Facebook could be fined $5 billion for privacy violations

Date Posted: June 24, 2019 Last Modified: June 30, 2023
Facebook likely to shell out a record 5 billion dollar fine for privacy violations Photo: Esther Vargas, Flickr

A deal between Facebook and the US Federal Trade Commission (FTC) could see the social media giant put under the government agency’s supervision for the next 20 years. Facebook is looking to close the deal with FTC within the next month which would include new privacy-focused changes in its governance. The platform could potentially also be asked to shell out nearly $5 billion for privacy violations—a penalty record by the FTC against a technology company. This record breaking penalty if imposed, will not only dwarf Google’s $22.5 million fine paid to the FTC, it indicates a new, tougher shift in US regulators’ attitude towards violations by big tech companies.

The FTC has been investigating the social media giant for more than a year, looking into whether Facebook’s actions in the Cambridge Analytica scandal violated a 2011 consent decree. While the 2018 Cambridge Analytica scandal—where the data of 50 million Facebook user accounts were breached by the now-defunct British political firm Cambridge Analytica—led to the probe, the FTC could also be looking into other violations like the data breach in September 2018 where 50 million Facebook user accounts were exposed. The recent political wrangling between the FTC and the US Justice Department has also given the FTC the authority to investigate Facebook’s market indicating further antitrust probes into the country.

The FTC is also under public pressure to add more privacy-focused changes to Facebook’s management such as the elevated responsibility of privacy oversight to Facebook’s board of directors. The agreement is also expected to require Facebook to be more vigilant in monitoring third-party app developers. The 2011 settlement also required the platform to report its privacy practices to the government agency for 20 years. Many onlookers aren’t happy with just setting a penalty record, saying it’s not enough and is money the company will recover in a matter of months. The company’s profits were still 2.4 billion despite setting aside 3 billion for the potential fine in the first quarter.

In a move to gain back waning public trust, last November Facebook announced plans for an independent oversight board with founder Mark Zuckerberg comparing it to a governing body akin to the US Supreme Court. The board’s potential capacities included looking into issues of the day on the platform and set a sort of Facebook case law. The company’s draft charter released in January, suggests creating a body of up to 40 “independent experts” to review Facebook’s most contentious content moderation decisions, in order to decide whether a certain post or comment should stay or go from the platform. In effect, the board’s decisions would affect Facebook’s 2.3 billion users worldwide—a population roughly seven times the size of the United States.

However, the fundamental problem with content moderation lies in the idea that platforms like Facebook are capable of doing so on its users’ behalf. This approach is limited in its potential and despite its best efforts platforms can never fully separate profit making from overseeing the content. The norm for most big tech companies—which rely on individuals users for content or inventory—is to outsource help for policing its platforms.

On Facebook, if someone uploads a contentious post its up to the user to report it. The underlying assumption here is the positioning of Facebook as a neutral ground where people show up and do things (as opposed to an algorithm specifically designed to entice people to do the same) means that the platform is always going to ask for external help to keep it in line. In reality, this allows Facebook to shape the discourse around what is appropriate or inappropriate content—allowing it to make free-speech decisions on its own with little accountability.

A joint statement by various signatories in response to Facebook’s draft charter for a content oversight board highlighted six essential aspects for the design and implementation of the new board which they urged the platform to consider while drafting the final charter. The key points of stress were on ensuring the independence of the board, a clearly defined role of the board in developing and modifying policies, space for journalists, advocates and interested citizens to raise issues, ensuring a diverse representation and promoting greater transparency around content regulation practices.

Zuckerberg has been increasingly vocal since last year about welcoming regulations.In a Washington Post op-ed in March, he called for more active government regulation on internet speech asking for new regulations in four areas: “harmful content, election integrity, privacy, and data portability.” This is at odds with the suspicious stand Silicon Valley tech leaders have held for years towards governments and regulators. What’s changed is now these big tech companies want to get ahead of the impending government regulations by suggesting the kind of rules it would like implemented. He states the example of getting more countries to adopt the European Union’s General Data Protection Regulation (GDPR). Facebook knows how to work with the GDPR and would prefer a consistent set of laws to follow instead of country-by-country laws.

Zuckerberg has also steered towards the direction of a more “privacy-focused” internet in what can also be seen as a pre-emptive attempt to fight off potential regulations by the US and EU to break up its subsidiaries WhatsApp and Instagram in order to introduce much-needed competition into the market. If Facebook is able to implement these “privacy-focused” changes which involves integrating the messaging services of its platforms, then the social media giant can argue that the three companies are too interconnected to be divided–building a stronger case in order to win this future battle.

“I strongly support consumer privacy when communicating online but this move is entirely a strategic play to use privacy as a competitive advantage and further lock in Facebook as the dominant messaging platform,” tweeted Ashkan Soltani, former chief technologist for the FTC. “While positioned as a privacy-friendly play, its timing suggests a competition play to head off any potential regulatory efforts to limit data sharing across services”.

Jonathan Albright, director of digital forensics at the Tow Centre for Digital Journalism warned against conflating the new increased “platform security” with “user-focused improvements.” He elaborated, “Privacy is really about the citizens’ right to control what is shared, and know the contexts in how it can be accessed. Nothing has changed in terms of that control. Access to users’ data is still dictated by Facebook. And now the terms of service will expand to all of Facebook’s subordinate services and apps.”

For years, there has been a disconnect in how Facebook defines privacy and how advocates do. The platform focuses on limiting government and public access to private individual data, while privacy experts have pushed for the platform to limit the amount of information it collects and retains about its users. While the key to Facebook’s privacy-focused changes include end-to-end encryption across its messaging services, there is no mention of any change or limitation to its collection of user data on other fronts. Its business model is based on collecting voluminous and detailed information about users to sell to advertisers.

The FTC Chairman Joe Simon has been under pressure to craft a tough settlement which includes future agreements on changes to corporate governance. The government agency’s main challenge according to privacy experts and advocates is to increase the accountability of Zuckerberg. At a privacy conference in Washington, Simon said that while holding company executives personally accountable in cases was “on the radar” but it wasn’t “something we’re expecting to do in every case”. He said companies resist such moves, which prompt expensive litigation taking away resources from other cases.

However, while Zuckerberg owns less than 1 percent of Facebook’s Class A stock, he controls more than 8o percent of Class B stock, which includes special voting rights giving him nearly 60 per cent of the vote when it comes to the company and the board making important decisions. Thus, for all practical purposes, “Mark is Facebook and Facebook is Mark” says former FTC chief technologist Ashkan Soltani. He notes that most of the company’s statements come from Zuckerberg himself stressing that, “The key factor here is that Zuckerberg still has control over the company and the board.”

The proposed trade commission agreement which includes the appointment of a government-approved in-house privacy executive and oversight committee also designates Zuckerberg to be the “designated compliance officer,” making him personally responsible for privacy issues, which has usually been subject to buck-passing within the company. These changes to the company’s structure and the additional antitrust scrutiny might just be the way forward to make the markets more competition and human rights-friendly.