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Facebook Expects to Be Fined Up to $5 Billion by F.T.C. Over Privacy Issues – The New York Times


SAN FRANCISCO — Facebook said on Wednesday that it expected to be fined up to $5 billion by the Federal Trade Commission for privacy violations, in what would be a record penalty by the agency against a technology company.

The social network disclosed the amount in its quarterly financial results, saying it estimated a one-time charge of $3 billion to $5 billion in connection with an “ongoing inquiry” by the F.T.C. Facebook added that “the matter remains unresolved, and there can be no assurance as to the timing or the terms of any final outcome.”

The Silicon Valley company and the F.T.C. have been in negotiations for months over a financial penalty for claims that Facebook violated a 2011 privacy consent decree. In 2011, the company promised a series of measures to protect its users’ privacy after an investigation found that its handling of data had harmed consumers. The F.T.C. opened a new investigation last year after Facebook came under fire again for the improper handling of people’s data involving Cambridge Analytica, a political consulting firm, as well as a major data breach.

Global regulators, privacy advocates and the technology industry have watched the investigation as a referendum on the ability of the United States to rein in the power of tech behemoths. A fine of $3 billion to $5 billion would be a milestone for the F.T.C., which is regarded as having allowed the tech industry to grow unfettered.

The F.T.C.’s biggest fine for a tech company was $22 million against Google, in 2012, for misrepresenting how it used some online tracking tools.

If the commission does levy a $5 billion penalty, it would bring the United States closer to the actions of regulators in Europe. Last year, regulators there fined Google a record $5.1 billion for abusing its power in the mobile phone market and ordered the company to alter its practices.

The F.T.C. declined to comment. The agency has not reached a final decision, said two people familiar with the situation, who were not authorized to speak publicly.

Though a $5 billion fine would be substantial, it may be a price Facebook is willing to pay. The amount would be only a small fraction of the company’s $56 billion in annual revenue, while alleviating regulatory pressure that has been intensifying over the past two years.

“This would be a joke of a fine — a two-weeks-of-revenue, parking-ticket-level penalty for destroying democracy,” said Matt Stoller, a fellow at the Open Markets Institute, a think tank that is a vocal critic of the power of tech companies.

More meaningful to Facebook would be any F.T.C. mandates that curbed its ability to share data with business partners or required it to take more measures to inform consumers when and how it collected data.

“Those will have the most lasting impact on consumers’ privacy,” said Ashkan Soltani, a former chief technology officer for the trade commission.

Even as the F.T.C. and Facebook continue to negotiate, the company’s business remains robust. Facebook said Wednesday that its revenue had risen 26 percent in the first quarter to $15 billion. Its net income dropped 51 percent from a year earlier to $2.4 billion because of the expected one-time charge related to the F.T.C. investigation. The company has more than $40 billion in cash reserves.

Mark Zuckerberg, Facebook’s founder and chief executive, said in a statement on Wednesday that he was focused on a more privacy-centric vision for the company, one he had outlined in March. At the time, Mr. Zuckerberg said he planned to start shifting people toward private conversations and away from public broadcasting.

“We are focused on building out our privacy-focused vision for the future of social networking, and working collaboratively to address important issues around the internet,” he said in the statement.

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