11 ms·

FTC Approves Roughly $5B Facebook Settlement

119 points by CaliforniaKarl 7y ago

mikece 7y ago
Even though that's a lot of money... I can't help thinking it's not nearly enough.
- swebs 7y ago
  What amount would you say is enough?
  - philipov 7y ago
    50 billion is the right order of magnitude.
    - zaroth 7y ago
      I think you might be conflating your overarching desire for the dismantling of Facebook with the actual case at hand, which is for specific actions taken by Facebook which violated certain aspects of their users’ privacy based on a practice (API supported friend scraping) which is no longer allowed.
  - colechristensen 7y ago
    Enough to put shareholder equity at risk, or in other words, a fine on the scale of bankruptcy risk. FB is flat over the last year, I would like to see a fine that results in a significant loss of market cap, preferably something which would require selling off business units to stay solvent.
    - closetprep 7y ago
      This was already priced into the stock value which is why it hasn't had an effect
      - colechristensen 7y ago
        I'm not talking about what happened today, but the long term effect. Yes it was priced into the stock and that price is about equal to the price of FB a year ago. I want that price, the long term price not the intraday reaction, I want the long term price to be down more than 10%.
- edf13 7y ago
  $5b is a record fine for this... I’m sure they agonised and struggled to get it this high. It’s not even been ratified yet. Can you really see a headline of a $10/20/50b fine for Facebook?
Balgair 7y ago
Q12019 revenue was ~$15B [0]. So, about a month's worth of revenue. Honestly, 1/12th of a year's revenue is a fair bit of pain. It's not exactly a slap on the wrist. My econ-mojo may be really off, but revenue is more akin to the gross profit, not the net profit, correct? [0] https://www.cnbc.com/2019/04/24/facebook-earnings-q1-2019.html https://www.cnbc.com/2019/04/24/facebook-earnings-q1-2019.ht...
- tylerhou 7y ago
  Gross profit refers to revenue minus non-fixed costs. Net profit refers to gross profit minus fixed costs (e.g rent). Revenue is how much you take in before costs. An analogy of revenue is how much money your employer pays you — before you deduct taxes, food, rent, etc.
  - Balgair 7y ago
    Thank you!
- vzidex 7y ago
  1/12th of a year's revenue is a bit of pain, but it won't cause any fundamental changes at Facebook I think. This just sends the message that you don't have to care about things like ethics or user data being private as long as you have a big enough war chest to pay off the government. Either the fine should've been bigger, or coupled with new regulation.
  - scarface74 7y ago
    Nothing can change Facebook that Zuckerberg doesn’t want to change. He has a controlling interest.
    - Balgair 7y ago
      Yup, FB is Zuck essentially. He owns ~53% of the voting stock shares.
    - 7y ago
deleted 7y ago
[deleted]
halfmatthalfcat 7y ago
Still distraught that Equifax, which was so egregious, was not disciplined at this level.
- dymk 7y ago
  Facebook got a lot more news coverage over a longer period of time
- Jach 7y ago
  Has anyone done an estimate to how much it would cost to roll out an actual ID system instead of continuing to use SSNs? Perhaps this unrelated $5BN can be used towards it. /s
  - dymk 7y ago
    It's not a matter of money cost. Americans are (in some ways rationally, in most irrationally) terrified of a national ID.
    - r00fus 7y ago
      Who's ginning up that terror? Where there's an irrational fear, there's usually a vested interest involved.
      - AnimalMuppet 7y ago
        Comparing US society to the USSR. The US wanted to not ever become a "papers please" society, and tried to make it impossible to become one. Some of this changed after 9/11, but the underlying mentality is still somewhat there.
  - dahfizz 7y ago
    Unfortunately I don't see something like that ever passing America. Nobody supports a national ID.
    - 7y ago
refurb 7y ago
Q4’18 profit was $6.9B, so $5B is nearly 1/4 of a year’s profit. That will be noticed.
- kingnothing 7y ago
  They had already budgeted for it earlier this year. https://www.nytimes.com/2019/04/24/technology/facebook-ftc-fine-privacy.html https://www.nytimes.com/2019/04/24/technology/facebook-ftc-f...
akavi 7y ago
Stock market seems to think it was a good deal for FB; share price jumped ~1.3% on the news.
- dymk 7y ago
