July 23, 2019 / 10:05 PM / 2 months ago

Breakingviews - Weak Facebook penalty mirrors weak U.S. watchdog

Silhouettes of mobile users are seen next to a screen projection of Facebook logo in this picture illustration taken March 28, 2018. REUTERS/Dado Ruvic/Illustration

SAN FRANCISCO/NEW YORK (Reuters Breakingviews) - A weak Facebook penalty reflects the state of its U.S. watchdog. The social network will pay a $5 billion fine and form a privacy oversight panel to settle allegations that it mishandled user data. The Federal Trade Commission, which is expected to announce the settlement on Wednesday, doesn’t have enough powers or staff to punch harder.

Republican and Democratic critics have urged the FTC to be tougher on Facebook in recent weeks. The company was accused of inappropriately sharing the data of 87 million users with now-defunct British political consulting firm Cambridge Analytica. That violated a 2012 consent decree with the FTC.

Senators Richard Blumenthal, a Democrat, and Josh Hawley, a Republican, said a $5 billion penalty, the largest civil fine paid to the FTC, would be a “bargain” for Facebook. They called on the FTC to hold top officials accountable, including Chief Executive Mark Zuckerberg. 

The FTC’s enforcement arm has long been seen as a toothless agency. It enforces antitrust laws and protects consumers against deceptive practices, but it has limited authority on data privacy and its decisions have to stand up in court, where it hasn’t fared well. The number of full-time FTC employees, which stood at about 1,100 in 2018, has dropped by about 37% since 1979. Previously, the highest penalty against a tech company had been a $22.5 million fine for Alphabet unit Google for violating a consumer data protection agreement. 

FTC Chairman Joseph Simons told lawmakers in the spring that the agency had to take into consideration that fines obtained in court have historically been low so it made sense to settle cases to extract more money. Simons also said that holding individuals responsible – like Zuckerberg – would spur more litigation, which would tie up FTC resources and result in fewer cases being brought.

Still, the Facebook penalty is almost 65% below the maximum possible fine. The consent agreement allowed for a $16,000 fine for each violation. With 87 million individuals affected, theoretically that could have resulted in a penalty of about $14 billion.

Democrats want to give more powers to the FTC as part of a federal privacy bill, but such a plan likely won’t come together this year. Unless Congress acts, Big Tech can expect more slaps on the wrist.

Breakingviews

Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.


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