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Facebook’s FTC fine could be much higher than the reported $3-5 billion

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Today Facebook released its quarterly earnings statement. Unusually, it contains a reference to the impending multi-billion dollar fine by the FTC.

As reported in the statement, the tech company has seen a continuous monthly and daily active user increase, as well as a 26% increase in year-over-year sales corresponding to $15.1 billion, ahead of expectations – meaning that the social network is doing pretty well, regardless of all the turmoil.

However, the report also contained a side reference to the FTC inquiries into Facebook’s privacy abuse.

“In the first quarter of 2019, we reasonably estimated a probable loss and recorded an accrual of $3.0 billion in connection with the inquiry of the FTC into our platform and user data practices, which accrual is included in accrued expenses and other current liabilities on our condensed consolidated balance sheet…We estimate that the range of loss in this matter is $3 billion to $5 billion. The matter remains unresolved, and there can be no assurance as to the timing or the terms of any final outcome.”

$3 billion sounds considerably less than “multi-billion” though. According to Ashkan Soltani, an ex-worker of the FTC, pre-announcing the fine could be a negotiation strategy, aimed at anchoring the price at a level that would be acceptable for the company while discouraging any further question.

Although $3 billion is a considerable amount of money, it pales in comparison to other fines issued by the FTC – for example, the $22.5 million fine to Google in 2012. It is just a fraction of the fines issued by the European Union: $15.3 and $5 billion respectively to Apple and Google.

It’s also a fraction of the fines issued to banks, such as the $16.7 billion to Bank of America for the frauds during the financial crisis.

The fine seems rather low also in relation to Facebook’s profits. Sen. Richard Blumenthal tweeted:

source: @SenBlumenthal

“Facebook made $15B in the last three months – $3B for violating an FTC order & a decade of privacy violations would be a mere slap on the wrist. FTC must pursue strong structural remedies & impose managerial accountability. Facebook won’t listen otherwise.”

The fine seems rather low to whoever is puzzled by the question – how much did Facebook really gain from the data leaks, in terms of profit, power, and influence?

Hard to tell. However, if Facebook speaks about paying $3 billion, it’s probably because they owe more.

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