A roughly $5 billion reported settlement between Facebook and the Federal Trade Commission (FTC) to close an investigation into the Cambridge Analytica data scandal is angering Democrats and tech industry critics who see it as a weak punishment.
Details of the settlement have not been made public by the agency, but The Wall Street Journal and other outlets reported on Friday that Republican FTC commissioners approved the deal in a 3-2 party-line vote last week.
The biggest tech critics in Congress, who had long pushed for tough penalties on Facebook over its handling of consumer data, made it clear that the settlement terms fell short of their expectations.
“The FTC just gave Facebook a Christmas present five months early,” Rep. David CicillineDavid CicillineDemocrats seek to cool simmering tensions Hillicon Valley —Apple is not a monopoly, judge rules Judge rules Apple is not 'illegal monopolist' in high-profile Epic case MORE (D-R.I.) said in a statement. “It’s very disappointing that such an enormously powerful company that engaged in such serious misconduct is getting a slap on the wrist.”
Full details about the terms of the settlement have yet to be released, but media reports indicated that Facebook will have to submit to greater oversight about how it collects user data. The fine would also be the largest the federal government has ever handed to a tech company. The previous record, issued in 2012 against Google, was $22.5 million.
But Facebook admitted in its most recent earnings report in April that it expected to pay as much as $5 billion to settle the investigation. And critics say that will be a drop in the bucket for a company whose first-quarter revenue this year was $15 billion and that reportedly has more than $40 billion in cash reserves.
Facebook’s stock even rose on Friday after the reports, suggesting markets saw little to fear from the fine, although much of the gains were lost during trading on Monday.
“This fine is a fraction of Facebook’s annual revenue. It won’t make them think twice about their responsibility to protect user data,” said Cicilline.
Democratic lawmakers, who had long made clear to the FTC that they didn’t believe the sum was high enough, or that a fine alone would be sufficient to change the company’s behavior after a string of scandals outraged Congress, were quick to pounce on the news.
Sen. Richard Blumenthal (D-Conn.), who has called for Facebook to be broken up, said in his own statement that only “structural, behavioral, and leadership reforms” would fix the problems at the company.
“The FTC is foolish and foolhardy to rely on money alone to punish decades of past privacy violations and ongoing profiteering,” he said. “Facebook’s business model is to monetize personal, confidential consumer information. It is relentlessly and tirelessly expanding its business model to invade our private lives.”
Sen. Amy KlobucharAmy KlobucharHillicon Valley — Presented by Xerox — Officials want action on cyberattacks Senate panel advances antitrust bill that eyes Google, Facebook This week: Democrats face mounting headaches MORE (D-Minn.), a 2020 presidential candidate, added, “Given the magnitude of the Cambridge Analytica violation, the FTC not only needs to impose a more significant fine, they need to be clear about what Facebook must change when it comes to data practices. It appears that they haven’t done that, which is why Congress must take action.”
The criticism of the settlement was bipartisan, with Facebook also in GOP crosshairs over a host of issues from its market size to allegations of anti-conservative bias.
On Monday, Republican Sen. Josh HawleyJoshua (Josh) David HawleySchumer moves to break GOP blockade on Biden's State picks Dems punch back over GOP holdup of Biden SBA nominee DHS chief 'horrified' by images at border MORE (Mo.) joined the chorus of Democrats, saying in a tweet, “To say this was a slap on the wrist for Facebook is too generous. No restrictions on Facebook collecting & sharing user data w/ third parties? Really does make you wonder if FTC jurisdiction should be reassigned.”
It is still unclear when the FTC will release the text of the settlement, which is reportedly under review by the Department of Justice, but it is certain to get more scrutiny and backlash in the coming days.
Two Facebook executives will be testifying in separate hearings before Congress on Tuesday to defend the company’s market power and its plans to launch a cryptocurrency. And next week, FTC Chairman Joseph Simons, a Republican, will testify before the Senate Judiciary subcommittee on antitrust.
There are still plenty of open questions about the FTC’s order, including whether it covers other privacy incidents aside from Cambridge Analytica and what other actions regulators will require of Facebook. But the reported partisan split at the agency over the settlement will likely invite further scrutiny from Democratic lawmakers.
And it’s certainly not the end of Facebook’s troubles with regulators. The company is facing investigations around the world, and Cicilline is leading a probe into tech giants’ market power that could expose Facebook to more restrictions from policymakers.
And the settlement is likely to intensify the spotlight on the FTC itself. In recent years, European regulators have been at the forefront of cracking down on tech industry practices. Consumer advocates have accused the FTC of being slow to act and lawmakers have openly questioned the agency’s ability to effectively police Silicon Valley.
The Facebook investigation was widely viewed as a test case for the agency’s ability to crack down on tech giants as Congress explores a potential consumer privacy bill that could give the agency more powers and oversight.
There are already calls for lawmakers to step in.
Charlotte Slaiman, a policy counsel at the consumer group Public Knowledge, believes that the settlement should impose conditions on Facebook’s practices if it’s to be effective. She said Congress has to act if lawmakers aren’t satisfied with the outcome.
“Their legal authority is insufficient,” Slaiman said of the FTC. “They can’t be an especially effective privacy regulator with the authority that they have.”
“Congress should act to give the FTC better authority on privacy and that will allow them to be stronger in situations like this,” she added.