  Facebook previously stated that they were expecting a fine of ~$5B. The fine + uncertainty was already priced into the stock. The market is reacting to the removal of that uncertainty, which is the same as a reduction in risk holding the stock.
  - alberth 7y ago
    And when FB previously announced they expected a $5B fine, their stock was up 10% on that day. https://news.ycombinator.com/item?id=19742270 https://news.ycombinator.com/item?id=19742270
alberth 7y ago
FB stock up ~2% today.
- dmix 7y ago
  Because FB accurately predicted the fine amount and doesn’t have to use any more money. The market are already adjusted to the FTC fine risk. The only risk measure by this point was if it would be higher than $5b.
  - alberth 7y ago
    But that’s not the case. When FB announces 3 months ago they were holding back $5B for an estimated fine, their stock was up 10% that day. https://news.ycombinator.com/item?id=19742270 https://news.ycombinator.com/item?id=19742270
    - pertymcpert 7y ago
      That is the case. A $5B estimated fine puts a rough ballpark on the potential fine. I.e. it's likely not going to be over $10bn. That could easily bump the stock up, with extra potential upside due to the uncertainty of what the actual figure will be. That is, could it be $8B? There is extra uncertainty priced in which has now been fully lifted.
nrclark 7y ago
Where does this money go, out of curiosity? Does it go into the FTC's budget? Govt general fund?
residentfoam 7y ago
$5B is peanuts for FB, just Mark personal wealth is ~$74B, he could pay the fine himself. The should have fined FB on some % of their total revenue, like GRDP. I'd say 15/20% at least.
- conanbatt 7y ago
  5 billion is a truck load of cash and any company with the least competitive capacity will be willing to spend up to 4.999.999.999 to avoid paying it.
  - residentfoam 7y ago
    > is a truck load of cash it is relative, for normal people it is indeed a ton of cash, but you have to compare that to the size of FB. In that respect, $5B is not that much.
    - conanbatt 7y ago
      Thats the wrong mental model. Most operations facebook does is in the few cents to a few dollars: that is insignificant to the total revenue, so they would forgo every single thing relative to the general income, and you can guess what happens afterwards.
- edf13 7y ago
  The problem is 15/20% gets into scary headlines that nobody wants to be behind
- icebraining 7y ago
  Their revenue for 2018 was $56B, so while not 15/20%, it's higher than the maximum fine of the GDPR (4%) would be. Though the GDPR is per violation, so technically one can be fined for more than that.
alt_f4 7y ago
I'm somewhat amazed how many people on here seem to be happy that large tech companies are forced to pay giant fines to the government when their salaries are paid or propped up by the market created by these same companies. I'm not saying FB has done no wrong, but is it really 100 times worse than Equifax, Wall Street banks and a host of other more malicious corporate offenders that got a slap on the wrist and a small 1-2 digit fine?
- temepsflk 7y ago
  2 wrong does not make one right. All these companies should be paying giant fines. FB's fine is not giant relative to their yearly revenue.
  - alt_f4 7y ago
    However, you don't see banksters on bankernews complaining how small their fine is. They realize that'd be biting the hand that feeds them. From all the big industries, only tech seems to have an active desire to watch itself burn. If it is not yet obvious, taking large amounts of money from tech companies will impact everyone, including tech employees by forcing job cuts and lowering salaries. Doesn't matter if you work at Facebook.
phlogisticfugu 7y ago
Facebook's current market cap is $585B, so this is less than 1% of their market cap https://ycharts.com/companies/FB/market_cap https://ycharts.com/companies/FB/market_cap About as painful as a bad PR week. And easy to attribute to the "cost of doing business"
redsparrow 7y ago
> disclosed in April 2019 that it was nearing the end of negotiations with the FTC and expected a fine of between $3bn and $5bn. That's a quote from the article in The Guardian [0]. Negotiations? They were negotiating their own fine? That sounds so absurd. Surely someone can reply telling me it's normal, but can anyone make an argument for why it makes sense? [0]: https://www.theguardian.com/technology/2019/jul/12/facebook-fine-ftc-privacy-violations https://www.theguardian.com/technology/2019/jul/12/facebook-...

