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Put Another Zero on Facebook’s Fine. Then We Can Talk
- paulcole 7y agoSerious question: Has there EVER been a case where a fine has been truly damaging/punitive to a company? Every instance I remember seems to be of the parking ticket variety.
- javagram 7y agoWhen the government wants to destroy a company they have a mechanism for it. https://en.m.wikipedia.org/wiki/Judicial_dissolution https://en.m.wikipedia.org/wiki/Judicial_dissolution Edit: Arthur Andersen, for instance, was convicted of a crime and had to surrender its CPA license, putting the company out of business. Fines are just supposed to change behavior. $3 billion is a lot of money regardless, and it’s likely Facebook will invest additional resources in the future to help avoid future such fines.
- ianai 7y agoThey should add 2 zeros to the fine and offer FB the option to be broken apart instead. Crimes were committed. Crimes continue to be committed.
- thaumasiotes 7y ago> Arthur Andersen, for instance, was convicted of a crime and had to surrender its CPA license, putting the company out of business. It was my understanding that Arthur Andersen went out of business as soon as it was indicted, such that there was no point in actually convicting it. And that that experience mostly defeated the purpose of having that process exist, since it isn't appropriate to kill a company without showing that it did anything wrong.
- javagram 7y agoAccording to Wikipedia the firm wasn’t completely put out of business until the conviction. I don’t know how accurate that is. They did win a unanimous ruling on appeal to the Supreme Court years later but by then it was too late to save the company.
- ianai 7y agoThere’s an “operational understanding” that companies should rarely be prosecuted or fined substantially because it can easily bankrupt them. I find this mindset ridiculously offensive.
- 6gvONxR4sf7o 7y agoThey are worse than parking tickets. A parking ticket is a loss in most all circumstances. It may be small, but the incentive is there to avoid the ticket. In these business cases, they are a net gain. The company does something illegal, makes a bunch of money off of it, and gets a fine for less than they made. They earn more by breaking the law and are incentivized to do so.
- dsfyu404ed 7y agoIf you were a delivery driver you would consider parking tickets a cost of doing business too.
- ska 7y agoThe difference is it is quite likely that the parking ticket cost is higher than the profit, even revenue you made while parked there. So there is a real incentive to at least try and avoid them. Consider the case if a parking ticket was 5c - why would (absent other disincentives) delivery drivers ever obey parking signage?
- awad 7y agoThis is a bit old but AFAIK still in place. http://www.nbcnews.com/id/14602712/ns/business-us_business/t/delivery-firms-big-ticket-item-parking-fines/ http://www.nbcnews.com/id/14602712/ns/business-us_business/t... "Under the program, the type of violation determines the ticket’s outcome. For example, double-parking in some parts of the city is a violation that can be erased completely for commercial vehicles. Violations for blocking a crosswalk or a bike lane can only be reduced by about 15 percent. Fines for blocking a driveway can be knocked down by 75 percent. To date, 312 companies are enrolled in the program, including heavyweights like UPS, FedEx, Verizon, Coca-Cola and Time Warner Cable, which are the city’s biggest commercial offenders."
- ska 7y agocrazy
- dsfyu404ed 7y agoHappens all the time to small businesses. You piss of the wrong person, phone calls get made and crippling fines are levied. At least that's how it works in my state. I can't think of it ever happening to a big business though.
- klank 7y agoI feel like our legislature hasn't scaled up with the economy and inflation. I feel this not just in the corporate world, but individuals as well. Only financially speaking, parking tickets and speeding tickets are an annoyance to me. If I didn't have an ulterior motive of being a good citizen, I could easily rationalize tickets as a tax. For others, they are oppressive given the severity of the offense. I don't think this is right.
- alyandon 7y agoI don't like Facebook and I don't like their privacy practices. However, $5B is approximately 20% of their cash on hand so I think that we aren't talking about "parking ticket" level fines. For real changes in behavior though, it'd probably take something radical like fining their board directly instead of punishing the shareholders.
- ianai 7y agoThe fine could be 100% of cash on hand and they would still have too strong an incentive to not change.
- alyandon 7y agoI simply do not believe that but everyone is certainly entitled to their opinion.
- ianai 7y agoWhat ever cash FB has on hand is what they want to have on hand. They’ve got plenty of ways to raise whatever cash they want or need in no time.
- jerf 7y agoBut not for free, and not forever. I've got ways I could raise some cash too, but not for free, and not forever. It may seem like it, since the cash I could raise is denominated in thousands and theirs in billions, but it's still true.
- ianai 7y agoPersonal finance is not corporate finance. You’re not worth north of 500 billion with probably millions of difference sources of revenue. (Billions since they’re clearly turning each user into revenue.)
- 7y ago
- gyaniv 7y agoWhenever they want to actually damage a company they just don't fine them. They pass a new bill, create new regulations, or take action against individuals in the company in order to "send a message" without hurting the business as a whole, to avoid scaring off other companies. which is exactly what a serious fine would do, as it should, and as everyone (but the investors) want.
