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It won’t be hard for Facebook to afford a $5 billion settlement with the FTC, but there may be other costs beyond money (FB)

Mark Zuckerberg

  • Facebook is dealing with a record-setting penalty of about $five billion from the Federal Trade Commission — but for the tech giant, which is only about as considerably as the income it generates in a month.
  • What could be much more damaging to Facebook than the financial prices of the settlement is the degree to which the government will get oversight of its company.
  • The New York Instances reviews that underneath the terms of the settlement, Facebook will be capable to proceed sharing information with third events, but that there will be much more oversight into how it handles consumer information. 
  • Dependent on how that oversight shakes up, it could bring about headaches for Facebook, even extended soon after that $five billion bill is paid.
  • Take a look at Company Insider’s homepage for much more stories.

Facebook is dealing with a penalty of about $five billion from the Federal Trade Commission (FTC) for violating a privacy consent degree set back in 2011. 

The multi-billion-dollar penalty — which was very first reported by the Wall Street Journal on Friday — is poised to be the greatest of its sort towards a tech organization, eclipsing a $22 million settlement with Google. For Facebook, although, it seems to be to be an quick bill to shell out, provided the approximately $45 billion income it has on hand.

5 billion bucks is about 9% of Facebook’s total revenue for 2018, which notched in at $55.83 billion. For a much more latest figure, to place it into context, Facebook did about $15 billion in income in the very first 3 months of 2019, averaging out to about $five billion a month.

Certainly, earlier this yr, Facebook announced that it had by now set aside $three billion to deal with any probable fine from the FTC, which it had by now estimated would be all over $five billion.

The other issue

What could be much more of a headache to Facebook than the financial prices of the settlement is any probable oversight of its company going forward. The Wall Street Journal reported that terms of the settlement had been “expected to include other government restrictions on how Facebook treats user privacy.”

Having said that, it really is not quickly clear what this kind of restrictions may possibly entail, as the New York Times reports that the settlement isn’t going to location any problems on Facebook’s capacity to acquire and share information with third events, although it does have provisions for much more “comprehensive oversight” of how the social network handles users’ information. 

That is possible very good information for Facebook’s core marketing company. Having said that, that oversight could nevertheless introduce much more overhead to the organization, and place a damper on new merchandise and programs — we have by now noticed skepticism from politicians such as President Donald Trump in excess of Libra, Facebook’s new cryptocurrency initiative. 

In other phrases, for a organization created popular for moving speedy and breaking items, this could force Facebook to slow down a tiny bit.

Go through much more: Trump blasts Bitcoin and says cryptocurrencies, such as Facebook’s Libra, ought to be ‘subject to all banking regulations’

It also stays to be noticed no matter if CEO Mark Zuckerberg will be held personally liable for long term infringements on the FTC consent decree, an concept that has been previously floated, but that is regarded as unlikely to come to pass.

Historical past lesson

The anticipated multi-billion dollar penalty comes as a end result of an FTC investigation into Facebook’s Cambridge Analytica affair, in which the private information for tens of hundreds of thousands of Facebook consumers was improperly accessed by the information company.

The primary query of the investigation was no matter if Facebook’s dealing with of consumer information in the situation violated a 2011 agreement with the company — as element of the terms of a settlement at that time, Facebook agreed to get techniques to defend consumer information. 

The $five billion that goes into settling the inquiry may possibly not have a huge influence on the company’s bottom line. In truth, Facebook stock closed up one.eight% on Friday, and climbed somewhat larger in soon after-hrs trading, even in the wake of the report of the settlement. 

Having said that, based on the supplemental terms of the settlement, this could have ripple results on Facebook’s company going forward. And if practically nothing else, don’t forget that there is practically nothing stopping the FTC from opening a different investigation, ought to situations warrant.

SEE ALSO: The FTC has authorized a approximately $five billion settlement with Facebook

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