Facebook expects $3B-$5B fine over Cambridge Analytica

Facebook expects $3B-$5B fine over Cambridge Analytica
© Greg Nash

Facebook believes that a Federal Trade Commission (FTC) probe into the company's handling of the Cambridge Analytica scandal could end up costing it between $3 billion and $5 billion.

The social network disclosed to investors in its quarterly earnings report on Wednesday that it had already set aside $3 billion as a legal expense. Facebook said that it had not yet reached a settlement with the agency, and it's unclear when the case would be resolved.

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An FTC spokeswoman declined The Hill's request for comment, but any multibillion-dollar fine over privacy violations would be a record for the U.S.

It might not do lasting damage to Facebook, however, which revealed on Wednesday that it had made more than $15 billion in revenue through the first three months of 2019.

The legal expense does appear to have eaten into the company's bottom line for the quarter. Facebook posted $2.4 billion in profits for the last three months, half of its haul in the first quarter of last year, despite a 26 percent revenue increase.

Facebook's shares shot up 10 percent in after-hours trading after the quarterly earnings was posted, prompting concern from some tech critics that the fine would not be enough to rein in the tech giant.

"Last month, I said that a fine in the low billions of dollars would amount to a slap on the wrist for Facebook," Rep. David CicillineDavid Nicola CicillineHillicon Valley: Federal inquiry opened into Google health data deal | Facebook reports millions of post takedowns | Microsoft shakes up privacy debate | Disney plus tops 10M sign-ups in first day Top antitrust Dem presses DOJ, FTC on Google's Fitbit acquisition Hillicon Valley: California AG reveals Facebook investigation | McConnell criticizes Twitter's political ad ban | Lawmakers raise concerns over Google takeover of Fitbit | Dem pushes FCC to secure 5G networks MORE (D-R.I.), who chairs a House antitrust subcommittee, wrote in a tweet. "Tonight, we learned that’s how Wall Street sees it too — as a slap on the wrist. If the FTC won’t act, Congress has to."

The FTC announced launched the investigation a year ago after it was revealed that Cambridge Analytica, a political consulting firm, had obtained Facebook user data on millions of people without their knowledge or consent.

The agency said it would be looking into whether Facebook violated a 2011 consent agreement that required it to implement a strong privacy program and to be more transparent about what was being done with user data.

Under that agreement, Facebook could theoretically be subject to fines upwards of a trillion dollars.

Facebook has maintained that it did not violate the settlement.

More worrisome for the massive social network than paying a few billion in fines is the possibility that the FTC cracks down on Facebook executives such as CEO, chairman and co-founder Mark ZuckerbergMark Elliot ZuckerbergHillicon Valley: Amazon to challenge Pentagon cloud contract in court | State antitrust investigation into Google expands | Intel agencies no longer collecting location data without warrant Civil rights groups demand changes to Facebook's political speech policy Hillicon Valley: Federal inquiry opened into Google health data deal | Facebook reports millions of post takedowns | Microsoft shakes up privacy debate | Disney plus tops 10M sign-ups in first day MORE. To settle the probe, the FTC could also push for restrictions to some of Facebook's business practices.

In the call with investors Wednesday afternoon, Facebook executives declined to discuss a potential settlement with the FTC and whether it might force changes to Facebook's data practices.

—Updated at 6:02 p.m.