4 ms·

Do fines to big corporations even work? I tend to suspect paying them is a part of the business model - they will keep doing whatever they want to generate huge

Do fines to big corporations even work? I tend to suspect paying them is a part of the business model - they will keep doing whatever they want to generate huge profits covering whatever fines they may have to pay.

Detrytus 2y ago
Well, I would expect that, in addition to paying money, this settlement also obliges Meta to stop doing whatever they were doing. And if they don't, then I would expect fine for repeated offense to be much higher, like 10x. At some point that would make ignoring law unprofitable.
- camdat 2y ago
  Meta had already ceased facial tagging over a year before the suit was filed, according to Ars. https://arstechnica.com/tech-policy/2024/07/meta-to-pay-1-4-billion-settlement-after-texas-facial-recognition-complaint/ https://arstechnica.com/tech-policy/2024/07/meta-to-pay-1-4-...
_mlbt 2y ago
Facebook annual revenue last year was $134.90 billion. https://investor.fb.com/investor-news/press-release-details/2024/Meta-Reports-Fourth-Quarter-and-Full-Year-2023-Results-Initiates-Quarterly-Dividend/default.aspx https://investor.fb.com/investor-news/press-release-details/...
- mbreese 2y ago
  That’s still a fine of 1% of revenue, which seems like a small percentage, but is still a sizable hit. It’s enough to make investors notice, but probably not substantially if it is a once-off event. If it isn’t a one-off event though and states/countries start fining it all over the place, then there might be more of an issue.
  - dantyti 2y ago
    as noted in the AP article, it's at least a second settlement: > In 2021, a judge approved a $650 million settlement with the company, formerly known as Facebook, over similar allegations of users in Illinois.
  - dartos 2y ago
    Ain’t no amount of money that can compare to infinite growth and mass media control.
    - j_maffe 2y ago
      This is just factually incorrect. Facebook doesn't have "infinite growth"
      - dartos 2y ago
        Tell big tech leadership and investors that
      - ta1243 2y ago
        The entire economy is based on infinite growth, and most of it is based on exponential growth, which is of course a problem. Indeed the concept of the infinite growth may well explain the Fermi paradox through the concept of a "light cage"[0] https://pureportal.strath.ac.uk/en/publications/the-light-cage-limit-to-interstellar-expansion https://pureportal.strath.ac.uk/en/publications/the-light-ca...
  - ta1243 2y ago
    If the illegal practice raised $5b in extra revenue then that's just good business sense.
- spywaregorilla 2y ago
  You should cite net income when trying to make a point on this.
DoubleDerper 2y ago
Corporate Crime and Punishment: An Empirical Study "Put simply, for large companies, criminal penalties may be just another cost of doing business—and quite a low cost at that." source: https://scholarship.law.upenn.edu/faculty_scholarship/2147/ https://scholarship.law.upenn.edu/faculty_scholarship/2147/
AmVess 2y ago
Nope. They get passed on to the consumer, anyway. The only way to stop this type of behavior is to throw execs in jail and take their personal assets off them.
- xvector 2y ago
  For facial recognition in 2011? Extreme take.
ta1243 2y ago
Based on how long this was going on, its about $5 per user per year.
josefritzishere 2y ago
I can report yes. California has been using them for years afer passing the CCPA to motivate better data privacy policy and procedure.
suprjami 2y ago
So if every US state sues Meta and settles for ~1.5B that's halved the value of the company. One more infraction with the same consequences and the company has no money left. That sounds pretty effective to me?
- echelon 2y ago
  Their market cap is approximately 1000x larger. Their annual income is approximately 100x larger.
  - xvector 2y ago
    Wrong. This is 3.5% of their annual income.
    - echelon 2y ago
      Your figure is net income, not gross. They can arrange those numbers as they like.
- kelnos 2y ago
  That doesn't work, though. In practice, most states probably won't sue for this. And even if they do, Texas is one of the most populous states in the US. Presumably the per-state settlements will be proportionate to the number of people harmed. So it's not going to be 1.5B * 50 = $75B.
  - suprjami 2y ago
    It doesn't matter if the states do or not. It's a deterrent. You go into your quarterly earnings call and say "we're conducting illegal business practices which expose us to up to $75B of risk" and see how the investors like that. You don't get caught every time you speed, but the fine certainly is a deterrent against doing 100mph everywhere.
    - JohnFen 2y ago
nickburns 2y ago
It's even more insulting than a fine. It's a voluntary payment in settlement that admits no liability or wrongdoing.
TiredOfLife 2y ago
They stopped doing facial recognition, so yes.
goodnuff 2y ago
[dead]
tediousgraffit1 2y ago
from the better ap-news article linked by the top comment: > The company announced in 2021 that it was shutting down its face-recognition system and delete the faceprints of more than 1 billion people amid growing concerns about the technology and its misuse by governments, police and others.
edm0nd 2y ago
Not really imo. Getting fined for doing something illegal just really means its legal for a price.
BurningFrog 2y ago
Incentives always work. If the expected fine for X is larger than the expected profit, companies will not do X.
- AnthonyMouse 2y ago
  That's actually kind of the problem here. The assumption built into this is that the company is doing the math. More likely the company is just so big that if even one mid-level person makes a bad call, the consequence gets propagated across a billion users. But there are so many mid-level people that it's guaranteed to happen. Which is the same reason that "higher penalties" wouldn't work either. The problem is not that the penalties aren't sufficient to deter, the problem is that the right hand doesn't know what the left hand is doing, so even if the lawyers tell them "you must never do this" they've got thousands of independent chances to screw it up. One person who doesn't heed their training and oof. The actual problem is that these companies are too big. Mistakes will always happen, but one mistake by one team in a huge bureaucracy shouldn't affect a population the size of a major country.
  - photonthug 2y ago
    Let’s go nuts and just take for granted the good faith and best intentions of megacorp, against all evidence. Even then, we all know that ignorance of the law doesn’t get people out of a speeding ticket. Why should the argument from ignorance hold up then with megacorp, who is staffed with hundreds of legal compliance professionals? Better yet, why should it hold up for their nth example of systematic abuse?
  - BurningFrog 2y ago
    I have some sympathy for the idea that these fines are a form of "stochastic taxation". There are so many rules, arbitrarily enforced and ever changing, that a large company will bleed off a billion now and then whatever you do. I think that definitely happens, but I'd guess it's the smaller part of the equation.
- khafra 2y ago
  Seems to be a pretty strong incentive for companies to make sure that, for anything unethical that they actually want to do, the fines will be large enough to satisfy the median voter, but small enough not to impede their business. Empirically, large companies seem to have little problem following this incentive.
ergocoder 2y ago
It works to a certain degree. The corporation cannot repeatedly violates nor make a policy that violates the same thing over and over. The punishment would be increased exponentially...

