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FTC Fines Facebook $5 billion. Shareholders Yawn

Fine will do little to circumscribe company's extremely lucrative and surreptitious business practices

The FTC reached an agreement with Facebook recently, with regards to the company’s breach of a 2011 consent decree, related to issues regarding the use of customers private data. The $5 billion fine the FTC imposed was the largest in the agency’s history and certainly far exceeds that of any fine or penalty levied against any tech company.

After announcement of the settlement, Facebook’s stock actually rose 1.8%, a clear indication that shareholders aren’t concerned in the least about the impact of the fine on the company’s 35% current operating profit margin. This is due to the fact that the FTC settlement leaves Facebook’s lucrative and surreptitious data harvesting practices, for the most part, intact.

While it is true that the jurisdiction of the FTC is somewhat limited there are many who argue that the fine was a drop in the bucket. This sentiment seems bolstered by investors attitude of complete nonchalance regarding the negligible .

Facebook reported its latest earnings yesterday: it earned $16.9 billion in revenue, up 28% from a year ago.

Democrats on the committee wanted to impose a larger fine to help deter Facebook’s deceptive business practices and selling its users private data to app developers and other third parties, without their knowledge or consent.

Any action that hopes to deter any of the privacy abuse practices of Facebook will need to impose stringent mandatory disclosure requirements on the company, so that users are informed of the extent of its tracking processes, how much Facebook earns from the use of this data, and to whom users’ data is transferred.

Attorney General William Barr has announced that the DOJ intends to conduct an extensive review to determine if Facebook is engaged or has engaged in conduct that has stifled competition in the market place. We know the answer to that question. During its rise, Facebook ruthlessly eliminated or acquired any potential competitors. Somnolent legislators and regulators ratified this conduct because they were asleep at the helm for the past decade.

Whether or not Barr will go after Facebook for its prior practices of using its dominant market position to eliminate other start-up social media companies remains to be seen.


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