settlement comes as lawmakers and regulators have recently ratcheted up pressure on Google, Facebook, Apple and Amazon. Within the F.T.C., the settlement was divisive, with the agency’s three Republican commissioners voting to approve the deal while the two Democratic commissioners dissented. The agreement stopped short of more punitive measures that the F.T.C. had previously discussed against Facebook, including holding the chief executive Mark Zuckerberg personally liable for missteps and potentially taking the company to court. The fine was also a fraction of Facebook’s $56 billion in annual revenue.
The agency also agreed the settlement would shield Facebook from known claims of violations before June 12, 2019, essentially giving the company a pass on its past. And it provided immunity to Facebook officers and directors.
In a statement, the F.T.C.’s Republican commissioners — including the chairman, Joseph J. Simons — said they were “proud” of the agreement. The measures “will provide significant deterrence not just to Facebook, but to every other company that collects or uses consumer data,” they said.
The F.T.C.’s two Democratic commissioners disagreed. “I fear it leaves the American public vulnerable,” said Rebecca Kelly Slaughter, a Democratic commissioner.
Rohit Chopra, another Democratic commissioner, warned that the terms of the settlement shielded Facebook from a wide range of problematic practices. “This shield represents a major win for Facebook, but leaves the public in the dark as to how the company violated the law and what violations, if any, are going unaddressed,” he said.
Mr. Zuckerberg said in a Facebook post that the F.T.C.’s orders “go beyond anything required under U.S. law today.” He added that he supported the agreement because it would “reduce the number of mistakes we make and help us deliver stronger privacy protections for everyone.” Facebook will report its quarterly earnings later on Wednesday.
The F.T.C. unveiled the settlement as lawmakers and regulators have recently ratcheted up pressure on Google, Facebook, Apple and Amazon.
Last week, Congress held several hearings to question the companies on whether they were stifling free speech and competition. President Trump has weighed in, calling the tech platforms “crooked” and “dishonest” and saying “something is going to be done.” On Tuesday, the Justice Department said it would start an antitrust review into how internet giants had amassed market power and whether they had acted to reduce competition.Last week, Congress held several hearings to question the companies on whether they were stifling free speech and competition. President Trump has weighed in, calling the tech platforms “crooked” and “dishonest” and saying “something is going to be done.” On Tuesday, the Justice Department said it would start an antitrust review into how internet giants had amassed market power and whether they had acted to reduce competition.
For Facebook, the agreement with the F.T.C. does not end its regulatory and legal headaches. Yet it’s unclear if those moves will lead to penalties or changes at the tech companies. That made the F.T.C. agreement the clearest indicator of how far American regulators would go to limit the firms.
The Securities and Exchange Commission on Wednesday said that it had levied a penalty of $100 million against the Silicon Valley firm for not clearly disclosing the risks around its privacy practices to investors. For Facebook, the F.T.C. settlement does not end its regulatory and legal headaches.
The Securities and Exchange Commission said on Wednesday that it had imposed a penalty of $100 million against Facebook for making misleading disclosures to investors about the risks of misuse of user data. The agency charged that Facebook had known for two years about the misuse of users’ data — and had shared that information with company employees — yet misleadingly presented those risks to investors as merely hypothetical.
And around the world, Facebook faces other fights. The authorities in Europe and elsewhere are lining up to probe and limit tech companies on issues including privacy, antitrust and harmful content such as disinformation and hate speech.And around the world, Facebook faces other fights. The authorities in Europe and elsewhere are lining up to probe and limit tech companies on issues including privacy, antitrust and harmful content such as disinformation and hate speech.
The F.T.C.’s investigation of Facebook for privacy violations was prompted by a report from The New York Times and The Observer of London last year on how the social network allowed Cambridge Analytica, a British consulting firm to the Trump campaign, to harvest the personal information of its users. Cambridge Analytica used the data to build profiles of American voters without the consent of Facebook users.The F.T.C.’s investigation of Facebook for privacy violations was prompted by a report from The New York Times and The Observer of London last year on how the social network allowed Cambridge Analytica, a British consulting firm to the Trump campaign, to harvest the personal information of its users. Cambridge Analytica used the data to build profiles of American voters without the consent of Facebook users.
The F.T.C. began examining whether the Cambridge Analytica scandal meant that Facebook had violated a 2011 privacy settlement with the agency. Under that earlier agreement, the company had agreed not to deceive people over how their information was used and shared.