- refurb 7y agoRead up on the SNC Lavalin affair going on in Canada right now and you'll understand what typically happens.[1] Company pays bribes in Libya. Attorney General presses charges. Prime Minister gets scared that company will go under if severely punished (lost jobs = lost votes) so puts pressure on Attorney General to "go easy on them". [1]https://en.wikipedia.org/wiki/SNC-Lavalin_affair https://en.wikipedia.org/wiki/SNC-Lavalin_affair
- whynyc 7y agoThis fine-as-tax trend is worrying. I propose crypto burn instead. It hurts the wrongdoer while not creating bad incentive for regulators. Win-Win.
- cowpig 7y agoWhat does "crypto burn" mean?
- whynyc 7y agoTransfering money to unspendable address. For example, $11M in 1CounterpartyXXXXXXXXXXXXXXXUWLpVr are unspendable. https://www.blockchain.com/btc/address/1CounterpartyXXXXXXXXXXXXXXXUWLpVr https://www.blockchain.com/btc/address/1CounterpartyXXXXXXXX...
- deleted 7y ago[deleted]
- Expez 7y agoIt's when you send cryptocurrency to an address nobody has the keys to, or that is the cryptographic equivalent of a black hole (provably inaccessible). The problem GP is addressing is that the regulators aren't really incentivized to make the bad behavior stop because they are collecting revenue by letting it continue.
- okket 7y agoNo, please not. Crypto burn only makes crypto coins owner richer. That is the opposite of what taxes, even as fines, are for.
- andjd 7y agoAgree that crypto-burn is a bad idea. But I am curious what that 3-5 billion government windfall will go towards.
- jmichaelhudson 7y agoWhat if it was 1985 and it was found out that someone at one of the bells had sold a service to 10,000 russian spies to call everyone in the united states, and also provided them with the means to pretend to be someone else and mask their accent? And they did this specifically to sway an election in the direction of someone known to be affiliated with the mafia? What would the punishment have been then? Adjust for inflation and multiply by 2 for punitive damages, by 3 for damage to the environment, by 4 for pissing off the entire U.S. Military. Zuckerberg owes us everything he has, he exploited the entire world and then bought himself an entire neighborhood of houses to live in and a jungle in hawaii he's probably burning down for a golf course as we speak. We should take it all back and put him in prison for about 10 lifetimes. He is an example for how to be awful. Then we'll put his 'hoodie' in a museum. https://lite.qwant.com/?q=zuckerberg+hoodie+symbol&t=images https://lite.qwant.com/?q=zuckerberg+hoodie+symbol&t=images Then apply the same to all American companies under Netanyahu's or Xi's control, and actually prosecute all spies from all countries after a 3 month warning to vacate or be imprisoned for life. Globalization is not using technology for everyone to wage secret wars across borders, it is about organized federalization of republics and we need to create technology to do that based on the pile of ethical ruin and spy warfare we are looking at today, that is driving most everyone to despair. And we need to do that fast.
- soup10 7y agoNot a fan of facebook but $5B is a big fine, NYTimes hosting multiple OP EDs claiming its not is disingenuous shilling more about them seeing FB as a competitor for advertising dollars and news.
- braythwayt 7y agoThat’s like saying that $5,000 is a big fine. If you make $50,000 a year or less before tax, $5,000 is hefty. If you make $20,000 a year or less before tax, and have no savings, it will probably bankrupt you. iIf you don’t have any significant income, you will probably never pay it off. But if you make $200,000 a year, it’s depriving you of a new carbon-fibre gravel race bike this season. Annoying, but you can handle it. “Big” is relative to your financial situation. For Facebook, it’s a parking ticket. For a startup, it would destroy them.
- Jyaif 7y agoFacebook earned $2.43 billion during the first quarter of 2019. You say "If you make $50,000 a year or less before tax, $5,000 is hefty". Well in this case it's like a $25,000 fine. Is this still a "parking ticket"?
- solatic 7y agoIt is if Facebook can issue debt to stretch the fine payment into several years or longer. If you make $50k a year, get a $25k fine, and stretch it out into 50 $500 payments, then it's about fifty parking tickets. Which is hard, but doable. And when you're a PM, or somewhere else nice and well far removed from the corporate bank accounts which are paying the fine, then you don't even notice. Actually, you notice something positive since your compensation took a nice bump when your stock options became worth more as a result of investors responding positively to the news. The amount of money needs to be commensurate with a level at which shareholders feel like they're taking a hit. It's not about the size of the fine, it's about how the fine makes investors feel.
- 7y ago
- mikece 7y agoHardly impartial for a member of the traditional media -- even one who works for the Gray Lady -- to call for upping the fine on the company doing the most to make them irrelevant.
- braythwayt 7y agoCircumstantial Ad Hominem: https://en.wikipedia.org/wiki/Ad_hominem#Circumstantial https://en.wikipedia.org/wiki/Ad_hominem#Circumstantial What you say may be true, but it does not establish that the OP’s argument is false.
