13 ms·

Facebook to Pay $550M to Settle Facial Recognition Suit

277 points by i_am_not_elon 7y ago

ConsiderCrying 7y ago
While it's very sad to hear this staggering sum called a 'rounding error' and a blip on Facebook's radar, I'm still happy about this news. It shows that fighting back legally is possible so the day we all have to wear recognition-scrambling patches is not as nigh as it could be. Just wish other places would amp up their privacy laws so Facebook would get more than occasional slaps on the wrist.
- gowld 7y ago
  It's not a blip. It's part of a pattern including GDPR fines that has a certain weight. At the end of the day any fine hurts shareholders at least a little but even if fines get so high that profit is decimated and stock plunges, as long as incurring fines is more profitable than other business tactics, and there is enough free cash flow to make liquidation unprofitable to private equity / corporate raiders Facebook will continue operating as it does. Same as for any business.
mehrdadn 7y ago
> David Wehner, Facebook’s chief financial officer, noted in an earnings call with investors that the settlement added to the social network’s rising general and administrative costs, which increased 87 percent from a year ago. So he literally just framed this as a 'cost of doing business'?
- TAForObvReasons 7y ago
  As long as the nature of punishment is a fine, it can be modeled and a cost-benefit analysis can be performed. If the forecasted economic benefit exceeds the cost, then the action should be taken, or so the theory goes. This happens in all industries. Part of the reason many legal settlements lead to a massive jump in stock price is that companies reserve funds for expected litigation. If FB models the settlement cost to $1B and it turns out to be $550M, that's a good result
  - zamfi 7y ago
    > As long as the nature of punishment is a fine, it can be modeled and a cost-benefit analysis can be performed. If the forecasted economic benefit exceeds the cost, then the action should be taken, or so the theory goes. The theory has limits though. If, in discovery, prosecutors find out that the company intentionally did something illegal because it believed that the cost of the fine was less than the benefit of the illegal action, then the fine is usually much higher and the specific executives involved often face much stiffer penalties.
    - octodog 7y ago
      Do you know of any examples when that has actually happened? Genuinely curious, because I can't think of any.
    - 1123581321 7y ago
      There is a difference between an intentional plot to commit one specific illegal act or tort, and recognition that torts and misbehavior will happen in a large enough organization and budgeting/insuring for it. This happens whether or not it’s believed paying damages is cheaper than fixing the problems.
      - zamfi 7y ago
        Agreed. I didn't say the theory was invalid, just that it has limits!
        1123581321 7y ago
        True! Sorry about that.
- tristador 7y ago
  I think a favorable reading is that he described the category. Facebook tracked that fine under "general and administrative".
- joez 7y ago
  There’s 4 broad buckets of costs for most companies - g&a (general and administrative), s&m (sales and marketing), r&d, and cost of revenue. The cost has to be classified into one of these buckets and so the CFO was probably just clarifying into which bucket they lumped it. This is part of the point of generalized accounting is so everyone gets a similar basis compare companies.
  - mehrdadn 7y ago
    Oh I see, thanks!
  - monadic2 7y ago
    > The cost has to be classified into one of these buckets Either PR was not consulted or they don’t understand how this comes off.
    - pottertheotter 7y ago