On Wednesday, the F.T.C. said it had also agreed to settle with Cambridge Analytica’s former chief executive, Alexander Nix, and Aleksandr Kogan, an app developer who worked with the company, to restrict how they did business in the future.On Wednesday, the F.T.C. said it had also agreed to settle with Cambridge Analytica’s former chief executive, Alexander Nix, and Aleksandr Kogan, an app developer who worked with the company, to restrict how they did business in the future.
The settlement between the F.T.C. and Facebook was being closely watched as a litmus test for how American regulators will curb the tech companies. But the partisan split at the F.T.C. may lead to questions for Mr. Simons about whether this was the best that the agency could do. Some lawmakers had already criticized the $5 billion fine against Facebook as a slap on the wrist, given the amount of revenue that the company brings in. With Facebook, the F.T.C. mandated the social network create an independently appointed privacy committee on its board that would review decisions affecting user privacy. The agency also ordered the company to designate compliance officers to oversee a privacy program, undergo regular privacy audits that Mr. Zuckerberg and others must submit to, and appoint an outside assessor to monitor the handling of data.
One point of contention among the F.T.C. commissioners was whether a settlement should shield Mr. Zuckerberg; Facebook’s chief operating officer, Sheryl Sandberg, and other Facebook executives and directors from any personal liability for the company’s transgressions. The Democratic commissioners argued that the violations warranted holding the executives personally liable, while the Republican commissioners said new oversight would reduce the ability of Mr. Zuckerberg and others to make unilateral decisions. During the discussions about the settlement with Facebook, one point of contention among the F.T.C. commissioners was whether it should shield Mr. Zuckerberg; Facebook’s chief operating officer, Sheryl Sandberg; and other Facebook executives and directors from any personal liability for the company’s transgressions. The Democratic commissioners argued the violations warranted holding the executives personally liable, while the Republican commissioners said new oversight would reduce the ability of Mr. Zuckerberg and others to make unilateral decisions.
The Democratic commissioners also argued that Facebook’s financial gains for violating its previous privacy commitments to the F.T.C. would far surpass the $5 billion fine that the agency was imposing. The Democratic commissioners also said that Facebook’s financial gains for violating its previous privacy commitments to the F.T.C. would far surpass the $5 billion fine that the agency was imposing.
“When companies can violate the law, pay big penalties and still turn a profit while keeping their business model intact, enforcement agencies cannot claim victory,” Rohit Chopra, a Democratic commissioner, said in his dissent. “When companies can violate the law, pay big penalties and still turn a profit while keeping their business model intact, enforcement agencies cannot claim victory,” Mr. Chopra said in his dissent.
The three Republican commissioners said the $5 billion fine was “record breaking” and that it reset the baseline for privacy cases.The three Republican commissioners said the $5 billion fine was “record breaking” and that it reset the baseline for privacy cases.
They also said the F.T.C. did not have a strong enough case to move forward with any litigation against Facebook. Ultimately, Mr. Simons and the other two Republican commissioners, Noah Phillips and Christine Wilson, said the concessions they were able to extract with a settlement were more valuable — and far more certain — than what might be achieved with a drawn-out legal battle in public.They also said the F.T.C. did not have a strong enough case to move forward with any litigation against Facebook. Ultimately, Mr. Simons and the other two Republican commissioners, Noah Phillips and Christine Wilson, said the concessions they were able to extract with a settlement were more valuable — and far more certain — than what might be achieved with a drawn-out legal battle in public.
“Is the relief we would obtain through this settlement equal to or better than what we could reasonably obtain through litigation?” they said. “If the answer had been ‘no,’ it would have made sense to aggressively move forward in court. The answer, however, was ‘yes.’ ”“Is the relief we would obtain through this settlement equal to or better than what we could reasonably obtain through litigation?” they said. “If the answer had been ‘no,’ it would have made sense to aggressively move forward in court. The answer, however, was ‘yes.’ ”
Some leading privacy experts, who have spent years pressing the F.T.C. to crack down on privacy abuses at Facebook, said the settlement was inadequate because it failed to significantly restrict Facebook’s collection and handling of consumers data or remedy the company’s past privacy deceptions.
Among other things, the F.T.C. should have required Facebook to divest WhatsApp, the messaging service it bought in 2014, as a remedy for Facebook reneging on its commitments at the time not to merge WhatsApp user data with Facebook data, said Marc Rotenberg, the executive director of the Electronic Privacy Information Center. His group spearheaded complaints that led to the F.T.C.’s 2012 settlement with Facebook.
“There are no significant changes in business practices mandated,” Mr. Rotenberg said. “That’s the bottom line. And that’s the wrong outcome.”