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Critics Warn FTC's Paltry $5 Billion Fine for FaceBook 'Leaves the Public Vulnerable' to Future Abuse by Tech Giant

"When companies can violate the law, pay big penalties, and still turn a profit while keeping their business model intact, enforcement agencies cannot claim victory."

Facebook was hit by a $5 billion fine Wednesday, but some observers felt it was not enough.

Facebook was hit by a $5 billion fine Wednesday, but some observers felt it was not enough. (Photo: Legal Loop)

Facebook was hit with a $5 billion fine and oversight requirements Wednesday, a move that was seen as an insufficient punishment and a worrying indicator of the future of tech regulation by the social media giant's critics.

The FTC's ruling (pdf) was along party lines, with the commission's three Republicans voting in favor and the two Democrats voting against. 

"I fear it leaves the American public vulnerable," said Democratic commissioner Rebecca Slaughter.

In his dissent, Slaughter's fellow Democrat Rohit Chopra said he was concerned about the future enforcement efforts of the commission in light of the ruling. 

"When companies can violate the law, pay big penalties, and still turn a profit while keeping their business model intact, enforcement agencies cannot claim victory," wrote Chopra. 

The company's "past privacy scandals," as described by The Washington Post, could have resulted in stricter oversight regulations and higher fines, but, the paper said, "the FTC stopped short of some even tougher punishments it initially had in mind."

Those punishments, the Post reported, included:

...fining Facebook not just $5 billion, but tens of billions of dollars, and imposing more direct liability for the company's chief executive, Mark Zuckerberg. Facebook, however, fiercely resisted the government's demands, and in the end, the FTC, facing a formidable foe whose $55 billion in revenue last year amounted to almost 200 times the budget afforded to the federal regulators, settled for less.

The $5 billion fine, which was approved on July 12, represents roughly three months of the tech giant's profit earnings. As Sen. Elizabeth Warren (D-Mass.) pointed out, Facebook made that much on the stock market less than an hour after the fine was announced, rendering it almost meaningless. 

"Let's be honest: this settlement is a victory for Facebook," Warren said in a July 12 tweet. "Just look to the markets. In the first 15 minutes after the settlement was reported, Facebook's market value went up by more than $5 billion."

"Far more serious consequences are needed to curb the tech industry's behavior and its amoral pursuit of growth at our expense."
—Gaurav Laroia, Free Press

The details of the settlement reportedly shield Facebook from admitting guilt for its behavior, ensuring the company is protected from future legal liability. The ruling led to a "denunciation" of the FTC from the Open Markets Institute, which, in a statement, called for congressional action against the commission. 

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"Open Markets reiterates its call for Congress to investigate the FTC's failure to police our markets and enforce the law," the organization said. "Congress should no longer tolerate the FTC's failures as an enforcer to protect our democracy, which have led to its crisis of legitimacy."

Other critics also weighed in. 

"Protecting Facebook users' privacy requires structural change, substantive policies, and impositions of liability to end Facebook's improper and unprecedented corporate surveillance system," Public Citizen president Robert Weissman said in a statement.

"The FTC settlement fails to deliver on those measures," Weissman continued. "It enables Facebook to escape genuine accountability for what it has done and leaves it likely that the company will betray its users yet again."

Free Press policy counsel Gaurav Laroia dismissed the fine and oversight as immaterial to the company's bottom line.

"The FTC's $5 billion fine is unlikely to change the company's behavior," Laroia said in a statement. "It represents just one month's worth of earnings for Facebook and is a tiny fraction of the company's growth in revenue since it entered into a consent decree with the agency in 2012 for violating its users' privacy."

"Far more serious consequences are needed to curb the tech industry's behavior and its amoral pursuit of growth at our expense," Laroia added. 

Curbing the tech industry's possible wrongdoing is the ostensible goal of federal investigators at the Justice Department, which announced Tuesday that it was opening a probe into "how market-leading online platforms have achieved market power and are engaging in practices that have reduced competition, stifled innovation, or otherwise harmed consumers."

The probe seeks "to assess the competitive conditions in the online marketplace in an objective and fair-minded manner and to ensure Americans have access to free markets in which companies compete on the merits to provide services that users want," the department said.

Open Markets Institute fellow Matt Stoller, in a tweet, expressed skepticism about the announcement in light of the FTC decision. 

"The DOJ announcement of an 'investigation' into big tech looks like cover for their poorly done FTC settlement and corrupt approval of the Sprint-T-Mobile merger," said Stoller. "We're in 'show me' not 'tell me' territory for these weaklings."

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