Detrytus 2y ago

Well, I would expect that, in addition to paying money, this settlement also obliges Meta to stop doing whatever they were doing. And if they don't, then I would expect fine for repeated offense to be much higher, like 10x. At some point that would make ignoring law unprofitable.

camdat 2y ago
Meta had already ceased facial tagging over a year before the suit was filed, according to Ars. https://arstechnica.com/tech-policy/2024/07/meta-to-pay-1-4-billion-settlement-after-texas-facial-recognition-complaint/ https://arstechnica.com/tech-policy/2024/07/meta-to-pay-1-4-...

_mlbt 2y ago

Facebook annual revenue last year was $134.90 billion. https://investor.fb.com/investor-news/press-release-details/2024/Meta-Reports-Fourth-Quarter-and-Full-Year-2023-Results-Initiates-Quarterly-Dividend/default.aspx https://investor.fb.com/investor-news/press-release-details/...

mbreese 2y ago
That’s still a fine of 1% of revenue, which seems like a small percentage, but is still a sizable hit. It’s enough to make investors notice, but probably not substantially if it is a once-off event. If it isn’t a one-off event though and states/countries start fining it all over the place, then there might be more of an issue.
- dantyti 2y ago
  as noted in the AP article, it's at least a second settlement: > In 2021, a judge approved a $650 million settlement with the company, formerly known as Facebook, over similar allegations of users in Illinois.
- dartos 2y ago
  Ain’t no amount of money that can compare to infinite growth and mass media control.
  - j_maffe 2y ago
    This is just factually incorrect. Facebook doesn't have "infinite growth"
    - dartos 2y ago
      Tell big tech leadership and investors that
    - ta1243 2y ago
      The entire economy is based on infinite growth, and most of it is based on exponential growth, which is of course a problem. Indeed the concept of the infinite growth may well explain the Fermi paradox through the concept of a "light cage"[0] https://pureportal.strath.ac.uk/en/publications/the-light-cage-limit-to-interstellar-expansion https://pureportal.strath.ac.uk/en/publications/the-light-ca...
- ta1243 2y ago
  If the illegal practice raised $5b in extra revenue then that's just good business sense.
spywaregorilla 2y ago
You should cite net income when trying to make a point on this.

