The Federal Trade Commission hit Facebook with a record-breaking $5 billion fine on Wednesday, along with a slew of new privacy restrictions in response to its mishandling of users’ private data.
The penalty, the largest levied against a company for privacy violations, stems from an investigation the FTC 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.
“Despite repeated promises to its billions of users worldwide that they could control how their personal information is shared, Facebook undermined consumers’ choices,” FTC Chairman Joe Simons said. “The magnitude of the $5 billion penalty and sweeping conduct relief are unprecedented in the history of the FTC.”
Simons said the settlement is intended “not only to punish future violations but, more importantly, to change Facebook’s entire privacy culture to decrease the likelihood of continued violations.”
Facebook’s priority now is to “build privacy protections as strong as the best services we provide,” CEO Mark Zuckerberg said in a post on the social media platform. “We already work hard to live up to this responsibility, but now we’re going to set a completely new standard for our industry.”
The agreement requires Facebook to adhere to new restrictions on its business operations, including setting up different mechanisms to make privacy decisions. It creates an independent privacy committee of Facebook’s board of directors, which is designed to strip Zuckerberg of “unfettered control” over consumer privacy, the FTC said.
Facebook must also name compliance officers responsible for its privacy program. Zuckerberg and those compliance officers are required to submit to the FTC quarterly certifications that verify Facebook is complying.
The company will be required to exercise greater oversight over third-party apps and implement a comprehensive data security program. It will be barred from using telephone numbers to enable two-factor authentication for advertising and is required to encrypt user passwords.
The FTC, which oversees enforcement of federal privacy regulations, first opened its probe after the disclosure that Cambridge Analytica, a political consulting firm that worked for President Trump’s 2016 campaign, improperly harvested personal data from 87 million Facebook users. That information was obtained through a quiz app that collected data from users and their friends.
The FTC voted 3-2 along party lines this month to approve the $5 billion settlement, which has been referred to the Justice Department.
The commission’s settlement earned sharp rebukes from the two Democrats on the panel.
“The press-driven price tag approach taken by enforcers is not only inappropriate — it is also unfair,” Commissioner Rohit Chopra said in a dissenting statement. “Large incumbents can easily afford to bankroll the kind of blockbuster settlements that generate headlines. The small companies that can’t pay away their legal problems face enforcers willing to wield their full authority and allocate substantial resources to hold them accountable.”
Chopra said the FTC’s agreement with Facebook gives the company “a lot to celebrate.”
Commissioner Rebecca Kelly Slaughter said the panel should have voted to start litigation against Facebook.
“I do not share my colleagues’ confidence that the order or the monetary penalty will effectively deter Facebook from engaging in future law violations, and thus I fear it leaves the American public vulnerable,” Slaughter said in a separate dissenting statement. “Facebook’s privacy and data practices affect all Americans, whether they are users or not.”
While the $5 billion fine is historic, it is a fraction of the $15 billion Facebook brought in last quarter.
Initial reports of the penalty prompted scrutiny from lawmakers on Capitol Hill, who said the fine would not be enough to hold Facebook accountable for its privacy missteps.
The settlement comes a day after the Justice Department announced a sweeping antitrust review of Big Tech companies, which is expected to ensnare Facebook, as well as Amazon and Google.