- return1 7y agothe article is an opinion, an ad hominem may be appropriate to highlight the bias of said opinion
- braythwayt 7y agoAn expressed argument doesn’t have a bias, the person making it has a bias. The argument can be refuted on its merits. Arguing that we should discount an argument because of its speaker’s bias is the flip side of arguing that we should give it more weight because of the speaker’s authority, another fallacy. That being said, if the speaker (or anyone else) attempts to argue from authority, I feel it’s appropriate to use a circumstantial ad hominem argument. Not to discount the argument itself, but to point out that their own appeal to authority is not only fallacious, but also unfounded.
- atonse 7y agoTalking about Kara Swisher? Kara Swisher has been a tech reporter for decades and is arguably one of the better connected in the Valley (and also one of the most critical of their bro culture and culture of uncontrolled excess).
- zaksoup 7y agoAlso, writing an op-ed for NYT is not "working for the gray lady"... Swisher founded Recode.
- deleted 7y ago[deleted]
- tptacek 7y agoYou can get a parking ticket practically every day and continue living your life as usual (ask me how I know). It does not seem at all clear to me that any tech company could sustain routine fines of this scale and remain a going concern. By Swisher's numbers in this post, 3 more fines of this size would deplete Facebook's cash reserves. A $5B fine represents most of the valuation of Slack, and an integer multiple of Discord, or any of a number of other "unicorn" companies Facebook could have bought, rather than shoveling that cash, in effect, into a furnace. It's also not clear what the underlying violations of the consent decree are. What this analysis loses sight of is that the deterrence question isn't simply about what it would take to stagger Facebook as a company, but rather what it would take to deter them from the particular violations they're charged with. If this is about lax controls over data exposed in Facebook's API (generalizing from the Cambridge Analytica scandal), what's our guess as to how much money Facebook made by allowing partners to do that, or how much money they saved by not building and managing better controls? It seems unlikely to be an amount denominated in billions. A company can be a goliath with hundreds of billions in reserve, but if a group inside that company that generates just tens or hundreds of millions of dollars reliably generates 5 billion dollar fines, that group is getting "reorganized".
- Despegar 7y ago>It does not seem at all clear to me that any tech company could sustain routine fines of this scale and remain a going concern. It will be fine if they stop doing the things that cause the fines. A $3-5B fine is nothing compared to the settlements that were extracted from banks, and the tech industry is much more profitable.
- tptacek 7y agoIn fact, no, this FTC settlement is in line with the settlements the banks got for their 2007 abuses. As I recall, some banks paid higher, by single digit billions, and some lower.
- Despegar 7y agoHere's a nice infographic with some of the settlements. https://dmxvlyap9srmn.cloudfront.net/production/articles/3539/f46dee0b-3d5f-4e8c-860d-c13a0d44986c.jpg https://dmxvlyap9srmn.cloudfront.net/production/articles/353...
- return1 7y agoWell that money would partially fund the NSA, so it evens out a bit
- throwaway_9168 7y agoWhy does everyone talk about increasing fines? Wouldn't it be a far more effective deterrent to charge some FB exec team for breaking some law (haven't they already done that in the "friendly fraud" case?) and put them in jail?
- Frost1x 7y agoLet's not forget board and large shareholders that shape direction for executives and the board.
- bsenftner 7y agoYes, let's see Facebook executives going to jail, with Mark first in line. The duration is almost irreverent, as they'd forever be labeled "ex-con". Plus the fine, too, needs to be real.
- JudgeWapner 7y agothe main point of a corporation is a shield of liability. both morally and legally. In a corporation, nothing is anybody's fault. Everyone, even up to the CEO, is a process that runs a script commonly called a policy. So you can't even be a member of the corporation without "following policy". But following policy shields you from any blame or accusation of wrongdoing, because it is always acceptable to say "wasn't our choice we were just following policy". The policy just comes out of nowhere. Nobody puts their name on the policy and says "This is what you do because I say so". So you can never track down who created the policy. It was created by people, but those people quickly disbanded and are not traceable to its inception. The CEO has a policy which is simply a contract to "shareholders". But not any individual shareholder, even "the board" isn't accountable, because they "represent" the "millions of shareholders". So no, it wasn't their idea. And you can't hold millions of people responsible. So no, there is no such thing as holding a corporation responsible.
- mpweiher 7y ago> the main point of a corporation is a shield of liability. Of the shareholders. Not the executives.
- sandworm101 7y agoBeing fined /= paying a fine. I would be interested to hear exactly how much is handed over at the end of the day. How much is forgiven? How much can they deduct from their taxes somewhere else? How much is quietly renegotiated a couple years after the headlines disappear.
- lazyjones 7y agoAt this point we might just as well introduce a hefty "privacy violation tax" (though with an euphemistic name) and treat FAANG as the new tobacco industry. Because these kinds of issues will never go away, they are firmly woven into these corporations' business models. Fines can't change that.