      I'm not fan of Facebook, but here it is in context: > Total expenses were $12.2 billion in Q4, up 34%. > Cost of revenue increased 25% and the growth was driven primarily by depreciation related to our infrastructure spend. > R&D grew 36% and was driven primarily by increased investments in core product as well as our innovation efforts, particularly in AR/VR. > Marketing and Sales grew 23% and was driven primarily by consumer and growth marketing. > Finally, G&A grew 87%, largely driven by higher legal fees & settlements. This includes charges related to a $550M settlement in principle we reached this month in connection with the Illinois Biometric Information Privacy Act litigation. This is standard for earnings calls. The point is for the CFO to add detail to the generally accepted accounting principles (GAAP) financial numbers so that investors understand why they changed. As @joez mentioned, companies have to report financial numbers according to GAAP, which mandates that companies disaggregate costs into specific areas. Both good and bad companies face lawsuits all the time, and the legal fees and settlements will show up in G&A. If G&A expenses change in an unexpected way, it is expected that the company will communicate why. There's definitely a lot that goes into crafting these calls, but having listened to and read more than a thousand of them, I don't think there was anything poorly done in this specific example.
- starpilot 7y ago
  Every large company is juggling multiple lawsuits at any given time. So, yes.
- deleted 7y ago
  [deleted]
- rolltiide 7y ago
  > So he literally just framed this as a 'cost of doing business'? How would you prefer he frame it? Maybe I'm jaded or cynical now
lalos 7y ago
To put in perspective that's like paying 10k per FB employee of fine in a single year.
- symplee 7y ago
  And to put that into perspective, their total spending is over 1,000k a year per employee.
  - sillysaurusx 7y ago
    Neither of these helped put anything into perspective for me. I don't know how many FB employees there are. Even if I did, I don't know how much they're being paid. And even if I knew that, I don't know how much FB makes per year.
    - symplee 7y ago
      Discussed earlier: https://news.ycombinator.com/item?id=22186790 https://news.ycombinator.com/item?id=22186790 In any event, the main point was that the fine is 1/100 of yearly spending.
vanadium 7y ago
Your move, Clearview AI. They’ve been sued in IL as well under the same auspices, and Clearview’s defense that they aren’t a private entity because they "only" do business with public entities (e.g., law enforcement) is definitely not going to fly here. This settlement establishes how seriously the state of Illinois is taking non-consensual biometric information gathering, especially facial recognition.
- oh_sigh 7y ago
  If I put information about myself out there on a public site, I still have a right to say that people can't download and use that information?
  - vanadium 7y ago
    Well, they're certainly feeling empowered against not only Clearview AI, but IBM as well: https://www.biometricupdate.com/202001/biometric-privacy-suits-leveled-against-ibm-and-clearview-ai-in-illinois https://www.biometricupdate.com/202001/biometric-privacy-sui...
    - oh_sigh 7y ago
      Wow, I'm glad that the rest of the country isn't following the Illinois example. I remember when the Google art institute released the "what classic painting do you look like", it was banned from use in Illinois, I guess this law is why.
      - beerandt 7y ago
        That's the price you set for your personal privacy? What painting you look like?
        oh_sigh 7y ago
        No, because I don't see my face as a private thing. Nor is the exact distance between my pupils, or the profile of my nose, or any other information that can be cleaned from a photograph of my face.
jaimex2 7y ago
FB: Lets face it, were here to make money. It was cost effective to settle and move on.
- creddit 7y ago
  Did you expect them to fall on a sword and commit seppuku? Obviously they did the most cost effective measure. Why try to snidely vilify them for acting according to the law in payment for their illegal acts? Vilify them for the illegal and unethical acts. Settling a lawsuit is neither of those and is a core part of our legal process.
  - jessaustin 7y ago
    Parent comment contained no snide vilification.
  - jaimex2 7y ago
    Tone gets lost in words, I wasn't meaning to vilify. I'd love to see Facebook actually fight the case to the end but nope, number say settle and move on.
pubacct71 7y ago
