Facebook Inc. (NASDAQ: FB) will reportedly pay approximately $5 billion to settle a Federal Trade Commission investigation into the social media company’s data privacy practices. According to reports, the FTC approved the settlement by a 3-2 vote along party lines, with Republicans in favor and Democrats against. The settlement will now be moved to the Justice Department’s civil division to be finalized.
According to reports, the settlement will also include government restrictions on how Facebook treats user privacy. The agency could also seek new accountability measures for privacy lapses. However, there were no details about these or other possible additional measures in the released reports.
The FTC investigation was sparked by the Cambridge Analytica scandal more than a year ago. It was found that political consulting firm Cambridge Analytica had improperly accessed the data of 87 million Facebook users in the run-up to the 2016 presidential election. That scandal and subsequent issues around the use and abuse of its customers’ information appeared to violate Facebook’s 2011 consent agreement with the FTC which required the social network to get the “express consent” of users before sharing their data.
This settlement would be the largest FTC penalty ever against a tech company. Previously, the largest penalty against a tech company came in 2012 when Google agreed to pay a $22.5 million fine over to its privacy practices. Facebook told investors in April that it expected fines from the investigation to be between $3 billion and $5 billion and set aside $3 billion for legal expenses related to the investigation.
Even though the fine is the FTC’s largest, it represents approximately 9 percent of Facebook’s 2018 revenue. The company’s revenue for the last fiscal quarter was roughly $15 billion. Investors appeared pleased that the fine wasn’t bigger. Facebook’s stock ended up nearly 2 percent after reports of the settlement were released.