What the FTC’s $5B fine against Facebook means for the broader crackdown on Big Tech

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Life-size cutouts of Facebook CEO Mark Zuckerberg appeared on the Capitol lawn before his testimony before Congress in 2018. (Flickr Photo / Joe Flood)

The U.S. technology industry, once seen as the darling of the economy, is facing a reckoning as Americans wake up to the power and influence a handful of companies wield. As regulators and lawmakers seek to rein in Big Tech, a new settlement between the Federal Trade Commission and Facebook is setting the tone for what could be a politicized fight that reshapes how we think about competition and market dominance.

The FTC slapped Facebook with a long-expected $5 billion fine Wednesday, concluding an investigation into the company’s privacy practices. The FTC is deeply divided over whether the settlement goes far enough and several members of Congress, on both sides of the aisle, expressed disappointment, though the fine is nearly 20 times larger than any privacy penalty ever levied worldwide.

(FTC Image)

The FTC settlement:

  • Fines Facebook $5 billion
  • Requires Facebook’s board create a new committee to monitor privacy practices
  • Requires Facebook to report to the FTC when data of 500 or more users is compromised
  • Orders quarterly certifications from Facebook CEO Mark Zuckerberg and compliance officers

Republicans on the FTC are championing the settlement as a serious penalty that will force Facebook to meaningfully change its behavior.

“The magnitude of the $5 billion penalty and sweeping conduct relief are unprecedented in the history of the FTC,” said FTC Chairman Joe Simons in a statement. “The relief is designed not only to punish future violations but, more importantly, to change Facebook’s entire privacy culture to decrease the likelihood of continued violations.”

But Commissioner Rohit Chopra published a scathing dissent Wednesday, claiming the settlement is a win for Facebook and questioning whether it’s possible to effectively regulate the tech industry using existing tools.

“When companies can violate the law, pay big penalties, and still turn a profit while keeping their business model intact, enforcement agencies cannot claim victory,” Chopra wrote. “If we cannot fix these problems, then policymakers must come together here at home and around the world to confront business models that rely on surveillance and profit from manipulation.”

Dissatisfaction with the settlement and partisan disagreement between FTC commissioners could be fodder for presidential candidates who have Big Tech in their crosshairs. The settlement could also be fuel for members of Congress who want to enact broader antitrust laws.

It is the intention of some policymakers to change the way privacy and competition are protected in the U.S. Sen. Elizabeth Warren is campaigning on a proposal to break up tech giants and enact new regulations to limit their reach. Other 2020 hopefuls have also expressed interest in reining in the tech industry. But legislation to change antitrust laws is not moving forward at this time.

That could change, according to Betsy Page Sigman, a Georgetown University professor specializing in social media and electronic commerce.

“Congress is likely to do anything that will put them in a better light these days,” she said. “And I certainly think reining in some unpopular aspects of high tech behavior these days would put Congress in a better light, and give them something that would be perceived as having benefits for their constituents.”

In the meantime, regulators are using their existing authority to examine the industry. On Tuesday, the Department of Justice announced a broad review of dominant tech companies to find out whether they are “engaging in practices that have reduced competition, stifled innovation, or otherwise harmed consumers.”

Last week, Amazon, Apple, Google, and Facebook testified before the House Judiciary Committee’s antitrust wing on competition and marketplace dominance. On Tuesday, the subcommittee’s chair, Rep. David Cicilline, sent follow-up letters to Amazon, Facebook, and Google demanding more clarity on issues raised during the hearing.

Prosecuting tech companies for anti-competitive behavior under current law is tricky. Traditionally, regulators have looked at whether companies are abusing their market power to raise prices for consumers as a benchmark. Tech companies don’t fit that mold because they often use their positions to lower prices, such as Amazon, or offer services for free, like Facebook and Google.

“We need to determine whether immunities granted by decades-old laws are compatible with this business model,” Chopra wrote in his dissent. “We need to make sure that the business model is not foreclosing competition and innovation.”

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