Facebook argued to FTC there was 'no consumer harm' from Cambridge Analytica

Facebook argued to FTC there was 'no consumer harm' from Cambridge Analytica
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Facebook argued that none of its users were harmed as a result of the Cambridge Analytica scandal in a memo the company sent to the Federal Trade Commission (FTC) in the months before the agency announced a $5 billion fine over the incident.

The Hill obtained the memo on Monday in response to a Freedom of Information Act request for communications between the FTC and Facebook ahead of their $5 billion settlement.

The records show that during the months-long negotiations between the two sides, Facebook’s lawyers at the law firm Gibson Dunn wrote a white paper in response to a proposed fine from agency staff that they considered excessive. Many of the documents were redacted, so it’s unclear how large of a fine the FTC staffers had initially proposed, or whether it was equal to or exceeded the $5 billion amount that ultimately ended up in the settlement.

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But the white paper makes it clear that Facebook found the sum to be over the top, arguing that the agency had failed to identify any harms to consumers that would warrant a large fine. Whatever the FTC staff had proposed was “unconstitutional” and wouldn’t stand up in court given the facts of the case, Facebook argued in the Feb. 28 memo.

“In contrast, the proposed complaint does not allege that Facebook's conduct resulted in any concrete consumer harm—neither ‘economic’ nor ‘physical,’ ” the white paper reads. “And, in fact, there was no consumer harm at all.”

The Washington Post reported on February 14 that the FTC and Facebook were negotiating over a $5 billion fine.

The FTC announced the eventual $5 billion settlement with Facebook in July, settling allegations that the social media platform had violated a previous privacy settlement from 2012 by deceiving users about the extent to which they could shield their personal information.

The settlement was the result of an investigation that the FTC launched following news of the Cambridge Analytica scandal in March 2018, in which the right-wing political consulting firm obtained data on millions of Facebook users without their knowledge.

The fine was by far the largest the agency had ever issued, but to many critics, including Democratic FTC commissioners who voted against the order, it still amounted to little more than a slap on the wrist for such a massive company.

The white paper released on Monday shows that Facebook’s lawyers initially pushed back hard against any attempt to impose a large fine. They argued that Facebook did not profit off the alleged conduct, that the fine exceeded what the FTC could impose under its legal authority and that it violated the Eighth Amendment of the Constitution as well as Facebook’s due process rights.

“The fine we paid is unprecedented,” a Facebook spokesperson said in a statement on Monday. “It’s the largest fine in the history of the Federal Trade Commission and exceeds what the FTC would have been able to obtain in court, as experts have said. For people who use Facebook, the most important parts of this agreement are the significant accountability and oversight measures we’re putting in place."

A spokesman for the FTC did not immediately respond when asked for comment.

The white paper also repeatedly references a $22.5 million privacy settlement that the FTC reached with Google in 2012, suggesting that a similar sum would be more appropriate. At the time, it was the largest fine the agency had ever imposed on a tech company.

“In 2012, when settling similar allegations against Google, the FTC not only determined, but strenuously defended, that a fine of $22.5 million was sufficient to vindicate its authority and send ‘an unequivocal message to other companies under order that the FTC will vigorously enforce its orders and that a defendant’s failure to comply carries a significant cost,’ ” Facebook’s lawyers wrote.

“Staff’s proposed penalty is unconstitutional, unlawful, and unsupported by the allegations in the draft complaint,” they added. “No court would entertain such a penalty, neither will Facebook.”

Facebook Memo by M Mali on Scribd