Even though that's a lot of money... I can't help thinking it's not nearly enough.

swebs 7y ago
What amount would you say is enough?
- philipov 7y ago
  50 billion is the right order of magnitude.
  - zaroth 7y ago
    I think you might be conflating your overarching desire for the dismantling of Facebook with the actual case at hand, which is for specific actions taken by Facebook which violated certain aspects of their users’ privacy based on a practice (API supported friend scraping) which is no longer allowed.
- colechristensen 7y ago
  Enough to put shareholder equity at risk, or in other words, a fine on the scale of bankruptcy risk. FB is flat over the last year, I would like to see a fine that results in a significant loss of market cap, preferably something which would require selling off business units to stay solvent.
  - closetprep 7y ago
    This was already priced into the stock value which is why it hasn't had an effect
    - colechristensen 7y ago
      I'm not talking about what happened today, but the long term effect. Yes it was priced into the stock and that price is about equal to the price of FB a year ago. I want that price, the long term price not the intraday reaction, I want the long term price to be down more than 10%.
edf13 7y ago
$5b is a record fine for this... I’m sure they agonised and struggled to get it this high. It’s not even been ratified yet. Can you really see a headline of a $10/20/50b fine for Facebook?

Q12019 revenue was ~$15B [0]. So, about a month's worth of revenue. Honestly, 1/12th of a year's revenue is a fair bit of pain. It's not exactly a slap on the wrist. My econ-mojo may be really off, but revenue is more akin to the gross profit, not the net profit, correct? [0] https://www.cnbc.com/2019/04/24/facebook-earnings-q1-2019.html https://www.cnbc.com/2019/04/24/facebook-earnings-q1-2019.ht...

tylerhou 7y ago
Gross profit refers to revenue minus non-fixed costs. Net profit refers to gross profit minus fixed costs (e.g rent). Revenue is how much you take in before costs. An analogy of revenue is how much money your employer pays you — before you deduct taxes, food, rent, etc.
- Balgair 7y ago
  Thank you!
vzidex 7y ago
1/12th of a year's revenue is a bit of pain, but it won't cause any fundamental changes at Facebook I think. This just sends the message that you don't have to care about things like ethics or user data being private as long as you have a big enough war chest to pay off the government. Either the fine should've been bigger, or coupled with new regulation.
- scarface74 7y ago
  Nothing can change Facebook that Zuckerberg doesn’t want to change. He has a controlling interest.
  - Balgair 7y ago
    Yup, FB is Zuck essentially. He owns ~53% of the voting stock shares.
  - 7y ago

deleted 7y ago

[deleted]

halfmatthalfcat 7y ago

Still distraught that Equifax, which was so egregious, was not disciplined at this level.

dymk 7y ago
Facebook got a lot more news coverage over a longer period of time
Jach 7y ago
Has anyone done an estimate to how much it would cost to roll out an actual ID system instead of continuing to use SSNs? Perhaps this unrelated $5BN can be used towards it. /s
- dymk 7y ago
  It's not a matter of money cost. Americans are (in some ways rationally, in most irrationally) terrified of a national ID.
  - r00fus 7y ago
    Who's ginning up that terror? Where there's an irrational fear, there's usually a vested interest involved.
    - AnimalMuppet 7y ago
      Comparing US society to the USSR. The US wanted to not ever become a "papers please" society, and tried to make it impossible to become one. Some of this changed after 9/11, but the underlying mentality is still somewhat there.
- dahfizz 7y ago
  Unfortunately I don't see something like that ever passing America. Nobody supports a national ID.
  - 7y ago

refurb 7y ago

Q4’18 profit was $6.9B, so $5B is nearly 1/4 of a year’s profit. That will be noticed.

kingnothing 7y ago
They had already budgeted for it earlier this year. https://www.nytimes.com/2019/04/24/technology/facebook-ftc-fine-privacy.html https://www.nytimes.com/2019/04/24/technology/facebook-ftc-f...

akavi 7y ago

Stock market seems to think it was a good deal for FB; share price jumped ~1.3% on the news.

