Facebook has been ordered to pay a record-breaking $5 billion penalty as part of a settlement with the Federal Trade Commission over a series of failed privacy protections for its users.
The 10-figure fine, the largest in FTC history, stands not just to punish Facebook but also as a warning for other companies, the agency said. The company recorded almost $56 billion in revenue last year.
“The size of the $5 billion penalty, as well as the percentage of profits it represents, will provide significant deterrence not just to Facebook, but to every other company that collects or uses consumer data. This penalty raises the bar for civil penalties in future matters involving privacy violations,” Chairman Joe Simons and Commissioners Noah Phillips and Christine Wilson said in a joint statement on Wednesday.
“Moreover, the Commission designed the order’s sweeping injunctive relief not only to punish future violations, but more importantly to implement dramatic privacy transparency and oversight changes at Facebook, thereby decreasing the likelihood that those violations will occur in the first place.”
CEO Mark Zuckerberg must also create a new privacy committee to oversee security matters, according to the settlement, and will have to personally certify that his company is meeting the requirements quarterly and annually.
The FTC, which voted 3-2 to approve the settlement, launched the investigation last year after the Cambridge Analytica scandal, during which the political consulting firm gained access to the personal data of millions of users. The two Democrats who opposed the fine said they wanted a stricter punishment.
“The proposed settlement does little to change the business model or practices that led to the recidivism,” Commissioner Rohit Chopra wrote in his dissenting statement. “Nor does it include any restrictions on the company’s mass surveillance or advertising tactics.”
In a Facebook post, Zuckerberg promised to make “some major structural changes to how we build products and run this company.”
“As we build our privacy-focused vision for the future of social networking that I outlined earlier this year, it’s critical we get this right,” he wrote. “The next focus for our company is to build privacy protections as strong as the best services we provide. I’m committed to doing this well and delivering the best private social platform for our community.”
The $5 billion fine is about 30 times the previous FTC record, a $168 million penalty against Dish Network in 2017.
At the same time, the Securities and Exchange Commission also leveled a $100 million fine against Facebook Wednesday for making “misleading disclosures” about the “misuse of user data” after posing hypothetical situations about misuse when the company already knew about the Cambridge Analytica breach.
-By Kate Feldman, New York Daily News