Facebook warns that its U.S. privacy penalty could touch $5 billion

CEO Mark Zuckerberg

Facebook announced on Wednesday that federal research into its privacy practices could cost the company as much as $5 billion.

In its quarterly outcomes reported to investors, Facebook told that for now, it was setting aside $3 billion to pay in potential penalties to the Federal Trade Commission but that the final number could be much bigger by the time the FTC’s investigation is over.

“We expect that the area of loss in this concern is $3.0 billion to $5.0 billion. The matter stays unresolved, and there can be no certainty as to the timing or the terms of any conclusive outcome,” the organization said.

The FTC announced last time it was examining statements that the British consulting organization Cambridge Analytica inappropriately obtained access to the data of tens of millions of Facebook users, seven years after Facebook admitted to improve its privacy methods to settle an earlier conflict with the FTC.

The council is also weighing whether and how to contain Facebook CEO Mark Zuckerberg privately accountable for bungling users’ private data, two references familiar with the conversations told NBC News last week.

Shares rose nearly 8 percent in after-hours dealing following Facebook’s statement.

The share cost rise was seen by some as evidence that even a multi-billion-dollar penalty against Facebook was too small a punishment for the company’s perceived crimes.

“Last month, I told that a penalty in the low billions of dollars would amount to a slap on the wrist for Facebook,” tweeted Rep. David Cicilline, D-R.I. “Tonight, we read that’s how Wall Street sees it too – as a slap on the wrist. If the FTC won’t act, Congress has to.”

Facebook did not tell how close it was to a probable settlement deal with the FTC. Bloomberg News published on Wednesday that the company was in “advanced talks” with an association of state attorneys general to fix a parallel inquiry by them.

The company said it had $45.2 billion in funds, cash equivalents and marketable protection at the end of March.

On a conference call with Wall Street investigators, Chief Financial Officer Dave Wehner was questioned how an FTC case force changes to Facebook’s business model. He refused to comment. “Can’t really discuss further, as this is an ongoing matter,” he said.

The FTC can bring directives in addition to monetary fines, said Ashkan Soltani, a former FTC chief technologist. “Depending on the injunctions, they may affect certain ad practices,” Soltani said on Twitter.

For example, Soltani said, the FTC might need to restrict the potential of Facebook to use data — such as a person’s location book for ad-targeting purposes — if Facebook gathered that data for an entirely separate reason.

The possible FTC punishment “is not expected to be tax-deductible,” the company appended in a footnote.

Facebook stated in its results that its platform had 2.38 billion monthly current users worldwide at the end of March, a rise of 8 percent from a year earlier.

It announced revenue for the initial three months of the year of $15.1 billion, a rise of 26 percent from the equivalent period a year earlier.

Zuckerberg told investigators on the discussion call that Facebook would give much of the next five years directing on a shift toward private encrypted messaging, with less of a weight on the public posts and headlines feeds that have been at the company’s core.

He said, though, that the shift won’t have a quick impact on the company’s ad business, telling investigators he’s “assured that won’t be a significant concern.”

News By- David Ingram


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