Reported by The Wall Street Journal, sources have shared that the FTC has approved a roughly $5 billion settlement with Facebook over privacy violations that will end its probe into the company that started over a year ago.
Update 7/24: After rumblings yesterday that the FTC was close to sealing the deal, CNBC reported this morning the FTC has officially announced the approval of Facebook’s $5 billion fine after getting the green light from the Justice Department and the FTC’s commissioners voting 3-2 in favor of the penalty.
The $5B fine amounts to about 9% of the company’s revenue from last year. The SEC also announced today that Facebook will pay a separate $100 million fine for misleading investors about the risks of misued user data.
As for Facebook’s fine with the FTC, the deal will require the company to set up an independent privacy committee on its board to reduce Mark Zuckerberg’s “unfettered control” over user privacy decisions.
The members will be nominated by an independent nominating committee and can only be fired by a two-thirds of voting shares, which would prevent Zuckerberg from controlling the vote with his share power.
The deal will also require Zuckerberg and others at Facebook to do quarterly and yearly certifications with the FTC to ensure they are following the agency’s privacy rules. Additionally, there will be an independent assessment every other year.
Outside of Facebook, an independent third-party assessor approved by the FTC will conduct biennial assessments and report to the new privacy committee quarterly. Facebook must notify the assessor within 30 days of discovering that data of 500 or more users has been compromised, according to the release.
Hitting Facebook with this $5 billion settlement dwarfs the previous record penalty as Google paid $22.5 million to the FTC in 2012. Another wild way to look at this number, the $5B penalty is five times what Facebook paid to purchase Instagram seven years ago.
While there were murmurs as far back as January of the FTC planning on making the number a record-setting fine for this settlement, Facebook only set aside $3 billion for the fine ahead of time, according to the WSJ.
The report notes that the deal will still need to be finalized by the Justice Department, but isn’t expected to change.
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.
In addition to the $5 billion, the settlement is expected to include privacy restrictions on how Facebook handles user privacy. Both the FTC and Facebook declined to comment to the WSJ on the matter.
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