August 24, 2019, 10:00


Facebook’s $5 billion fine and FTC settlement is a win for Facebook

Facebook’s $5 billion fine and FTC settlement is a win for Facebook

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Uncovering and explaining how our digital world is changing — and changing us.

At least part of Facebook’s bill for the Cambridge Analytica scandal has come due: The company will pay the US government $5 billion and will add layers of committees, inspectors, and rules that are designed to keep it from committing privacy blunders in the future.

What Facebook’s settlement with the Federal Trade Commission, announced Wednesday morning, doesn’t do is change the fundamental way Facebook operates: Facebook will continue to harvest the data it collects about its 2 billion-plus users and employ that information to run an incredibly powerful advertising business.

Not coincidentally, Facebook will announce its earnings today and is expected to tell investors it generated more than $16 billion in revenue in the second quarter of 2019.

You may think this summary understates the significance of the settlement if you read the FTC and Facebook’s description of the agreement, because both of those entities are painting this as a very big deal.

“FTC settlement imposes historic penalty, and significant requirements to boost accountability and transparency,” says the FTC, which includes a helpful infographic designed to let you know that $5 billion is a giant fine.

Facebook, meanwhile, says it has a “comprehensive new framework for protecting people’s privacy and the information they give us,” and says “the agreement will require a fundamental shift in the way we approach our work.”

For good measure, Facebook also announced that it will pay the Securities and Exchange Commission an additional $100 million to settle charges alleging that it should have told investors more about its privacy screw-ups. It also announced yet another privacy problem: It says it figured out that it was still leaking data to outside companies that should have been cut off earlier this year. It’s fixing that now, Facebook says.

But it is worth noting that the FTC approved this deal along party lines, with three commission members appointed by Republicans outvoting two appointed by Democrats. And the two Democrats are sharply opposed to the settlement because they say it doesn’t go nearly far enough.

Per the Washington Post, the FTC had originally considered penalties worth tens of billions of dollars and rules that would hold Facebook CEO Mark Zuckerberg personally responsible; it agreed to much smaller penalties after concluding that it didn’t want to take on Facebook in a multi-year legal battle.

More fundamentally, they argue, the settlement doesn’t really change Facebook’s desire to compile as much information as it can about its users, so that it can use that data to build a giant advertising business. “Facebook’s violations were a direct result of the company’s targeted behavioral advertising business,” FTC Commissioner Rohit Chopra writes in his dissent. “The proposed settlement does little to change the business model or practices …[and] imposes no meaningful changes to the company’s structure or financial incentives.”

Instead, what the settlement does is build in multiple layers of compliance oversight, including a third-party privacy assessor who will report to the FTC, as well as a new privacy group appointed by Facebook’s board of directors. Facebook will also have to conduct a privacy review for any new product or practice it rolls out for Facebook, Instagram, or WhatsApp, and will have to employ new compliance officers to monitor all of this, along with more granular rules regarding things like letting users opt in to facial recognition programs, instead of making them opt out.

The FTC says this will take away Mark Zuckerberg’s “unfettered control … over decisions affecting user privacy.”

But that’s not a bad thing for Zuckerberg. His company would rather not have to hire a bunch of lawyers and privacy watchdogs and jump through more hoops every time it wants to roll out a new feature. But it can certainly afford to do that (again, see today’s earnings announcement).

More important, Zuckerberg would like to be able to tell the government, investors, and his users that his company has agreed to all the new terms and it’s taking privacy seriously, and then move ahead with his business, which is based on surveilling his users.

Just ask Facebook, which, perhaps tellingly, doesn’t mention Zuckerberg by name (instead referring to “our CEO”) in its announcement this morning: “By resolving both the SEC and the FTC investigations, we hope to close this chapter and turn our focus and resources toward the future.” Wall Street has already blessed this deal: Onward.

But Facebook isn’t out of the woods yet. If you are a congressional critic of Facebook and think the FTC settlement doesn’t come close to restricting the power of the world’s most powerful social network, you may actually use today’s news as a reason to push through meaningful legislation. Meanwhile, the Trump administration has signaled that it isn’t done looking at Facebook or the rest of Silicon Valley, announcing that its Department of Justice is going to launch an antitrust review aimed at Facebook and other tech giants.

Recode and Vox have joined forces to uncover and explain how our digital world is changing — and changing us. Subscribe to Recode podcasts to hear Kara Swisher and Peter Kafka lead the tough conversations the technology industry needs today.

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