Facebook sales soared 28% to $16.6 billion in the three months through June, more than three times what the social media giant is paying to settle a privacy investigation by the Federal Trade Commission.
The cost of operational changes the commission required in addition to its $5 billion fine, which will take hundreds of engineers and involve more than 1,000 people across the company, remain to be seen. The Menlo Park, California-based business is naming a chief privacy officer, appointing a related board committee and executives will be required to certify personally that Facebook is meeting its commitments to regulators.
“These changes go beyond anything required under U.S. law today,” founder and CEO Mark Zuckerberg wrote in a Facebook post. “The reason I support them is that I believe they will reduce the number of mistakes we make and help us deliver stronger privacy protections for everyone.”
While the settlement solves one regulatory challenge for Facebook, the company confirmed Wednesday that the commission is still conducting an antitrust investigation and acknowledged the Justice Department’s review of anticompetitive behavior among leading online platforms.
The industry’s handling of user data, which companies use to connective lucrative advertising customers with a carefully tailored market of buyers, and concerns that dominant players are unfairly competing with their own customers have grown as the 2020 presidential campaign begins in earnest. In addition to congressional hearings on data privacy, Democratic candidates such as Sen. Elizabeth Warren of Massachusetts have suggested breaking up Facebook and Amazon.
“Privacy has enormous potential to bring these companies almost down to their knees,” Thomas Cooke, a professor of business law at Georgetown University’s McDonough School of Business, told the Washington Examiner. Improper use of personal data, whether it’s credit card information or tracking of comments on platforms, is behavior U.S. consumers have shown they won’t tolerate, he explained.
Voters will support tougher regulations to prevent such tactics, Cooke added: “Most people would say companies need to be allowed to be free and prosper, but not at individual expense.”
Many social media users don’t realize how their interactions on such platforms reveal preferences for travel destinations, restaurants, and even clothing designers. Despite agreeing to often-complex terms of service before downloading the apps, they’re surprised when data breaches occur as well as by how much information they’ve consented to sharing with developers of linked programs.
Zuckerberg, grappling with growing irritation about such issues, has said he supports a federal standard, as do a number of Silicon Valley trade groups, which hope it would preempt a growing thicket of state regulations, including one in California that mirrors new European rules.
He has also suggested governments need to set clearer standards governing data portability, handling of harmful content such as videos of shootings and violent crimes and inauthentic content designed to sway elections.
Facebook has grappled with harsh criticism since U.S. intelligence agencies said the platform and its rivals were used by Russian agents seeking to inflame and influence voters in the 2016 presidential election won by Donald Trump. While Democrats said the company was too slow to act, GOP members complained that Facebook was censoring conservative opinions with the posts and accounts taken down once it started tightening oversight.
“I don’t believe it’s sustainable for private companies to keep making such major decisions on social issues without a robust democratic process,” Zuckerberg told investors on an earnings call on Wednesday. “Either the right regulations will be put in place or we expect frustration with our industry will continue to grow.”
The FTC penalty announced Wednesday, the largest levied against a company for privacy violations, stems from an investigation the agency opened last year into claims Facebook violated a 2012 consent decree with deceptive practices that left users unaware the company was sharing their personal data with third-party apps.
Among the matters covered was information acquired by Donald Trump’s campaign consultant, Cambridge Analytica, on 87 million Facebook users and their connections.
Democratic members of the commission, who opposed the settlement, said it was too small to change Facebook’s behavior. While the company’s profit sank 49% to $2.62 billion in the second quarter, it still had $48.6 billion in cash and marketable securities on hand, according to a statement.
