5 ms·

I mean first fines pretty much have to scale with total revenue to deter behavior second 5 billion won't even lead to an unprofitable quarter at 2018's numbers

I mean first fines pretty much have to scale with total revenue to deter behavior second 5 billion won't even lead to an unprofitable quarter at 2018's numbers so there's a loooot of room between 5B and an existential fine, we aren't any where near the slippery part of the slope.

adventured 7y ago
> I mean first fines pretty much have to scale with total revenue to deter behavior That's only an effective approach if your goal is to cripple many of the companies that you fine. Almost no large companies on the planet have the extreme profit margins of Facebook. Alternatively to avoid that kind of damage you have to adjust the percentage scale to each individual company's profit margins (25% revenue fine for Facebook, N% for a retailer with microscopic 3% profit margins), which instantly makes the revenue approach absurd. Slap 3M, Walmart, Caterpillar or Costco with the equivalent of a ~25% quarterly revenue fine, and you'll do severe damage to the company. A 25% quarterly fine on Walmart's revenue would nearly bankrupt them. As opposed to Facebook which has profit margins 15-20x greater than eg Costco and can more or less absorb the fine directly out of its quarterly profit. I don't see the argument behind using fines as a means to intentionally severely damage companies, which is what huge revenue-based fines accomplish.
- Avshalom 7y ago
  Fair enough I used 'total revenue' instead of total profit to make it clear which part of the paragraph is was arguing with. However it's not profit margin but overall profit: Walmart might have thin margins but they still made ~20B in profit: they too could absorb a $5B fine. Costco could eat a billion. But purposely damaging a company is exactly what a fine is for. It's punishment and deterrent.
- stevenjohns 7y ago
  > That's only an effective approach if your goal is to cripple many of the companies that you fine Yes, some companies should be crippled. With criminal sentencing, the first goal is to isolate that person from society as a punishment with reform being a second consideration. With criminals, judges or magistrates would level higher-end sentences as an example and you won't hear many people arguing against a criminal's 15 year sentence by saying it would cripple their economic output. Society owes nothing to corporations and this "too big to fail" mentality creates a system where corporations are above ethics. Seeing Facebook fined into to a point where they are seriously crippled as a company will make a lot of other companies change their tune, internationally, for the better.
  - tptacek 7y ago
    TBTF has nothing to do with this. What's being proposed is basically the exact opposite of TBTF --- that Facebook is too big not to fine unusually. If you believe there should be a notion of SITCs --- Systemically Important Tech Companies --- lobby to pass that law in such a way that it survives judicial review. But it can't simply be up to the FTC to make that rule up.
  - int_19h 7y ago
    > With criminal sentencing, the first goal is to isolate that person from society as a punishment with reform being a second consideration A lot of people would argue that this is the root of most problems in our justice system.
- FridgeSeal 7y ago
  > That's only an effective approach if your goal is to cripple many of the companies that you fine. Don’t screw up egregiously and repeatedly and you won’t get burnt. ¯\_(ツ)\_/¯ Taking the gently-gently approach with fining companies has totally failed: they simply incorporate the cost into their margins and continue on like nothing actually happened; so yes, it is time to start burning companies that don’t do the right thing. Maybe some will fail as a result, that’s ok: simply existing is not carte balnche permission to continue existing. At least the new gap in the market will probably make room for a new company that will play by the rules.
  - tptacek 7y ago
    Nobody has taken a "gently-gently" approach here. $5B is a record-setting fine, the largest in the FTC's history I believe, and situated nicely in the middle of the fines the big banks got for the 2008 crisis. I reject the premise that people are suggesting we have to be careful not to kill Facebook; that's not what's being said. What's being said is that if you're going to try to cripple Facebook, you have to have a rational basis in law for doing so.
- kilotaras 7y ago
  We use percent of person's total life revenue (jail time) for non-violent crimes (theft, fraud, etc.) all the time. It's not clear why corporations should get a pass.
tptacek 7y ago
No, fines don't have to scale with total revenue. If most of Facebook's revenue has nothing to do with the incident the FTC is fining it for, all the fine needs to do is make that specific business activity irrationally risky to do in the future.
- Avshalom 7y ago
  that specific business activity is 7 years of non-compliance on top of however many years they had no actual user privacy before their 2012 agreement. That specific business activity is selling information to advertisers, which is their entire business model. So scale the fine to make 10 years of selling ads irrationally risky? I'm okay with that.
  - tptacek 7y ago
    See, there's the problem. The FTC lacks the authority to fine Facebook for "10 years of selling ads", or really, anything outside of behavior they can prove violated Facebook's consent decree. The distinction here is behavior that we disapprove of and behavior the FTC does (or should) have the ability to sanction. If the FTC can fine Facebook $5B† for a (comparatively) minor violation as a way of expressing the agency's disapproval for all the rest of Facebook's business practices, it can do that to anyone. It can, for instance, fine Apple tens of billions for minor, provable violations as a way of coercing them into cooperating with law enforcement to unlock phones. Again, I do not like Facebook, broadly agree with 'idlewords testimony before the Senate today that his necktie is more tightly regulated than our industry, and want that to change. I do not think the FTC should be able to make up the rules as it goes, especially not as a way for politicians to showboat. † or whatever you think the appropriate number is; I'm happy to stipulate that $3-5B is the appropriate range for the fine
    - Avshalom 7y ago
      The FTC not having the legal authority is a very different argument than your first post which just stated they shouldn't... as a principle. As to blackmailing Apple: while Cambridge analytical is a (maybe) minor violation the fact that it happened is again evidence of 7 years of non compliance with a previous settlement and it is a fundamental part of their business model. I would probably have a different stance if Facebook was being fined umpteen billion for like bribing a doctor for unneeded handicap parking placards.

