FTC Inquiry Could Cost Facebook A $5 billion Fine

BusinessFTC Inquiry Could Cost Facebook A $5 billion Fine

FTC Inquiry Could Cost Facebook A $5 billion Fine

Facebook might have a hard year in 2018, but 2019 only seems to get worse. In January, the Washington Post reported that the Tech giant would be set a “record-setting fine” by the Federal Trade Commission of more than $5 billion following the Cambridge Analytica scandal.

This fine is intended to discourage Facebook to share its users’ data without their consent to third-party companies. But as the social media has reached more than two billion humans, will international institutions be able to catch it on time, whenever its technology is going “too far”? 

More surprisingly, according to experts, this fine should not affect Facebook’s revenue for 2019 Q2 and Q3, as well as repelling some investors due to a tarnished reputation – and therefore slumping numbers. 

Cambridge Analytica still ongoing

It seems that the time where Facebook’s CEO Mark Zuckerberg talked to Congress in an awkward tuxedo was years ago… But Zuckerberg only testified before Congress on April 10th, 2018, just a year ago.

Cambridge Analytica, a private company based in the United Kingdom, has reportedly paid an external Facebook’s researcher to access data of million of people, pretending Analytica would use it for “academic purposes”.

As some mainstream media broke the news – including the Guardian, it appeared that Cambridge Analytica was selling information to politicians for electoral purposes – from Brexit to the 2016 U.S Presidential elections.

As this practice is strictly forbidden, the FTC ordered a historical fine. At the moment, Facebook has only shared one press release, explaining that: “The matter remains unresolved, and there can be no assurance as to the timing or the terms of any final outcome”. 

Read More: What Just Happened with Facebook and Cambridge Analytica?

Multiple fines on their way

According to MSNBC, the real news was not only the current investigation is ongoing in the United States, but that several countries are also trying to find evidence to sue the Internet giant.

This stands far away from the biggest fine ever given before this one, who was addressed to Google by the FTC, for $22.5 million back in 2012.

As a reminder, Facebook only confirmed its involvement in the Cambridge Analytica scandal last July, so about less than a year ago. Prosecutors from several U.S States are currently investigating on their end, such as the Northern District of California who is currently working with the SEC and the FBI.

The Californian court is trying to figure out if shareholders knew about Cambridge Analytica and if so, if they had specific information on the shareholders that could have been crucial for some of the political elections that were influenced by the British company.

As MSNBC reported, “Spokespeople from the SEC, the FBI and the Northern District of California’s U.S. attorney’s office declined to comment or confirm the investigation.”. 

The state of New York is also looking into this case. In another kind of fashion than in California, “a grand jury in New York subpoenaed records from at least two well-known companies that make smartphones and other devices”, according to the New York Times. “The companies reportedly had both partnered with Facebook to access personal information from hundreds of millions of Facebook users.”
In addition to this, the American newspaper confirmed last June that Facebook gave access to its users’ data to more than 60 companies in total in the world  and these companies had signed “data-sharing agreements” with these organizations.

Across the ocean, European countries also have decided to launch investigations, such as Ireland, Belgium, but also Germany, the biggest and most powerful country in the European Union. Fines in each country are relatively low compared to the American one, averaging $250,000.

For traders, it’s “BUA”

What marks economists the most, is that it seems that traders do not seem to be affected by the news. Indeed, Facebook’s share did not seem to move the day the amount of the fine – which was initially st at $3 and went up to $5 billion – was announced.

For experts, there is even a “worry” that this might give an example for bigger firms that they can do whatever they want to, without undergoing a severe financial impact.