7% of yearly profit doesn't sound like a rounding error to me.
- bekman 7y ago
  Last year FB’s profit was 22 billion so that’s less than 3%
kissickas 7y ago
Opt-out link: https://www.facebook.com/settings?tab=facerec https://www.facebook.com/settings?tab=facerec
- mikro2nd 7y ago
  How would that work for people who do not have a FB account?
  - Jolter 7y ago
    I don't think someone without an account can be tagged in a photo. More importantly, the recognition engine will not find them, afaik.
    - ddebernardy 7y ago
      Friends can likely tag you in their photos, even if you don't have an account.
    - swarnie_ 7y ago
      Isn't Facebook known for building shadow profiles on non-users?
- spurgu 7y ago
  That's good and I had it turned off already but one ongoing issue is that I have to crawl through all the various settings every couple of months since there's always new privacy invading stuff found and it's obviously turned on by default.
alex_young 7y ago
Archive link: https://web.archive.org/web/20200129235635/https://www.nytimes.com/2020/01/29/technology/facebook-privacy-lawsuit-earnings.html https://web.archive.org/web/20200129235635/https://www.nytim...
djannzjkzxn 7y ago
I find it weird how people compare a fine for some specific conduct to the revenue or profit of an entire company. In this case, the illegal use of facial recognition probably slightly increased engagement for photo sharing features. That’s worth something but it obviously only accounts for a very small portion of the company’s revenues. If the story was “judge declares entirety of Facebook enterprise illegal, punishment is $550M fine” I would get the outrage.
- Traster 7y ago
  You need to view this in the context of all the things facebook is doing. They might get fined $550m for this one thing, but how many projects is Facebook engaged in that skirt regulations or outright breach them? Dozens of projects? Hundreds? So you can't compare the $550m against only the facial recognition, you've got to compare it against the entire suite of questionable things they're doing. THe point is that the corporate strategy is to skirt these lines and the success of that strategy is the cumulative success of all the projects along with the handful of fines they hit. So you've got to have disproportionate fines because you know enforcement is patchy.
  - bryan_w 7y ago
    I ... don't think you're grounded in reality. What do you think Facebook is doing right now that currently break the law? Please, be specific.
    - freeflight 7y ago
      Tracking users without their consent or them actually being users [0] is probably one of the most blatant ones for people in the EU. But it's not like there's a lack of other issues to pick from [1], of course, one can insist on it all being "alleged", but let's be real here on hackernews: If it's technically feasible, then it's most likely being done, legalities are regularly just an afterthought to the actual product, particularly when it's about the monetization of user data. A lot of that might be completely legal in the US with law-doctrines that undermine privacy expectations on a fundamental level [3], but the US isn't the whole world. [0] https://www.reuters.com/article/us-facebook-privacy-tracking/facebook-fuels-broad-privacy-debate-by-tracking-non-users-idUSKBN1HM0DR https://www.reuters.com/article/us-facebook-privacy-tracking... [1] https://en.wikipedia.org/wiki/Criticism_of_Facebook https://en.wikipedia.org/wiki/Criticism_of_Facebook [2] https://en.wikipedia.org/wiki/Third-party_doctrine https://en.wikipedia.org/wiki/Third-party_doctrine
33MHz-i486 7y ago
biometrics of the face, body or eye are mostly simple algorithmic transformations of photographic images. I find it hard to believe that "biometric data gathering" of Illinois residents can have massive civil liability without effecting all public photography and publishing thereof. there's also the catch-22, that if an entity is pursuing legal collection outside of Illinois (for example of the Flickr dataset from the IBM case) it has no way of knowingly excluding Illinois residents without identifying them by using an (illegal) facial recognition dataset in the first place.