adventured 7y ago

> I mean first fines pretty much have to scale with total revenue to deter behavior That's only an effective approach if your goal is to cripple many of the companies that you fine. Almost no large companies on the planet have the extreme profit margins of Facebook. Alternatively to avoid that kind of damage you have to adjust the percentage scale to each individual company's profit margins (25% revenue fine for Facebook, N% for a retailer with microscopic 3% profit margins), which instantly makes the revenue approach absurd. Slap 3M, Walmart, Caterpillar or Costco with the equivalent of a ~25% quarterly revenue fine, and you'll do severe damage to the company. A 25% quarterly fine on Walmart's revenue would nearly bankrupt them. As opposed to Facebook which has profit margins 15-20x greater than eg Costco and can more or less absorb the fine directly out of its quarterly profit. I don't see the argument behind using fines as a means to intentionally severely damage companies, which is what huge revenue-based fines accomplish.

Avshalom 7y ago
Fair enough I used 'total revenue' instead of total profit to make it clear which part of the paragraph is was arguing with. However it's not profit margin but overall profit: Walmart might have thin margins but they still made ~20B in profit: they too could absorb a $5B fine. Costco could eat a billion. But purposely damaging a company is exactly what a fine is for. It's punishment and deterrent.
stevenjohns 7y ago
> That's only an effective approach if your goal is to cripple many of the companies that you fine Yes, some companies should be crippled. With criminal sentencing, the first goal is to isolate that person from society as a punishment with reform being a second consideration. With criminals, judges or magistrates would level higher-end sentences as an example and you won't hear many people arguing against a criminal's 15 year sentence by saying it would cripple their economic output. Society owes nothing to corporations and this "too big to fail" mentality creates a system where corporations are above ethics. Seeing Facebook fined into to a point where they are seriously crippled as a company will make a lot of other companies change their tune, internationally, for the better.
- tptacek 7y ago
  TBTF has nothing to do with this. What's being proposed is basically the exact opposite of TBTF --- that Facebook is too big not to fine unusually. If you believe there should be a notion of SITCs --- Systemically Important Tech Companies --- lobby to pass that law in such a way that it survives judicial review. But it can't simply be up to the FTC to make that rule up.
- int_19h 7y ago
  > With criminal sentencing, the first goal is to isolate that person from society as a punishment with reform being a second consideration A lot of people would argue that this is the root of most problems in our justice system.
FridgeSeal 7y ago
> That's only an effective approach if your goal is to cripple many of the companies that you fine. Don’t screw up egregiously and repeatedly and you won’t get burnt. ¯\_(ツ)\_/¯ Taking the gently-gently approach with fining companies has totally failed: they simply incorporate the cost into their margins and continue on like nothing actually happened; so yes, it is time to start burning companies that don’t do the right thing. Maybe some will fail as a result, that’s ok: simply existing is not carte balnche permission to continue existing. At least the new gap in the market will probably make room for a new company that will play by the rules.
- tptacek 7y ago
  Nobody has taken a "gently-gently" approach here. $5B is a record-setting fine, the largest in the FTC's history I believe, and situated nicely in the middle of the fines the big banks got for the 2008 crisis. I reject the premise that people are suggesting we have to be careful not to kill Facebook; that's not what's being said. What's being said is that if you're going to try to cripple Facebook, you have to have a rational basis in law for doing so.
kilotaras 7y ago
We use percent of person's total life revenue (jail time) for non-violent crimes (theft, fraud, etc.) all the time. It's not clear why corporations should get a pass.

tptacek 7y ago

No, fines don't have to scale with total revenue. If most of Facebook's revenue has nothing to do with the incident the FTC is fining it for, all the fine needs to do is make that specific business activity irrationally risky to do in the future.

Avshalom 7y ago
that specific business activity is 7 years of non-compliance on top of however many years they had no actual user privacy before their 2012 agreement. That specific business activity is selling information to advertisers, which is their entire business model. So scale the fine to make 10 years of selling ads irrationally risky? I'm okay with that.
- tptacek 7y ago
  See, there's the problem. The FTC lacks the authority to fine Facebook for "10 years of selling ads", or really, anything outside of behavior they can prove violated Facebook's consent decree. The distinction here is behavior that we disapprove of and behavior the FTC does (or should) have the ability to sanction. If the FTC can fine Facebook $5B† for a (comparatively) minor violation as a way of expressing the agency's disapproval for all the rest of Facebook's business practices, it can do that to anyone. It can, for instance, fine Apple tens of billions for minor, provable violations as a way of coercing them into cooperating with law enforcement to unlock phones. Again, I do not like Facebook, broadly agree with 'idlewords testimony before the Senate today that his necktie is more tightly regulated than our industry, and want that to change. I do not think the FTC should be able to make up the rules as it goes, especially not as a way for politicians to showboat. † or whatever you think the appropriate number is; I'm happy to stipulate that $3-5B is the appropriate range for the fine
  - Avshalom 7y ago
    The FTC not having the legal authority is a very different argument than your first post which just stated they shouldn't... as a principle. As to blackmailing Apple: while Cambridge analytical is a (maybe) minor violation the fact that it happened is again evidence of 7 years of non compliance with a previous settlement and it is a fundamental part of their business model. I would probably have a different stance if Facebook was being fined umpteen billion for like bribing a doctor for unneeded handicap parking placards.