Facebook is set for a heavy fine from the Federal Trade Commission (FTC) over data privacy violations.
An investigation is being carried out by the FTC and it could result in fines anywhere from $3 billion to $5 billion.
The company has appropriated $3 billion in legal expenses in lieu of the investigation, which cut into its earnings for the first three months of 2019. Facebook’s profit for the quarter was recorded at $2.4 billion, which is 51 percent less than last year.
According to Facebook’s Chief Finance Officer (CFO), David Wehner, the actual amount of payment cannot be determined yet, as the matter remains unresolved. However, he said that the loss can range from $3 to $5 billion.
Rumors regarding the imposition of heavy fine on Facebook has been circulating for the last few months. Now, the company itself has confirmed the news. However, the news failed to alarm the investors, as Facebook’s shares surged by 10 percent in a few hours after the news went public. It certainly raises the question about the effectiveness of such fines on companies like Facebook, which can write them off as the cost of doing business and continue activities that led them to be fined in the first place.
This will be the first financial penalty for the company in the US since the Cambridge Analytica scandal surfaced last year. After that scandal, the social media network came under public scrutiny as well.
Both occurrences show that Facebook violated a 2011 consent agreement with the FTC. The agreement required the company to develop a ‘comprehensive privacy program’ and to get the users’ ‘express consent’ before sharing their data.
Previous FTC fines against tech firms were never this huge. It fined Google $22.5 million in 2012 for violating an earlier privacy agreement with the agency.