US regulators approve $5bn Facebook settlement over privacy issues

The US Federal Trade Commission approved a

roughly $5 billion settlement with Facebook Inc over its investigation into the
social media company’s handling of user data, a source familiar with the
situation said.

The FTC has been investigating allegations

Facebook inappropriately shared information belonging to 87 million users with
the now-defunct British political consulting firm Cambridge Analytica. The
probe has focused on whether the data sharing violated a 2011 consent agreement
between Facebook and the regulator.

Investors cheered news of the deal and pushed

Facebook shares up 1.8pc, while several powerful Democratic lawmakers in
Washington condemned the proposed penalty as inadequate.

The FTC is expected to include in the

settlement other restrictions on how Facebook treats user privacy, according to
the Wall Street Journal, which also said that the agency vote was along party
lines, with three Republicans voting to approve it and two Democrats opposed.

The settlement would be the largest civil

penalty ever paid to the agency.

The FTC and Facebook declined to comment.

Representative David Cicilline, a Democrat and

chair of a congressional antitrust panel, called the $5 billion penalty “a
Christmas present five months early.”

“This fine is a fraction of Facebook’s annual

revenue. It won’t make them think twice about their responsibility to protect
user data,” he said.

Facebook’s revenue for the first quarter of

this year was $15.1 billion while its net income was $2.43 billion. It would
have been higher, but Facebook set aside $3 billion for the FTC penalty.

While the deal resolves a major regulatory

headache for Facebook, the Silicon Valley firm still faces further potential
antitrust probes as the FTC and Justice Department undertake a wide-ranging
review of competition among the biggest US tech companies.

It is also facing public criticism from

President Donald Trump and others about its planned cryptocurrency Libra over
concerns about privacy and money laundering.

The Cambridge Analytica missteps, as well as

anger over hate speech and misinformation on its platform, have also prompted
calls from people ranging from presidential candidate Senator Elizabeth Warren
to a Facebook co-founder, Chris Hughes, for the government to force the social
media giant to sell Instagram, which it bought in 2012, and WhatsApp, purchased
in 2014.

But the company’s core business has proven

resilient, as Facebook blew past earnings estimates in the past two quarters.

While details of the agreement are unknown, in

a letter to the FTC earlier this year, Senators Richard Blumenthal, a Democrat,
and Josh Hawley, a Republican, told the agency that even a $5 billion civil
penalty was too little and that top officials, potentially including founder
Mark Zuckerberg, should be held personally responsible.

FTC Commissioner Rohit Chopra, a Democrat, has

said the agency should hold executives responsible for violations of consent
decrees if they participated in the violations. Chopra did not respond to
requests for comment on Friday.

The settlement still needs to be finalized by

the Justice Department’s Civil Division and a final announcement could come as
early as next week, the source said.

A source knowledgeable about the settlement

negotiations had told Reuters in May any agreement would put Facebook under 20
years of oversight.