On Friday the US Federal Trade Commission handed Facebook a $5 billion fine for its involvement with the Cambridge Analytica scandal and for breaking its 2011 agreement with the organization. But here’s the real kicker: the government spent months trying to come up with a suitable punishment for Facebook — but it ended up handing it one that increased the stock price and value of the company.
In other words, investors showed that the fine doesn’t scare them at all. Enforcement like this can only work when there are consequences for bad behaviour, but since Facebook has acted relatively badly from its inception, it’s only received friendly warnings from authorities. It’s difficult to tell a teenager that their behaviour is unacceptable when you’ve been allowing them to act the same way for over a decade.
This fine is the biggest one the FTC has ever handed out — the previous record was a miniscule $22 million that it fined Google in 2012. The organization was founded by the US government to prevent anticompetitive, unfair or deceptive business practices by companies operating within the country.
The social network has been involved in a growing string of privacy mishaps, including:
It played an integral role in the Russian troll operation relating to the 2016 election, according to the Mueller report
How it allowed Cambridge analytica to harvest 87 million users’ data for political advertising purposes
That it had struck deals with more than 60 phone manufacturers to share the personal information from users with them, reported The New York Times
We published a more comprehensive overview of Facebook’s various privacy scandals
While the $5 billion fine seems like a lot in comparison to the other fines the FTC has issued, it’s not a lot to Facebook. The company made $15.08 billion in Q1 2019 according to its financial documents, with a profit of more than $22.11 billion during 2018. The big news here is that the fine is literally pocket change to Facebook — taking up only a month in revenue.
Facebook revenue and profit per quarter, in billions
Facebook’s profit drops so drastically in Q1 2019 because it took into account the fine it would be receiving from the FTC — though the company estimated it would be fined $3 billion, less than the $5 billion it was actually fined.
There are numerous voices that are calling for a more impactful fine, including Oregon Senator Ron Wyden, Massachusetts Senator Ed Markey and Virginia Senator Mark Warner. Without a doubt there will be more opposition to the fine and calls for a greater one, but we’ll only be able to find out how or if the fine will change as it makes its way through the Justice Department for review.