277 points by i_am_not_elon 7y ago

While it's very sad to hear this staggering sum called a 'rounding error' and a blip on Facebook's radar, I'm still happy about this news. It shows that fighting back legally is possible so the day we all have to wear recognition-scrambling patches is not as nigh as it could be. Just wish other places would amp up their privacy laws so Facebook would get more than occasional slaps on the wrist.

gowld 7y ago
It's not a blip. It's part of a pattern including GDPR fines that has a certain weight. At the end of the day any fine hurts shareholders at least a little but even if fines get so high that profit is decimated and stock plunges, as long as incurring fines is more profitable than other business tactics, and there is enough free cash flow to make liquidation unprofitable to private equity / corporate raiders Facebook will continue operating as it does. Same as for any business.

mehrdadn 7y ago

> David Wehner, Facebook’s chief financial officer, noted in an earnings call with investors that the settlement added to the social network’s rising general and administrative costs, which increased 87 percent from a year ago. So he literally just framed this as a 'cost of doing business'?

TAForObvReasons 7y ago
As long as the nature of punishment is a fine, it can be modeled and a cost-benefit analysis can be performed. If the forecasted economic benefit exceeds the cost, then the action should be taken, or so the theory goes. This happens in all industries. Part of the reason many legal settlements lead to a massive jump in stock price is that companies reserve funds for expected litigation. If FB models the settlement cost to $1B and it turns out to be $550M, that's a good result
- zamfi 7y ago
  > As long as the nature of punishment is a fine, it can be modeled and a cost-benefit analysis can be performed. If the forecasted economic benefit exceeds the cost, then the action should be taken, or so the theory goes. The theory has limits though. If, in discovery, prosecutors find out that the company intentionally did something illegal because it believed that the cost of the fine was less than the benefit of the illegal action, then the fine is usually much higher and the specific executives involved often face much stiffer penalties.
  - octodog 7y ago
    Do you know of any examples when that has actually happened? Genuinely curious, because I can't think of any.
  - 1123581321 7y ago
    There is a difference between an intentional plot to commit one specific illegal act or tort, and recognition that torts and misbehavior will happen in a large enough organization and budgeting/insuring for it. This happens whether or not it’s believed paying damages is cheaper than fixing the problems.
    - zamfi 7y ago
      Agreed. I didn't say the theory was invalid, just that it has limits!
      - 1123581321 7y ago
        True! Sorry about that.
tristador 7y ago
I think a favorable reading is that he described the category. Facebook tracked that fine under "general and administrative".
joez 7y ago
There’s 4 broad buckets of costs for most companies - g&a (general and administrative), s&m (sales and marketing), r&d, and cost of revenue. The cost has to be classified into one of these buckets and so the CFO was probably just clarifying into which bucket they lumped it. This is part of the point of generalized accounting is so everyone gets a similar basis compare companies.
- mehrdadn 7y ago
  Oh I see, thanks!
- monadic2 7y ago
  > The cost has to be classified into one of these buckets Either PR was not consulted or they don’t understand how this comes off.
  - pottertheotter 7y ago
    I'm not fan of Facebook, but here it is in context: > Total expenses were $12.2 billion in Q4, up 34%. > Cost of revenue increased 25% and the growth was driven primarily by depreciation related to our infrastructure spend. > R&D grew 36% and was driven primarily by increased investments in core product as well as our innovation efforts, particularly in AR/VR. > Marketing and Sales grew 23% and was driven primarily by consumer and growth marketing. > Finally, G&A grew 87%, largely driven by higher legal fees & settlements. This includes charges related to a $550M settlement in principle we reached this month in connection with the Illinois Biometric Information Privacy Act litigation. This is standard for earnings calls. The point is for the CFO to add detail to the generally accepted accounting principles (GAAP) financial numbers so that investors understand why they changed. As @joez mentioned, companies have to report financial numbers according to GAAP, which mandates that companies disaggregate costs into specific areas. Both good and bad companies face lawsuits all the time, and the legal fees and settlements will show up in G&A. If G&A expenses change in an unexpected way, it is expected that the company will communicate why. There's definitely a lot that goes into crafting these calls, but having listened to and read more than a thousand of them, I don't think there was anything poorly done in this specific example.
starpilot 7y ago
Every large company is juggling multiple lawsuits at any given time. So, yes.
deleted 7y ago
[deleted]
rolltiide 7y ago
> So he literally just framed this as a 'cost of doing business'? How would you prefer he frame it? Maybe I'm jaded or cynical now

lalos 7y ago

To put in perspective that's like paying 10k per FB employee of fine in a single year.

symplee 7y ago
And to put that into perspective, their total spending is over 1,000k a year per employee.
- sillysaurusx 7y ago
  Neither of these helped put anything into perspective for me. I don't know how many FB employees there are. Even if I did, I don't know how much they're being paid. And even if I knew that, I don't know how much FB makes per year.
  - symplee 7y ago
    Discussed earlier: https://news.ycombinator.com/item?id=22186790 https://news.ycombinator.com/item?id=22186790 In any event, the main point was that the fine is 1/100 of yearly spending.

vanadium 7y ago

Your move, Clearview AI. They’ve been sued in IL as well under the same auspices, and Clearview’s defense that they aren’t a private entity because they "only" do business with public entities (e.g., law enforcement) is definitely not going to fly here. This settlement establishes how seriously the state of Illinois is taking non-consensual biometric information gathering, especially facial recognition.

oh_sigh 7y ago
If I put information about myself out there on a public site, I still have a right to say that people can't download and use that information?
- vanadium 7y ago
  Well, they're certainly feeling empowered against not only Clearview AI, but IBM as well: https://www.biometricupdate.com/202001/biometric-privacy-suits-leveled-against-ibm-and-clearview-ai-in-illinois https://www.biometricupdate.com/202001/biometric-privacy-sui...
  - oh_sigh 7y ago
    Wow, I'm glad that the rest of the country isn't following the Illinois example. I remember when the Google art institute released the "what classic painting do you look like", it was banned from use in Illinois, I guess this law is why.
    - beerandt 7y ago
      That's the price you set for your personal privacy? What painting you look like?
      - oh_sigh 7y ago
        No, because I don't see my face as a private thing. Nor is the exact distance between my pupils, or the profile of my nose, or any other information that can be cleaned from a photograph of my face.