dymk 7y ago
Facebook previously stated that they were expecting a fine of ~$5B. The fine + uncertainty was already priced into the stock. The market is reacting to the removal of that uncertainty, which is the same as a reduction in risk holding the stock.
- alberth 7y ago
  And when FB previously announced they expected a $5B fine, their stock was up 10% on that day. https://news.ycombinator.com/item?id=19742270 https://news.ycombinator.com/item?id=19742270

alberth 7y ago

FB stock up ~2% today.

dmix 7y ago
Because FB accurately predicted the fine amount and doesn’t have to use any more money. The market are already adjusted to the FTC fine risk. The only risk measure by this point was if it would be higher than $5b.
- alberth 7y ago
  But that’s not the case. When FB announces 3 months ago they were holding back $5B for an estimated fine, their stock was up 10% that day. https://news.ycombinator.com/item?id=19742270 https://news.ycombinator.com/item?id=19742270
  - pertymcpert 7y ago
    That is the case. A $5B estimated fine puts a rough ballpark on the potential fine. I.e. it's likely not going to be over $10bn. That could easily bump the stock up, with extra potential upside due to the uncertainty of what the actual figure will be. That is, could it be $8B? There is extra uncertainty priced in which has now been fully lifted.

nrclark 7y ago

Where does this money go, out of curiosity? Does it go into the FTC's budget? Govt general fund?

residentfoam 7y ago

$5B is peanuts for FB, just Mark personal wealth is ~$74B, he could pay the fine himself. The should have fined FB on some % of their total revenue, like GRDP. I'd say 15/20% at least.

conanbatt 7y ago
5 billion is a truck load of cash and any company with the least competitive capacity will be willing to spend up to 4.999.999.999 to avoid paying it.
- residentfoam 7y ago
  > is a truck load of cash it is relative, for normal people it is indeed a ton of cash, but you have to compare that to the size of FB. In that respect, $5B is not that much.
  - conanbatt 7y ago
    Thats the wrong mental model. Most operations facebook does is in the few cents to a few dollars: that is insignificant to the total revenue, so they would forgo every single thing relative to the general income, and you can guess what happens afterwards.
edf13 7y ago
The problem is 15/20% gets into scary headlines that nobody wants to be behind
icebraining 7y ago
Their revenue for 2018 was $56B, so while not 15/20%, it's higher than the maximum fine of the GDPR (4%) would be. Though the GDPR is per violation, so technically one can be fined for more than that.

alt_f4 7y ago

I'm somewhat amazed how many people on here seem to be happy that large tech companies are forced to pay giant fines to the government when their salaries are paid or propped up by the market created by these same companies. I'm not saying FB has done no wrong, but is it really 100 times worse than Equifax, Wall Street banks and a host of other more malicious corporate offenders that got a slap on the wrist and a small 1-2 digit fine?

temepsflk 7y ago
2 wrong does not make one right. All these companies should be paying giant fines. FB's fine is not giant relative to their yearly revenue.
- alt_f4 7y ago
  However, you don't see banksters on bankernews complaining how small their fine is. They realize that'd be biting the hand that feeds them. From all the big industries, only tech seems to have an active desire to watch itself burn. If it is not yet obvious, taking large amounts of money from tech companies will impact everyone, including tech employees by forcing job cuts and lowering salaries. Doesn't matter if you work at Facebook.

phlogisticfugu 7y ago

Facebook's current market cap is $585B, so this is less than 1% of their market cap https://ycharts.com/companies/FB/market_cap https://ycharts.com/companies/FB/market_cap About as painful as a bad PR week. And easy to attribute to the "cost of doing business"

redsparrow 7y ago

> disclosed in April 2019 that it was nearing the end of negotiations with the FTC and expected a fine of between $3bn and $5bn. That's a quote from the article in The Guardian [0]. Negotiations? They were negotiating their own fine? That sounds so absurd. Surely someone can reply telling me it's normal, but can anyone make an argument for why it makes sense? [0]: https://www.theguardian.com/technology/2019/jul/12/facebook-fine-ftc-privacy-violations https://www.theguardian.com/technology/2019/jul/12/facebook-...