FTC Approves Roughly $5 Billion Facebook Settlement – The Wall Street Journal

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The Federal Trade Commission approved a $5 billion settlement with Facebook; the matter has moved to the Justice Department for review.


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Thibault Camus/Associated Press

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The Federal Trade Commission voted this week to approve a roughly $5 billion settlement with

Facebook
Inc.

over a long-running probe into the tech giant’s privacy missteps, according to people familiar with the matter.

The 3-2 vote by FTC commissioners broke along party lines, with the Republican majority lining up to support the pact while Democratic commissioners objected, the people said. The matter has been moved to the Justice Department’s civil division and it is unclear how long it will take to finalize, the person said. Justice Department reviews are part of the FTC’s procedure but typically don’t change the outcome of an FTC decision.

A settlement is expected to include other government restrictions on how Facebook treats user privacy. The additional terms of the settlement couldn’t immediately be learned.

An FTC spokeswoman declined to comment, as did a Facebook spokesman.

Facebook said April 24 that it was expecting to pay up to $5 billion to settle the probe. A resolution was bogged down by a split between Republicans and Democrats on the FTC, with the Democrats pushing for tougher oversight of the social-media giant.

The FTC investigation began more than a year ago after reports that personal data of tens of millions of Facebook users improperly wound up in the hands of Cambridge Analytica, a data firm that worked on President Trump’s 2016 campaign. The FTC investigation centered on whether that lapse violated the 2012 consent decree with the agency in which Facebook agreed to better protect user privacy.

Since the Cambridge Analytica affair, other privacy missteps have come to light, adding to Facebook’s headaches.

The settlement would easily exceed the previous record penalty for violating an FTC order, a $22.5 million fine against Google Inc. in 2012. The commission has limited powers to impose fines for first-time privacy violations but has broad latitude to sanction repeat offenders.

Facebook shares gained slightly more than 1% on the news, despite the amount being $2 billion more than the company had reserved for the settlement.

The party-line decision could expose Republicans to criticism by Democrats and diminish its impact for the FTC, which has sometimes been criticized for being toothless on privacy in the past. After Facebook set aside billions of dollars to pay the fine, some Democrats criticized the amount as too little.

Facebook and other large tech are under an increasingly harsh spotlight in Washington, D.C., including at a “social media summit” hosted by the White House on Thursday in which President Trump repeatedly bashed Silicon Valley for being unfair to conservatives. Facebook wasn’t invited to attend, nor were other tech companies, and they have previously said they police their platforms without regard to political ideology.

Facebook is also gearing up for potential scrutiny of its competitive practices. The Wall Street Journal reported last month that the Justice Department is gearing up for an antitrust probe of

Alphabet
Inc.

’s Google and has authority to look into

Apple
Inc.

while the FTC has taken jurisdiction for possible antitrust probes of Facebook and

Amazon.com
.

Facebook is also preparing for congressional hearings next week related to its proposed cryptocurrency Libra, which has drawn skepticism from President Trump and many regulators.

The privacy settlement comes as the FTC has faced mounting political pressure to take a tougher line against Facebook and potentially other tech companies, at a time when European enforcers have been seen as the global top cop on the tech beat.

With the dollar amount approved this week, the FTC obtained a financial penalty higher than what European Union could have sought under its privacy law.

Facebook’s first FTC settlement, finalized in 2012, resolved commission allegations that the company repeatedly broke its privacy promises to the site’s users, including by sharing their data with advertisers and other third parties.

For example, Facebook-based apps like a television-show quiz could find a user’s relationship status or photos, the FTC said at the time—even though Facebook said it wouldn’t share unnecessary personal details with apps. Facebook settled the case in part by promising not to further deceive users.

In 2017, Facebook said a personality-prediction app had gathered data from tens of millions of users and shared it with a political consulting firm, Cambridge Analytica. The FTC re-opened the case, this time armed with its significant power to punish repeat offenders.

The big-ticket fine is unlikely to satisfy Facebook’s staunchest critics, much as multibillion-dollar penalties against big banks after the 2008 financial crisis did little to reduce anger at Wall Street.

Lawmakers in both parties are working on new privacy rules for large tech firms, while many Democratic presidential candidates want to investigate Facebook’s market power. Sen. Elizabeth Warren (D., Mass.) is calling to break up the company, a position recently backed by Facebook co-founder Chris Hughes.

—John McKinnon contributed to this article.

Write to Emily Glazer at [email protected] and Ryan Tracy at [email protected]

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