American authorities have approved a $5 billion fine against Facebook over the sharing of data with political consultancy Cambridge Analytica.
The Justice Department is now expected to review and approve the settlement after the US Federal Trade Commission (FTC) made its landmark decision.
The motion was passed by a vote of 3-2, FTC’s decision broke party lines, with the Republican majority voicing support of the fine, while Democratic commissioners voice objections.
The investigation was opened in March last year following claims that data from approximately 87 million Facebook users had been obtained by Cambridge Analytica.
The enquiry has largely focused on whether the sharing of users’ data violated a 2011 agreement between the regulator and the company.
The penalty will mark the largest in the FTC’s history if agreed by the civil division of the US Department of Justice.
The fine sets a new bar for privacy enforcement by US regulators, who have so far only brought a handful of cases against big tech firms.
As a result, Facebook will now surely face more unwelcome restrictions and scrutiny. According to the Washington Post, both Facebook and the FTC have declined to comment
Before now, the largest fine4 in the U.S. was $22 million for Google in 2012. Facebook’s mammoth fine has been expected for a long time and it’s not expected to make a dent in its very deep pockets, but it could mean the tech giant will now be burdened with additional restrictions and scrutiny – as well as causing damage to its reputation.
According to the Wall Street Journal, several Democrats claimed the punishment was merely a slap on the wrist.
Democrat representative David Cicilline, who is chair of a congressional antitrust panel, called the $5 billion penalty ‘a Christmas present five months early’.
He said: ‘This fine is a fraction of Facebook’s annual revenue. It won’t make them think twice about their responsibility to protect user data.’
Facebook had nearly $56 billion in revenue last year and this year, Zacks analysts expect around $69 billion.
The company will also be able to exclude the amount from its adjusted earnings results —the profit figure that investors and financial analysts pay attention to.
Wedbush analyst Danie Ives said: “This closes a dark chapter and puts it in the rear-view mirror with Cambridge Analytica.
“Investors still had lingering worries that the fine might not be approved. Now, the Street can breathe a little easier.”
It was interesting to note that investors did not seem overly concerned as Facebook shares finished the day the news broke, up 1.8 per cent, at $204.87.
However, anti-Facebook coalition, Freedom from Facebook, called the punishment ‘a slap on the wrist’ and said Congress must investigate the FTC.
In a statement they said: “Trump’s FTC commissioners have rolled over the monopoly, voting 3-2 for a slap-on-the-wrist settlement with Facebook.
“The FTC continues to lay bare their inability to protect American consumers and markets and Congress needs to investigate the FTC’s wanton disregard of their duties.”