jaimex2 7y ago

FB: Lets face it, were here to make money. It was cost effective to settle and move on.

creddit 7y ago
Did you expect them to fall on a sword and commit seppuku? Obviously they did the most cost effective measure. Why try to snidely vilify them for acting according to the law in payment for their illegal acts? Vilify them for the illegal and unethical acts. Settling a lawsuit is neither of those and is a core part of our legal process.
- jessaustin 7y ago
  Parent comment contained no snide vilification.
- jaimex2 7y ago
  Tone gets lost in words, I wasn't meaning to vilify. I'd love to see Facebook actually fight the case to the end but nope, number say settle and move on.

pubacct71 7y ago

7% of yearly profit doesn't sound like a rounding error to me.

bekman 7y ago
Last year FB’s profit was 22 billion so that’s less than 3%

kissickas 7y ago

Opt-out link: https://www.facebook.com/settings?tab=facerec https://www.facebook.com/settings?tab=facerec

mikro2nd 7y ago
How would that work for people who do not have a FB account?
- Jolter 7y ago
  I don't think someone without an account can be tagged in a photo. More importantly, the recognition engine will not find them, afaik.
  - ddebernardy 7y ago
    Friends can likely tag you in their photos, even if you don't have an account.
  - swarnie_ 7y ago
    Isn't Facebook known for building shadow profiles on non-users?
spurgu 7y ago
That's good and I had it turned off already but one ongoing issue is that I have to crawl through all the various settings every couple of months since there's always new privacy invading stuff found and it's obviously turned on by default.

alex_young 7y ago

Archive link: https://web.archive.org/web/20200129235635/https://www.nytimes.com/2020/01/29/technology/facebook-privacy-lawsuit-earnings.html https://web.archive.org/web/20200129235635/https://www.nytim...

djannzjkzxn 7y ago

I find it weird how people compare a fine for some specific conduct to the revenue or profit of an entire company. In this case, the illegal use of facial recognition probably slightly increased engagement for photo sharing features. That’s worth something but it obviously only accounts for a very small portion of the company’s revenues. If the story was “judge declares entirety of Facebook enterprise illegal, punishment is $550M fine” I would get the outrage.

Traster 7y ago
You need to view this in the context of all the things facebook is doing. They might get fined $550m for this one thing, but how many projects is Facebook engaged in that skirt regulations or outright breach them? Dozens of projects? Hundreds? So you can't compare the $550m against only the facial recognition, you've got to compare it against the entire suite of questionable things they're doing. THe point is that the corporate strategy is to skirt these lines and the success of that strategy is the cumulative success of all the projects along with the handful of fines they hit. So you've got to have disproportionate fines because you know enforcement is patchy.
- bryan_w 7y ago
  I ... don't think you're grounded in reality. What do you think Facebook is doing right now that currently break the law? Please, be specific.
  - freeflight 7y ago
    Tracking users without their consent or them actually being users [0] is probably one of the most blatant ones for people in the EU. But it's not like there's a lack of other issues to pick from [1], of course, one can insist on it all being "alleged", but let's be real here on hackernews: If it's technically feasible, then it's most likely being done, legalities are regularly just an afterthought to the actual product, particularly when it's about the monetization of user data. A lot of that might be completely legal in the US with law-doctrines that undermine privacy expectations on a fundamental level [3], but the US isn't the whole world. [0] https://www.reuters.com/article/us-facebook-privacy-tracking/facebook-fuels-broad-privacy-debate-by-tracking-non-users-idUSKBN1HM0DR https://www.reuters.com/article/us-facebook-privacy-tracking... [1] https://en.wikipedia.org/wiki/Criticism_of_Facebook https://en.wikipedia.org/wiki/Criticism_of_Facebook [2] https://en.wikipedia.org/wiki/Third-party_doctrine https://en.wikipedia.org/wiki/Third-party_doctrine

33MHz-i486 7y ago

biometrics of the face, body or eye are mostly simple algorithmic transformations of photographic images. I find it hard to believe that "biometric data gathering" of Illinois residents can have massive civil liability without effecting all public photography and publishing thereof. there's also the catch-22, that if an entity is pursuing legal collection outside of Illinois (for example of the Flickr dataset from the IBM case) it has no way of knowingly excluding Illinois residents without identifying them by using an (illegal) facial recognition dataset in the first place.