The Federal Trade Commission (FTC) has voted to approve a £4bn ($5bn) settlement with Facebook over the Cambridge Analytica scandal. The fine is the largest-ever imposed by the FTC for violating an order and is in line with what the company said it expected to pay in its quarterly report in April.
The fine and the changes to Facebook’s business practices must now be reviewed by the US Department of Justice before they are formally announced. It is unclear how long this will take, though the DoJ rarely rejects FTC settlements.
The terms of the settlement include proposals to change how Facebook handles and stores user data and what customers know about those practices, as well as making the company more transparent to the FTC.
Facebook’s shares rose almost 2pc on the news, which provides certainty as to the scale of the financial hit the social network is set to take over the scandal.
The figure had been described as a “slap on the wrist” by critics, who argue that it is too low to be a meaningful punishment.
David Cicilline, the Democratic head of the House of Representatives antitrust subcommittee, said in a statement,
A $5bn fine on Facebook amounted to a “slap on the wrist” for “such serious misconduct”
The congressman added:
“It won’t make them think twice about their responsibility to protect user data . . . If the FTC won’t protect consumers, Congress surely must.”
The FTC first launched its investigation into the social media giant in March last year, in the wake of the Cambridge Analytica data scandal in which user data were leaked to a political research group through a third-party app.
It has been investigating whether the company breached an earlier settlement that it signed with the FTC in 2011, which required it to be clear to users about the privacy of their personal information and get explicit permissions if it changed the way their data were shared.
That earlier order was agreed after the FTC found that the company had “deceived consumers” by saying their information was private but then “repeatedly allowing it to be shared and made public”.
In its first-quarter earnings this year, the company set aside $3bn to cover the new FTC penalty, in keeping with accounting guidelines, hitting its profits. It is unclear whether Facebook will set aside a further $2bn in its forthcoming earnings release later this month to account for the rest of the fine.
