Facebook’s stock price jumped after it said it expects to incur a fine of up to $5 billion from the Federal Trade Commission. And that’s all you really need to know about whether the historically large penalty matters to the company.
The Menlo Park, California-based social media giant reported its first-quarter earnings on Wednesday and revealed it had set aside $3 billion during the period related to the FTC’s investigation into its handling of user data and potential privacy violations. Facebook expects the matter could wind up costing it between $3 billion and $5 billion.
The possibility of a fine wasn’t a surprise — the Washington Post reported in February that the FTC and Facebook were negotiating a multibillion-dollar fine. But Facebook’s earnings confirmed it.
The question now becomes whether the fine, if and when it hits, is just a slap on the wrist. The amount is orders of magnitude larger than the FTC’s previous largest fine to date — $22.5 million against Google in 2012. But for Facebook, while it may be a knock to the bottom line, it’s far from the end of the world — even with the $3 billion it set aside in the first quarter, the company still made a profit of $2.4 billion.
“Is this going to get their attention? It will get their attention to the extent that they’re going to try to be more careful in the future,” said Peter Henning, a law professor at Wayne State University and a former federal prosecutor. “But does it really deter violations? I think the answer to that question is no. For some companies, it’s viewed as the cost of doing business.”
The Menlo Park, California-based social media giant reported its first-quarter earnings on Wednesday and revealed it had set aside $3 billion during the period related to the FTC’s investigation into its handling of user data and potential privacy violations. Facebook expects the matter could wind up costing it between $3 billion and $5 billion.
The possibility of a fine wasn’t a surprise — the Washington Post reported in February that the FTC and Facebook were negotiating a multibillion-dollar fine. But Facebook’s earnings confirmed it.
The question now becomes whether the fine, if and when it hits, is just a slap on the wrist. The amount is orders of magnitude larger than the FTC’s previous largest fine to date — $22.5 million against Google in 2012. But for Facebook, while it may be a knock to the bottom line, it’s far from the end of the world — even with the $3 billion it set aside in the first quarter, the company still made a profit of $2.4 billion.
“Is this going to get their attention? It will get their attention to the extent that they’re going to try to be more careful in the future,” said Peter Henning, a law professor at Wayne State University and a former federal prosecutor. “But does it really deter violations? I think the answer to that question is no. For some companies, it’s viewed as the cost of doing business.”
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