FTC could have fined Facebook ‘Tens of Billions’, but couldn’t

A new report details how Mark Zuckerberg’s lawyers beat Washington into submission.

The Federal Trade Commission’s settlement negotiations with Facebook concluded not with a bang, however with a whimper. Sixteen months after opening a privacy investigation into the tech giant, the FTC cut a deal for Facebook to pay a $5 billion fine—roughly comparable to the revenue Facebook generated in a single month.

It was, on the one hand, the biggest fine in FTC history. it absolutely was also so tiny, relative to Facebook’s monster income, that the company’s stock actually went up. Chief executive officer and founder Mark Zuckerberg finished the day $1 billion richer.

In a parallel universe where the FTC has a spine, things might have ended differently. The Washington Post reports that the independent government agency had originally planned to fine Facebook “tens of billions of dollars” and impose reforms that would hold Zuckerberg in person accountable—a potentially historic action that would have had serious consequences for Facebook and made enormous changes at the corporate. Instead, the FTC reportedly caved under pressure from Facebook’s larger and better capitalized legal team.

While the FTC had believed Facebook’s privacy violations warranted a fine in the tens of billions, the tech giant “had a different understanding of its own errors,” in line with the Post . Facebook lawyers believed the corporate ought to pay a fine in the many millions range “at most.”

Ultimately Facebook oh-so-graciously agreed to “assuage regulators” by paying $5 billion—but won other crucial concessions in return. One such concession may be the FTC losing out on its desire to carry Zuckerberg more responsible for Facebook’s missteps by putting him in person under an FTC order—a move that Facebook’s legal team “steadfastly opposed.” (The final settlement is anticipated to incorporate reforms that subject Facebook to higher federal scrutiny, although actual terms of the deal have yet to be formally declared.) The FTC, it seems, didn’t have the manpower or resources to put up much of a fight. Facebook made it clear that they’d take the matter to court if needed—a legal battle which may have taken years and cost tens of millions of dollars.

Internally, the agency knew that it wasn’t absolute to get a multi-billion dollar fine and other new commitments from a federal judge. Adding to the difficulty, the agency, armed with a relatively tiny $306 million budget in 2018 that supported roughly 1,100 workers, had to confront the chance that it would be outmatched in such litigation. Even FTC Chairman Joseph Simons gave the impression to warn Congress about the resource challenges once he appeared in front of Senate lawmakers last November, repeatedly citing some of the agency’s staffing and budget challenges.

“Many of the FTC’s investigations and cases in this arena involve complex facts and technologies and well-financed defendants, usually requiring outside specialists, that may be expensive,” he said in prepared testimony.

A loss also may have vastly damaged the agency, maybe setting a legal standard that curtailed the commission’s authority to police other tech giants for their privacy and security practices.