DoubleDerper 2y ago

Corporate Crime and Punishment: An Empirical Study "Put simply, for large companies, criminal penalties may be just another cost of doing business—and quite a low cost at that." source: https://scholarship.law.upenn.edu/faculty_scholarship/2147/ https://scholarship.law.upenn.edu/faculty_scholarship/2147/

AmVess 2y ago

Nope. They get passed on to the consumer, anyway. The only way to stop this type of behavior is to throw execs in jail and take their personal assets off them.

xvector 2y ago
For facial recognition in 2011? Extreme take.

ta1243 2y ago

Based on how long this was going on, its about $5 per user per year.

josefritzishere 2y ago

I can report yes. California has been using them for years afer passing the CCPA to motivate better data privacy policy and procedure.

suprjami 2y ago

So if every US state sues Meta and settles for ~1.5B that's halved the value of the company. One more infraction with the same consequences and the company has no money left. That sounds pretty effective to me?

echelon 2y ago
Their market cap is approximately 1000x larger. Their annual income is approximately 100x larger.
- xvector 2y ago
  Wrong. This is 3.5% of their annual income.
  - echelon 2y ago
    Your figure is net income, not gross. They can arrange those numbers as they like.
kelnos 2y ago
That doesn't work, though. In practice, most states probably won't sue for this. And even if they do, Texas is one of the most populous states in the US. Presumably the per-state settlements will be proportionate to the number of people harmed. So it's not going to be 1.5B * 50 = $75B.
- suprjami 2y ago
  It doesn't matter if the states do or not. It's a deterrent. You go into your quarterly earnings call and say "we're conducting illegal business practices which expose us to up to $75B of risk" and see how the investors like that. You don't get caught every time you speed, but the fine certainly is a deterrent against doing 100mph everywhere.
  - JohnFen 2y ago

nickburns 2y ago

It's even more insulting than a fine. It's a voluntary payment in settlement that admits no liability or wrongdoing.

TiredOfLife 2y ago

They stopped doing facial recognition, so yes.

goodnuff 2y ago

[dead]

tediousgraffit1 2y ago

from the better ap-news article linked by the top comment: > The company announced in 2021 that it was shutting down its face-recognition system and delete the faceprints of more than 1 billion people amid growing concerns about the technology and its misuse by governments, police and others.

edm0nd 2y ago

Not really imo. Getting fined for doing something illegal just really means its legal for a price.

BurningFrog 2y ago

Incentives always work. If the expected fine for X is larger than the expected profit, companies will not do X.

AnthonyMouse 2y ago
That's actually kind of the problem here. The assumption built into this is that the company is doing the math. More likely the company is just so big that if even one mid-level person makes a bad call, the consequence gets propagated across a billion users. But there are so many mid-level people that it's guaranteed to happen. Which is the same reason that "higher penalties" wouldn't work either. The problem is not that the penalties aren't sufficient to deter, the problem is that the right hand doesn't know what the left hand is doing, so even if the lawyers tell them "you must never do this" they've got thousands of independent chances to screw it up. One person who doesn't heed their training and oof. The actual problem is that these companies are too big. Mistakes will always happen, but one mistake by one team in a huge bureaucracy shouldn't affect a population the size of a major country.
- photonthug 2y ago
  Let’s go nuts and just take for granted the good faith and best intentions of megacorp, against all evidence. Even then, we all know that ignorance of the law doesn’t get people out of a speeding ticket. Why should the argument from ignorance hold up then with megacorp, who is staffed with hundreds of legal compliance professionals? Better yet, why should it hold up for their nth example of systematic abuse?
- BurningFrog 2y ago
  I have some sympathy for the idea that these fines are a form of "stochastic taxation". There are so many rules, arbitrarily enforced and ever changing, that a large company will bleed off a billion now and then whatever you do. I think that definitely happens, but I'd guess it's the smaller part of the equation.
khafra 2y ago
Seems to be a pretty strong incentive for companies to make sure that, for anything unethical that they actually want to do, the fines will be large enough to satisfy the median voter, but small enough not to impede their business. Empirically, large companies seem to have little problem following this incentive.

ergocoder 2y ago

It works to a certain degree. The corporation cannot repeatedly violates nor make a policy that violates the same thing over and over. The punishment would be increased exponentially...