Facebook fined $5 billion by FTC, must update and adopt new privacy, security measures

CEO of Facebook, Mark Zuckerberg posted on Facebook;

“We’ve agreed to pay a historic fine, but even more important, we’re going to make some major structural changes to how we build products and run this company.”

Zuckerberg wasn’t joking when he said ‘historic fine’. Before now, the highest fines Federal Trade Commission has ever charged was $22.5 million in 2012, which was paid by Google and then $500,000 in 2017, paid by Upromise. And now, the biggest social networking tech company, Facebook, must pay and have agreed to pay a mouthwatering and skyscraping $5 billion fine as part of a settlement with FTC and adopt new protections for data users on the social network for violating consumers’ privacy rights. They’ve also accepted to adopt measures that limit the power of CEO Mark Zuckerberg.

According to the FTC order, the social networking giant must expand its privacy protections across Facebook itself, as well as on Instagram and Whatsapp as well as adopt a cooperate system of checks and balances to remain complaints. Facebook has also been employed to maintain data security, for instance, when it comes to protecting information such as users’ phone numbers.

Up until now, the FTC has not charged any company, talk less of a big tech company such as Facebook a fine as large as that as privacy or data security penalty. This $5 billion fine is arguably one of the largest imposed by the U.S. government for any violation. Yet, some of Facebook’s meanest critics feel that this fine, though historic or record-breaking, is nothing but just a get out of jail free card for Facebook and just the very beginning of how far these consumer watchdog groups are set to go to protect users’ privacy.

“A penalty that doesn’t require real structural changes, that financially is a drop in the bucket, and that appears to absolve Facebook of any liability over additional abuses like tricking kids into in-app purchase, is a get out jail free card for Facebook and sends a signal to the rest of the industry that business, as usual, is acceptable,” said Common Sense CEO James Stever in a statement. “This punishment supply does not fit the crime and we strongly encourage policymakers to consider this just the very beginning of the long way we have to go to hold Facebook and the tech industry accountable for protecting the privacy of users, especially young people.”

“As expected, the size of the settlement is historic, but these attempts to hold Facebook accountable are not enough to make a real difference. With a weak and under-resourced FTC, and a glaring need for far more comprehensive privacy laws, Congress must raise the standards for consumers and hold Big Tech accountable,” Consumer Report President and CEO Martha Tellado added.

What makes this settlement game-changing is far from just its financial demand, it also saps out some of Mark Zuckerberg’s power as the CEO of Facebook by restricting to some extent, his oversight in privacy and security matters. As a part of this settlement which was approved with an a3-2 vote by the Commission, Facebook is required to create a new privacy committee with independent board members. These individuals can only be removed with nothing less than two-third shareholder vote. Zuckerberg and designated compliance officers each must submit individual quarterly compliance reports to the FTC. Finally, a third-party assessor will monitor Facebook’s privacy-related decisions henceforth.

Admittedly, however, diminishing Mr. Zuckerberg’s power effective by the order is a feat FTC wouldn’t have been able to achieve by going to court. Chairman Joe Simons and the commissioners Noah Joshua Philips and Christine Wilson acknowledged this in their lengthy statement of approval to this settlement.

The statement says, “The Order significantly diminishes Mr. Zuckerberg’s power – something no government agency, anywhere in the world, has thus far accomplished,”

“The provision of this Order extinguish the ability of Mr. Zuckerberg to make privacy decisions unilaterally by also vesting responsibility and accountability for those decisions within business units, DCO’s (digital compliance officers), and the privacy committee.”
But, regardless, Facebook went ahead to agree to the settlement even though there are good chances that these changes will make it longer to bring new features to Facebook and its other products like Zuckerberg said. While the company might not have had a better option, Mr. Zuckerberg has this to say acknowledging that it is the company’s responsibility to protect people’s privacy.

“We already work hard to live up to this responsibility, but now we’re going to set a completely new standard for our industry,”

“Overall, these changes go beyond anything required under the US law today. The reason I support them is that I believe they will reduce the number of mistakes we make and help us deliver stronger privacy protections for everyone.”

Stephanie Avakian, co-director of the SEC’s Enforcement Division said in a statement, “Public companies must accurately describe material risks to their business… As alledged in our compliant, Facebook presented the risk of misuse of users data as hypothetical when they knew user data had in fact been misused.”

The separate SEC complaint dates back to Facebook’s response to Cambridge Analytica. The allegation, which Facebook while agreeing to the final $100 million judgement admits nor denies, is that in 2014 and 2015, Cambridge Analytica paid an academic researcher to “collect and transfer data from Facebook to create personality scores for approximately 30 million American” and that Facebook discovered this misuse in 2015 but failed to correctly disclose it for more than two years.

No doubt, for quite a long time now, Facebook’s privacy practices have been in the government crosshairs and under the scrutiny of consumer watchdog groups.

Moreover, separate settlements with Cambridge Analytica, its former CEO Alexander Nix, and an app developer who worked with the company, Aleksandr Kogan were also announced by the FTC. The announcement claimed that Cambridge “used false and deceptive tactics to harvest personal information from millions of Facebook users” and all face restrictions on future business.

On the other hand, Facebook is expected to release its second-quarter results after the market closes Wednesday. Meanwhile, Facebook shares have risen 47% so far this year. The company shares were down more than 1% in early trading to $199.94; they ended the trading day up $2.30 to close at $204.66.

Whew. Ok, it was a long way down! But it’s clear; Facebook has done something exceedingly remarkable and has been inclined to take a whole new dimension. So what do you think? What is the future of Facebook? And how do you feel about the tech industry as a whole especially now that one of the most daring amongst them is repeatedly found faulty – misusing user’s data and going against their privacy law?

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